Technology is taking over the banking industry, but is that a good thing or a bad thing for customers?
In an article published this week by BAI Banking Strategies, Jeff Marshall outlines his vision for the evolution toward one-click banking, where analytics systems become sufficiently sophisticated to integrate online and in-branch banking so customers get the best of technology and personal service. Marshall’s example cites a customer seeking a loan, who fills out the paperwork online and then completes the transaction in the bank, with all the paperwork and approvals prepared. As Marshall writes:
Ultimately, we see a migration toward “One-button Banking,” or giving the customer everything he or she needs through any channel via one button. Think of the evolution of the smartphone, where the capabilities have increased, but the number of buttons has decreased. Banks have an opportunity to do the same thing, using data analytics in an omnichannel strategy to give customers more, more simply and in a more timely manner.
But is this really what customers want from their banking experience? Do they want to do all their financial shopping online without advice? Can automation really meet customers’ banking needs or are they looking for more personalized service?
A study conducted by Cisco Systems indicates that consumers are becoming more comfortable with online bank interaction. They showed willingness to provide more information about their financial habits in exchange for protection from identity theft (83%), more savings (80%), more personalized service (78%), and greater simplicity (56%). However, they still want personal financial advice; 54% said they want automated systems to provide financial recommendations.
Automating banking saves overhead for financial institutions and provides customer convenience, but it also tends to lead to depersonalization. Customers are stuck with cookie-cutter options. They can choose one of the menu items without a opportunity to discuss personalized options or alternative products that might better suit their needs.
In addition to streamlining transactions, technology can be used to promote personalization as well. Consider the case of the Oversea-Chinese Banking Corporation (OCBC), which launched a big data initiative to learn more about their customers. Using all the information they could find, OCBC was able to create customer profiles and target personalized marketing messages across 10 channels (email, ATM transactions, online, text, etc.). The result was an increase in leads of 417% and conversion rates as high as 40%.
This is a proven approach to target your current product offering to the profiles of specific customers. But what about personalizing products to meet specific customer needs? The Model T Ford was available in one model and one color, and today there are dozens of customized Ford cards in multiple colors. Will customers settle for the cookie cutter products or will they expect banks to offer more customized products? As Matthew Lifshotz, Director of Global Business Development for Choice Financial Solutions, writes in The Financial Brand:
A paradigm shift is taking place, from a product centric approach (off-the-rack) to a customer centric approach (made-to-order), where customer involvement shifts from just purchase to the development as well. It’s become more important than ever for companies, especially those in financial services, to be nimble and respond quickly to this market demand.
Does this mean banks and credit unions need to follow the consumer goods example and offer made-to-order products, like Nike custom shoes? Perhaps. As the OCBC example shows, we have the technology is to identify and target specific customers with custom products. We even have the technology to help customers create “roll your own” financial products online. Whether consumer demand for customized financial service products will become a differentiator for banks and credit unions has yet to be seen. However, consumers will continue to look to online services for their banking needs, and they may ultimately expect a robo-banker to help them customize their loan and savings products.
So are the days of in-person, in-branch service numbered? Will banks start to adopt the Amazon transaction model for banking?