Survival code for tomorrow's banks

D. MURALI | Updated on March 24, 2011


When customers are not going back to the old ways of banking, the only option you have as a bank is to move forward with them; else they will pass right by you, at warp speed, observes Brett King in ‘Bank 2.0: How customer behaviour and technology will change the future of financial services' (

“Get moving, or get out of the way,” is his message to those waiting for a technological trend to be three years into its cycle to adapt. Because by three years into the adaption cycle, the next big thing will already be on its way, he reasons.

Customer dynamics team

A key thought in the book is that the more channels, applications, touch-points, and locations you use for engaging customers, the more you will discover that channel silos are crippling the speed with which you engage and convert sales opportunities.

The antidote, as the author prescribes, is to start removing the silos in the interest of revenue; and to create a team that is both an advocate for customers, and a team dedicated to creating the right offer, across the right channels, at the right time. “Give these resources huge support because they are your new frontline. The customer dynamics team will be one of your largest departments within three years.”

An important exercise outlined for bankers is to look at the structure of the executive team and the marketing team today. If your executives are not on Twitter, LinkedIn or Facebook, help them get engaged with these new tools to understand what your customers are doing, instructs King. He goes on to urge you to replace your heads of marketing if your marketing budget is not at least 50 per cent dedicated to digital or interactive today, because these people are already five years behind the trend on this!

Automated channels

The author foresees that automated channels could account for more than 70 per cent of revenue within the next five years most certainly, if not sooner. He, therefore, counsels that having your primary revenue capability as a subset of transactional services, marketing or IT simply does not make strategic or business sense.

Predicting that, in the most fundamental sense, channel management and customer dynamics will become the most strategic business units for the retail bank, King frets that these do not even exist today.

Channel management, he describes, will increasingly include fully automated branches such as ING Direct's Bank Cafés and other solutions incorporating avatar tellers and the like. And, customer dynamics, as he elaborates, will use the bank's customer intelligence capability constantly to optimise the customer experience through product offerings, sales campaigns and offer management, including the way staffed branches will utilise the data.

Stronger accountability

It should make for grim reading for marketing professionals to know that management is demanding stronger accountability and strong metrics which demonstrate ROMI (return on marketing investment), even as marketing departments are seeing CPM (cost per impression) response rates and sales figures plummet off traditional advertising mechanisms.

King is aghast that, due to a deficient skill set within the marketing department, rather than coming up with original and innovative approaches to utilise social networking and digital technologies, most marketing departments are stuck and simply find themselves trying to retrofit traditional campaigns onto new media, with very little success.

An example he cites is of electronic direct mail, which is virtually useless as a medium now because such broadcast, one-size-fits-all e-mail campaigns have been overused, creating a broad brush classification of all such e-mail marketing as spam. He laments that all the traditional marketers who have been dumping direct mail down their e-mail lists have simply ruined the medium for marketing altogether.

So, what is the solution? Create a team that focuses on constant optimisation of customer propositions through segmentation analysis, behavioural analytics, just-in-time product manufacturing, and permission-based marketing, the author directs.

This will be supported, he adds, by neural networks through precognitive selling, which will anticipate the sale based on behavioural patterns and segmentation data, thus generating averaging response rates of 20-25 per cent rather than the 0.01 per cent (TVC) to 0.4 per cent (direct mail) of traditional push approaches common today. “Customers will perceive this not as marketing, but rather as servicing because the messages will be individual, unique and integrated seamlessly into their banking experience.”

Optimising brand experience

Sample these scenarios that the author lists:

When you are shopping, your bank offers you a line of credit to use for purchasing the bedroom setting you are considering buying.

When you are booking travel online, your bank automatically provides you with travel insurance coverage at an agreed set rate.

When you get a salary increase, the bank offers you an upgraded platinum credit card with an extended credit limit.

Insurance on your home, car, and boat are integrated into a central policy, automatically updated unless you nominate otherwise, thus offering you bundled products that are constantly optimised.

Thus, when the customer is the primary focus, as emphasises King, the marketing team will be a true revenue generation platform, not through advertising, but through channel, customer, and offer management. “The biggest obstacle the marketing team will need to face is the concept that the customer dynamics team is far more than a new method of organising advertising activities. It is a team dedicated to optimising and showing customers the brand experience, and not just telling them what the bank can offer.”

Straight-thru processing

An informative section on ‘technology and innovation' discusses such core changes as STP (straight-thru processing) capability, the move towards channel-agnostic content, and processing capability backed by IP-based service-oriented architecture.

For starters, STP is a concept and process encapsulating technology that relies on a number of core technologies, including customer analytics and metadata management, consolidating the messaging platform between channels and legacy systems (middleware), credit risk management, settlements, and other core components, as the book educates.

“STP automates the assessment of risk for low to medium involvement products, ranging from credit card applications and personal loans, to refinancing of mortgages and lines of credit, and the establishment of overdraft facilities. STP will enable the bank to give instant approval, streamline the fulfilment process and reduce paper handling to an absolute minimum.”

Service-oriented architecture

In the author's view, the bank's service-oriented architecture will become the DNA of the business, as ATMs, voice, data, branch automation, the Internet and mobile all move on to IP-based operating platforms. He avers that we will continue to migrate business processes to application server technology or even into the cloud, thus continuing to move away from legacy core banking systems wherever possible.

The biggest single improvement, postulates King, will be in telephone-based service technologies. He wishes that, rather than have an IVR system that sounds like we are reading out the bank's organisation chart (‘Press 1 for Retail Banking, Press 2 for Corporate Banking…'), the IVR will be optimised for each customer. “That is, he can either ask for exactly what he wants, or he will be presented with options most regularly chosen by him in previous interactions with the bank.”

Recommended study for professionals in financial services.

Published on March 23, 2011

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