In our last installment on Building a Better Bank, we addressed the need for the banking industry to move beyond transactions in order to forge deeper customer relationships. While much of that relationship-building takes place at the branch level, there are interactions that happen across other channels that can impact a consumer’s connection with their bank. Some of those channels are driven by technology – like web and mobile banking. Despite its reputation as cold and off-putting, technology when deployed well can actually help support other channels in deepening customer relationships. To discuss tech’s role in banking today, we talked with international banking expert David Cavell.
We often think of technology as a replacement for staffed interactions – a cost-efficient substitute for branches. In his work with banks across the globe, Cavell sees the branch in a different way. Cavell says, “We are absolutely preoccupied, and rightly so, with mobile in particular. But the thing that's led the way there has been payments more than anything else. A branch has never really been about transactions. A branch has been about building profitable relationships. So, we've had bankers over here putting the branch in the too hard box, listening to some of the hyperbole in the market, taking quite a wrong view, and frequently leaving gaps in the market for competitors to come in.”
From Cavell’s vantage, an over reliance on mobile will boomerang back on banks. While technology supercharges mobile transactions and payments, it is not a replacement for the branch. Rather, it supports the branch banking channel through convenience, freeing the branch channel to focus on consultative activities. Cavell says, “We're probably got around just over a million branches across the world at the moment. The numbers leveled off, and I'm quite sure it'll start to go backwards. But many of the larger, more tech-savvy banks which are often market leaders in technology still regard the branch as their key channel. I think as a generalization that holds true in most markets still.”
Cavell believes bank brands don’t have an either/or scenario when it comes to technology and branches. It’s BOTH and how technology is integrated with the branch matters. Cavell says, “It's almost a realization that technology is not so much a threat to the branch, but in fact is an enabler of greater efficiency [within it]. So branch transformation can take two forms. It can be a chief executive standing back and saying, ‘I need to redevelop my branch design. I need to redevelop the way my brand is represented within the branch context.’ Or they can be looking at it from a technology point of view.” How technology is integrated in the overarching bank brand and within the branch matters deeply.
Cavell describes this ethos is coming from banks and credit unions of all sizes. He describes financial institutions in the U.S. and in Europe that are looking closely at in-branch technology. He says, “They've looked at it and they've said ‘We’ve got this great technology, what can we do with it? And how can we transform our branch around the new processes that it's offering us?’… We're seeing banks looking at their branch space and putting in to play better designs, leveraging technology to have greater efficiency, in particular, to take the transactional work away from the staffer in the branch.” So, while transactions move toward a technology platform – whether in branch or online/mobile – that doesn’t mean the branch doesn’t matter. In fact, it’s technology that can make it mean more.
Cavell describes the lack of comprehension of technology’s purpose and possibility as creating gaps on the branch level. He says, “It’s the lack of knowledge of technology – and how technology works and is appreciated by the consumer – that is one of the most dangerous areas of ignorance banks have.” Technology is not a silver bullet that will come in and solve a bank’s problems. Knowing what you’re solving for is the first step toward a targeted deployment of technology – both within the branch environment and with mobile and web solutions. It’s friction that banks want to avoid. Staff needs to understand how the technology can create a seamless experience.
Describing technologists in the branch environment, Cavell says, “They get the money – they get the elephant share of the budget – and off they go, and people are left [in the branch] scratching their heads thinking, ‘Well hold on. How much have we got left now to spend at our branches? What more can we do now with self-service technology?’ It’s that lack of coordination across the channels and the lack of a sensible allocation of available funds and capital... I think is a fundamental weakness.” Describing how technology supports staff, he says you have to have a good “management technique for ensuring that capital is allocated in a rational and sensible way. It's not just a question of who shouts loudest."
Over-reliance on mobile or web is another trap for banks. Thinking that one type of technology or channel is going to future-proof your bank ignores some practical realities. Cavell says, “Somebody goes in with a very frightening story about how far behind they're going to fall if they don't do this or that with their mobile. Banks have got scarce resources – because nobody's got endless resources – then over allocate to one channel or the other. Now, that's one phenomenon I see driven by ignorance, and the lack of knowledge and lack of understanding of technology at the EVP level and in the boardroom is still a major concern.”
In describing what customers are looking for from their banking experience, Cavell describes channel coordination as a vital force for driving customer loyalty. Cavell says, “If you look at some work the Wells did about a year or two back. They did some profitability analysis based on channel usage, intensity of channel usage, and scope of channel usage. [These analyses] came up with a very clear indicator that customers wanted choice of channels, and if you give them a choice of channels, you will increase the intensity of their use of your systems. You'll increase their loyalty, and you will, as a direct result, increase their profitability as well.”
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