How improving digital sales and servicing can take pressure off banks

As economies unlock, you might suspect banks can take a breather, especially as some countries like the UK report big leaps in economic performance. Yet, the reality is the pressure on banks around revenue and costs continue, even if there are some nuanced changes.

In particular, banks are realising the predicted losses are not as high as they had provisioned for. However, most banks are still understandably concerned about the financial resilience of some retail and business customers. They feel that even though there are signs of improvement, economic activity is not going to go up enough to rectify cash flow issues people may have over the next six to 12 months. Anxiety remains about collections and losses on that side of the business.

The banking sector came into the lockdown already focused on controlling its own costs. The tools for achieving this were digital and these have helped banks at this critical time. By and large, banks adapted quickly, accelerating digital transformation to support workers who are maintaining customer service remotely. They also saw many more customers migrating to digital services out of necessity.

So now as banks plot their route through the upcoming months when worries about consumer financial resiliency are growing, their investment in improving digital sales and services will be crucial. This is because of how digital sales and servicing delivers some fundamental benefits: improved process efficiency, greater savings in employee time, driving through cost-savings and maintaining customer loyalty.

What is notable is that most banks have some way to go on their digital journey, with many sitting at a relatively low base line of digitisation. For instance, while many customers are viewing it as ‘normal’ to simply identify themselves electronically via a passport or driving license for opening an account, it is still not the norm. And for more complex products like a secured personal loan, mortgage or business facility, the levels of digital sales and service completion are still low.

While there are examples of banks with very high levels of digital sales and service completion such as in the Nordics or some parts of southeast Asia, there is a long way to go. I see examples of targets being set for hitting 40% in two years, compared to some banks already achieving 60-70% now.

There is an opportunity for banks to level-up digital sales and service significantly with smarter use of AI-powered customer engagement software, data analytics and real-time decisioning to be more proactive and more effective.

For example, in a mortgage scenario, AI could spot that the customer has a current account with another bank, and proactively ask them for permission to view the last two years of bank statements. That way, the mortgage application process is made easier for the applicant, and the bank would have an even more accurate picture of the customer’s affordability, reducing risk.

Digital sales and servicing need to get much more ambitious for another reason, the acceleration of bank branch closures. The logic of branch closures is sound, but banks are losing a valuable source of their sales. While the primary purpose for a customer to go into their branch to do something quite simple might have used to be for something like depositing a cheque, this has shifted to being something where advice is needed such as for a home or personal loan. As a general rule, when you see someone face to face, there’s more chance of a sale, because people build trust face to face more easily compared to online. So, bank staff are often in an ideal position to close a sale. This all means that yes, some branches inevitably must close, but many also need re-purposing along with supporting technology to better enable staff to service customers.

Consolidation of branch networks is not going to pause – in fact, the pandemic gave added impetus to the process despite the criticism heaped on many banks – but it is imperative to emulate those personal interactions associated with going into a branch. It’s not so much about access to cash which seems to be a large focus in discussions on branches, but more about the broader sales and service coverage needs. Whether it is a video call, or a phone call with a real person without a long wait time, harnessing technology to drive efficiency while maintaining satisfaction and loyalty is key.

Getting digital sales and service correct is critical, and investing in it will continue to be the biggest driver when it comes to easing pressure on banks’ cash flow.