How are customer expectations changing and how does that impact traditional brick and mortar retail banks?

We launched TCS Digital Software & Solutions Group as an independent software startup inside Tata Consultancy Services because we spotted the increasing interplay between what was happening both inside an enterprise and outside, in the physical world. Today’s consumers compare their experiences with Uber and Airbnb with banks, retailers and other local businesses. Every interaction with a brand that understands them as a unique individual and anticipates their needs raises the bar for every  company they do business with. Not only does the bar keep rising, but banks face an onslaught of agile challengers – from FinTechs and online rivals to Big Tech firms. To compete long term they must act with the understanding that today’s consumers buy experiences, not products. Banks need to get much better at selling experiences that tell their brand story in more meaningful and holistic ways throughout the customer journey. Fortunately, they’re sitting on a goldmine of customer data to do just that. But they need to act with a greater sense of urgency.

What are some trends on the horizon that retail banks should get prepared for? 

There’s a perfect storm of disruption that will force traditional banks to change. Millennials will embrace born-on-the-web alternatives to make payments and for checking and savings accounts and loans. Brick-and-mortar banks will evolve but not disappear, with affluent customers continuing to prefer branches for advisory services like wealth management. Expect impending Big Tech rivals like Amazon, Google and Facebook to be even more disruptive than FinTechs because of their deeper and expansive customer reach and engagement. There’s also open banking, which took off in Europe and will eventually reach the U.S. That’s where consumers use third-party providers to manage their finances. Plus more digital-only neobanks like the UK’s Monzo, and of course, cryptocurrencies.

All these factors spell a sea change in how banks will manage the cornerstone of Digital Transformation, the customer experience. In traditional marketing, the moment of truth used to be that specific point in time when a customer interaction with a bank formed an impression that solidified their decision to win their business. For a regional bank, it could be that warm feeling when a teller addressed you by name or asked out of the blue if you’ve thought about how to finance your kid’s college education. Today there are countless moments of truth because the ways consumers interact with banks – online, apps, chatbots, by phone, ATMs and of course at branches – has multiplied. Banks must now logically weave each and every interaction along the customer’s journey – including ones with ecosystem partners – into seamless, highly-personalized and connected experiences that tell their brand story.

Smaller banks in particular have a promising opportunity to position themselves as partners in their customers’ financial well being. If they can better harness the customer data they already have, banks can connect them to advisory services not just in branches but throughout their daily lives.

It seems everyday we read about another company offering a bank service. Examples include Walmart underwriting personal loans at point of sale, Apple offering a credit card, and T-Mobile offering free checking accounts with 4% interest. What can retail banks do to fend off these new types of competition? 

Banking is still a relationship business built on loyalty. To fend off new types of rivals, banks need to compete on the battlefield of customer experience by tapping data in new ways to deliver more personalized customer service. While no bank is immune from new challengers, all banks have core competencies they can leverage to effectively compete against them.

First and foremost is an enormous wealth of knowledge about their customers, transactions and financial needs. Their breadth of products and financial services is also a big asset because they can address a much greater diversity of consumer needs. Today’s empowered consumers demand a better customer experience, whether it’s a financial product from a bank or a non-traditional competitor. In the speed of a tweet they’re aware of new financial products and services from all kinds of companies and can easily comparison shop to get the best interest rates or terms of service. To win over consumers, banks must truly know them, anticipate their needs and figure out how they want to be catered to. That requires connecting the dots with data from across siloed banking operations – as well as from the real world, the Internet of Things –  to deliver not just personal service, but hyper-personalized, connected experiences.

When it comes to Digital Transformation, banks are often faced with replacing everything with a new platform, deploying an analytics tool that must be extensively customized, or building their own solution from scratch. Yet all of these are lengthy, risky propositions. What advice would you offer small and mid-size retail banks to manage risk and deliver new digital services faster?

