Banks today typically do not know their customer very well. Now, at the product level, many banks have invested significantly in customer analytics – plenty of credit card providers, for example, understand a customer’s value potential, can track spending patterns and make targeted offers. Yet, many still send customers multiple product offers in the hope that something will stick. And few can analyze a customer’s deposit account, see that his salary deposit has increased, and send a note congratulating the customer on his or her promotion together with an offer of a premium card and a higher credit limit.
What business are banks in if they are not in the banking business? Put simply, ...view middle of the document...
*(1) And this company did not exist at all 10 years ago...
Retail bank managers will have to accept that the rules of the game have changed, as telecommunications technologies break down geographical barriers. And there will be a strong need for training and motivating tellers and advisors, making them understand how new technologies and innovations can help them get closer to customers, regain their trust, and be perceived as truly bringing value.
* Banks are shifting from the traditional product focus to a more clientcentric strategy. Although most banks have virtually identical products, their customers are obviously distinct and, hence, offer these firms a pathway for differentiation. Banks that cultivate a deep knowledge of their customers — their financialservices preferences, economic demographics, and consumer behavior — can tailor offers to individuals in a timely manner based on activity in their accounts and lifestyle changes or choices.
A consumer focused approach can improve revenue by attracting new customers and increasing the bank’s wallet share of existing customers. What’s more, greater marketing precision can direct banks’ spending more efficiently and help control costs.
A majority of banking executives (53%) believe that simplification is very important, and 70% are making some level of investment in simplification. Yet, only 17% feel well-prepared. Taking a customer perspective, a majority of executives believe their banks must simplify products, channels and prices/rates. Taking an internal perspective, a majority of executives believe they must simplify their technology, their processes and their back offices. Bankers believe that simplification will lead to better service, lower costs and increased profitability.
This complexity and redundancy drives poor customer experience, high cost, operational risk, employee frustration and regulator unease. And the traditional separation between customer-facing activities, and operations and technology means few business leaders are strong end-to-end managers who understand sales through delivery. Indeed, we frequently hear of business leaders complaining about their operations and technology cost allocations, instead of managing them.
Since the crisis, banks have been fighting hard to cut costs. Headcounts have been significantly reduced paving the way for a variation of branch models to support the anticipated customer experience despite the reduction in face-to-face banking. When you walk into your local branch you can see various models being tested: assisted self- service machines, iPads to log into online banking, telephone banking in-store etc.
Every bank has launched re-engineering efforts with some considerable successes. Yet, expense ratios remain stubbornly in
line with pre-crisis levels as regulatory implementation costs continue to rise.
And with higher capital charges, ROEs remain depressed.
Customer demands and competitive intensity...