Get the journey right, stop focusing on the destination

Until we reach the point when we're able to cite relevant examples from the banking industry - whatever happened to Metro Bank? - and not have to rely on Apple Store type of examples, banks are safe. Equality or inequality in the relationship, banks can draw comfort from the knowledge that people can't buy checking accounts, mortgages and other financial products from Apple Stores.

But, in all fairness to banks, let me narrate the experience of a business associate who visited the flagship Apple Store in Times Square, NYC, to buy an iPad 2. Although it was just three or four days after the launch, he was told that they had run out of stock of iPad 2s and that it would take two weeks for replenishment stocks to arrive*. With its storied commitment to superior customer experience and complete control of its supply chain, if this is the best that Apple could do, how can we expect a bank to explain why it had to decline someone's mortgage application? After all, the applicant's prior dealings with another bank or FI could've tarnished their credit rating, a factor that impacts the bank's decision but one over which it has little visibility or control. 

*: According to the store attendant, Apple was going to bring back stocks of iPad 2s previously shipped overseas so that they could meet local demand. When these consignments returned, they'd be used to restock the Times Square and other flagship stores in the US. That's how this store could commit two weeks delivery. So, if the customer journeyed via Broadway / 5th Avenue, Apple would be pleased to sell them an iPad 2. However, if they journey via Regent Street or rue de Rivoli, sorry, Apple would turn them back empty-handed. I'm not sure if I'd like this kind of attention to my journey from a bank!

Ketharaman,

The reason I didn't cite a banking example is there isn't one that end-to-end gets the job right. Metro is a great branch example, but their web and mobile are poor comparatively. The direct banks, namely First Direct, Rabo, ING and UBank are probably the best at multi-channel - but again they don't have branch presence. Itau is getting there, as is ANZ in Australia, but we don't have a stand-out example of multi-channel excellence. To proposition anything else is just being too kind to bankers.

The reason why you can't find an example of a bank that has a high level of consistent service across every channel is simple:

1. Metrics - current measures internally at banks focus on product revenue and not customer or channel performance

2. Silos - Apple doesn't silo performance around their stores versus their online and mobile stores, but banks do. When silos are around it will always psychologically be a case of branch versus alternative channels - that is wrong. We need a channels team that controls branch, web, mobile, ATM, etc under one bucket (that is not a head of retail BTW, it is a channels expert)

3. Imperative - While this is thankfully changing, there is still not enough of a push from the top-down to change the structure and motivation of the retail bank to be a total-channel bank. P&L structures don't adequately support mobile, social and web versus branch at the moment, and the org structures don't match the reality of customer behavior.

There's a lot more work to do.

BK

@Brett K:

Thank you for the clarifications. 

Sometimes, being late to the party has its own advantages e.g., late computerization in India and other emerging markets meant no mainframes, hence no Y2K problem. I think banks have a similar advantage now with their channels.

Let me explain with reference to the growing traction around "Omni-channel" retailing. Apparently, an increasingly large percentage of consumers prefer to research, price-compare and order gadgets, white goods and other products online, but prefer to pay and collect them from physical stores.

If this is happening with physical goods, I tend to believe that the banking industry, with the more complex nature of its products and services, will need to plan for omni-channel sooner or later. 

Maybe banks could leapfrog directly to an omni-channel landscape right away? In other words, freeze existing channel capabilities at their current states, spend their time and money on developing suitable integration pathways between multiple touchpoints spread across multiple channels. Personally, I don't think it's mandatory to reach the 100% mark in the current channel journey before jumping on to the omni-channel bandwagon, but that's a purely subjective view.      

Ketharaman,

The fact that India, China and others didn't have legacy systems and data silos to deal with, is turning out to be an advantage in some respects. However, that's hardly an argument for not spending on development for other banks or regions is it?

There's one problem with the omni-channel assumption. Your assumption is that banking fits the retail model. What we've seen with Blockbuster, Borders and countless other businesses that have products that can be easily digitized is that the physical retail model comes under threat. It becomes redundant.

The fact is most of the products banks provide are not that complex and don't need a retail presence to support. It's only when you get into the high-net-worth space that there is a sustainable model in this respect. 

So the reality is that 80% of the business needs to shift day-to-day to non-branch channels, and branch networks will unavoidably shrink because their value in the value chain simply isn't strong enough. If I don't need an advisor to help me choose a product, then the physical branch is simply a hinderance to efficient customer engagement because we keep focused on drive-to-branch when it isn't sustainable as a competitive differentiator - if anything it is a negative.

We have to seriously rethink the total customer value chain. Trying to reinforce existing branch networks just because they are already invested in is tantamount to arguing we still need blockbuster stores to sell video. It's 1.0 thinking and it's going to bring banks down.

BK

@Brett K:

I'm all for banks to reconfigure their investments in channels to keep pace with changing consumer preferences. For example, if more consumers want to open checking accounts online, then banks should make this functionality available online and provision for greater bandwidth for their datacenter. While there's scope for making their online - as well as branch - interactions more frictionless, I think banks everywhere are doing reasonably well on this count within the framework of the current regulatory environment. 

But, I believe that there are many customers who still prefer banking in person, at least to open new accounts or to buy new products if not to check balances and get a new check book. Dwindling as their tribe might be, they aren't extinct at this point, so I'm not in favor of a total shutdown of branches anytime soon.

According to this recently-released TowerGroup report, sixty-one percent of all US consumers still prefer to open accounts in the branch. Apart from product complexity, this report cites friction in present day online account opening solutions as a major driver of this high percentage. At the same time, 52% of 18–34 year olds prefer the online channel for account opening. This seems to highlight the importance of following a well-nuanced mix of branch and digital channels in retail banking. 

Ketharaman,

All that proves is that account opening online and through mobile sucks! Which supports my argument for better customer experience and thinking about journeys.

I actually don't have a problem with people going to a branch to open an account. But guess what? I bet they chose the bank they're opening that account at via research online....

BK

@Brett K:

Absolutely! That ties in with the possibility of 'omni-channel banking' that I'd alluded to earlier, with the account opening behavior serving as an example of ROBO (Research Online Buy Offline).

Among others, support for 100% online account opening calls for realtime integration of the bank's related functionality with third-party identity and address verification services. A bank that doesn't have this integration faces two choices today:

1. Invest time and money to enable the aforesaid integration, eliminate friction from the current web/mobile channels, and thus deliver 100% online account opening functionality, OR
2. Freeze investment in the online channel where it is. But, ensure that when a customer walks into a branch after having researched the bank online, the branch staff is able to progress the offline transaction from where the customer left off the online one (by using clickstream analysis and other currently available technologies), instead of starting the process from Step One because the channel has changed.

I've nothing against the first option. However, the second option does give banks a graceful exit from their present situation. It also offers them the chance to regain their reputation by expediting the arrival of omnichannel banking in response to growing consumer preference in that direction.