In our experience there are seven factors for banks to succeed at Digital Transformation:

• Avoid big bang transformations in favor of an incremental approach. Think in terms of use cases and business outcomes in short spans.
• Develop a roadmap of use cases and prioritize them based n their impact on customer experience, customer engagement and front office enablement.
• Don’t start from scratch. Look for tools that provide pre-built use cases that accelerate business outcomes. This will also address gaps in technical skills and digital maturity.
• Think of customer data strategy in tandem with native protection of data privacy and security. Digital trust is foundational to the core value proposition for customers.
• Complement existing investments, don’t replace them. Replatforming exercises are complex, demand large investments and tend to underdeliver.
• Adopt open source and avoid proprietary lock-in to facilitate easy integration with partners and ecosystems.
• Plan for the future. Look for tools that can provide capabilities that support emerging trends for delivering connected banking experiences.
  

These insights drive our Customer Intelligence and Insights for Banking solution, which provides pre-built retail banking-specific use cases for delivering personalized banking services that can get a bank started in just 10-12 weeks. It brings the power of Big Data, AI and the Internet of Things together on an open source based, plug-and-play platform that’s future ready for connected banking and open banking. Its low code, self-serve features and data connectors enable teams with even moderate Big Data and Analytics skills to quickly integrate to existing bank systems and with their partners, develop new use cases and publish new APIs and data services. 

What are some ways small and mid-size retail banks can modernize in today’s digital world? Small and mid-size banks have always focused on customer service. How can they leverage partnerships to remain relevant?

Partnerships are great opportunities to deepen customer loyalty. Regional, small and mid-size banks can take advantage of their closer relationships with customers to offer them more valuable ways to meet their goals and ambitions. So instead of just selling them a mortgage, by leveraging their knowledge of local ecosystem players like real estate agents, moving companies and landscaping services, a bank could provide a complete home buying experience. Through partnerships with local firms, banks could deliver connected consumer experiences related to home ownership. This has the dual benefit of deepening customer relationships and helping the bank make the transition from selling financial products to owning the customer journey.

Not every institution aspires to be an all-in-one bank. Smaller banks trying to appeal to millennials and digital natives will pursue strategies that reflect their business aspirations, availability of investment capital, skills, and digital maturity. Banks at the base level of digital maturity or about to embark on their digital journey should consider partnering with fintechs instead of trying to go it alone. By partnering they can handle the federally regulated side while their start-up partners focus on building apps and platforms. We’re already seeing community banks and credit unions revive their legacy businesses through FinTech partnerships in which they run the plumbing for billion dollar FinTech businesses.

Small and mid-size banks should also look at fintech partnerships not just from a channel perspective but as a chance to convert low cost digital accounts to high value relationships through targeted financial advisories, data-driven campaigns and a very tight fulfillment process. This requires basic foundations to be set up, such as: a customer data and 360 degree insights foundation; segmenting the customer base and identifying product needs; building up a basic analytics capability to drive data-driven campaigns with targeted offers and messages, and developing strong operational insights to improve customer onboarding and reduce churn and dormancy in the first 90 days. Once they have the capability to truly understand the personal needs and goals of their customers, banks can further monetize relationships acquired through fintechs, such as turning a personal loan account into a wealth management relationship.

Small and mid-size banks tend to have data silos associated with their different product groups. How would you recommend they use this data to improve the customer experience?

When banks pursue a use case-driven approach rather than a technology-based strategy, it leads to more assured outcomes. But if they begin by setting up master data management and enterprise data lakes before planning business use cases, they usually have to wait 18-24 months for use cases to be delivered. By that point so much time has passed that use cases may be misaligned with shifting business priorities. Banks can achieve much better results when customer experience use cases and enterprise data strategy go hand-in-hand, not in sequence.

Fortunately they don’t have to boil the ocean before making progress. Even when data resides in product silos they can start on the vision of enterprise customer 360 but implement in incremental phases, starting with one product line and use case and adding other products and use cases over time. The key is to avoid the big bang approach. It’s much better to start small with what you have, even if the data is residing in silos, while ensuring tight alignment to customer experience delivery.

Delivering connected banking experiences is vital to helping customers view their bank as a partner in building a healthier financial lifestyle. We recommend banks look at business priorities to identify use cases that will bring the greatest improvements in customer journey experiences. They could also go after low hanging fruit based on data availability. Sometimes just providing a single customer view to your tellers and call center agents can bring the biggest improvements in first call resolution and customer satisfaction.