Transform research: The age of omnichannel banking 2015

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Transcript of Transform research: The age of omnichannel banking 2015

  • The age of omnichannel bankingWhy omnichannel is the next wave of retail banking innovation


    Introduction: The Omnichannel age of retail bankingThe death and destruction of traditional bank branches caused by digital and changing customer dynamics is widely foretold. But even digital natives are dual citizens of the physical world. Branch location is still customers strongest reason for switching current account and retail customers still want branches for important elements of sales and service.Retail is increasingly moving towards Omnichannel; enabling customers to do business on whatever mix of channels they choose. How channels are integrated is becoming as important as what channels are available.This has big implications for banks. Too often today, it is almost as if the digital and bank branch experience is designed and built by different companies. In the future, digital will underpin how banks deliver great customer experiences across channels.In this report we explore what drives the shift towards Omnichannel, how banks are performing today and a vision for Omnichannel banking in the future.Simon is a Transform Associate and a former Head of Product at Barclays BankJames is Financial Services practice lead for Transform


    The report structureThe report itself is structured into 3 sections:

    Why omnichannel mattersThe strategic drivers of Omnichannel bankingHow banks perform todayResearch on how 11 banks integrate digital and physical journeysThe future of omnichannel bankingOur vision of the future of omnichannel banking


    The banks we surveyed..Transforms primary research was concluded in March 2015 across 11 high street retail banks. The research focussed on the experience delivered to new customers and comprised:a mystery shopping exercise testing aspects of branch customer experiencea feature benchmark of digital capabilities

  • Executive Summary


    Executive SummaryEconomics, technology, digital adoption and customer demand are pushing banking rapidly into an Omnichannel age. To understand how well banks deliver an Omnichannel experience today, we studied eleven high street banks. We looked at two important bricks & clicks journeys: from digital to branch and in-branch to digital.We found that todays banks:offer a fragmented and channel-siloed experience to customers. For example, only three banks offered any type of click for appointment capability; four failed to offer any kind of integration of digital in-branchAre led by Barclays and NatWest in terms of delivering an Omnichannel experience. However banks are generally immature in their Omnichannel offering and trail the wider retail sectorOur vision for tomorrows Omnichannel banks adds up to a reinvention of retail banking. Customers will enjoy far more integrated journeys across channels for sales and service. Branches will use technology to serve, sell and educate customers. Branch networks will become more customised and in many cases traditional branches will be replaced with skinny self-service branches. Increasingly branch-like experiences will be delivered flexibly by individual staff. Making this happen demands more than the digital technology. It requires the right systems, process, data and people capabilities. All of this will be underpinned by a continued cultural shift towards deep customer-centricity.

  • Why omnichannel mattersThe strategic drivers of omnichannel banking


    What is omnichannel bankingOmnichannel provides an integrated approach for customers to interact with the bank whether that be for sales, transactions or service. From the customers perspective this means being able to:

    Choose the most appropriate channel(s) for any given interaction (although note that omnichannel does not mean providing all channels for all interactions).Make seamless transitions from one channel to another (including web, social, TV, mobile, telephone, ATM, branch and paper channels).Enjoy more consistent interactions across the various touch points and channels.


    Retail banking is about to enter the omnichannel age

    1963 Charge cards launched in UK1967 Worlds first ATM1969 Cheque guarantee cards launched in UK1970 Direct debits launched in UK1990 Cashback launched in UK1987 Debit card launched In UK

    1989 First UK telephone bank1997 First UK internet bank channel launched1997 First UK supermarket bank launched1999 First internet-only banks launched

    2010 Launch of mobile banking2012 First instant payment app (PingIt) launched by Barclays2014 PayM launches first mobile payments servicesA high quality, omnichannel customer experience will become the most important differentiator in UK retail banking

    1659 Earliest known cheque1694 Bank of England founded1809 There are now 800 branches outside of London1833 Joint stock banking permitted by Act of Parliament; accelerates expansion of branch networks


    Omnichannel customers buy more financial productsSOURCE: Wells Fargo Bank, Investor Report, 2013,


    Six strategic factors drive banking towards omnichannelThe death of traditional bank branches is widely predicted. But even digital natives are dual citizens of the physical world. Customers trust local staff. Branch location is still customers strongest reason for switching current account and retail customers still want branches for important elements of sales and service.

    Factors driving digital bankingFactors sustaining branch bankingCUSTOMER TRUSTCUSTOMER SERVICE PREFERENCESBRANCH ROLE IN SALESCOST SAVINGSCUSTOMER ADOPTION OF DIGITAL CUSTOMER SATISFACTION Branch networks are expensive to operate and the digital cost to serve is significantly lower.Digital is now the most high touch channel because it offers customer convenience. Branches are becoming lower touch.Customers trust local branch staff considerably more than national bank brands.Despite high digital adoption, customers still typically prefer to use the branch for some types of interaction.Most branch networks have not delivered sufficiently high customer satisfaction to prevent migration to digital channels.Convenient branch location is the most frequent reason for account switching.Omnichannel banking will be the outcome of rapid digital channel growth, combined with strong customer factors that sustain branches.


    SOURCES: Autonomous Research, quoted in FT, October 2014 converted to GBP at $1.47: 1.00; Intelligent Environments; 1. The high cost of the traditional branch networkAverage cost range of branch network (as % of total Operating Cost) Branch service costs are around 100 x greater than digital channels. 60%The average cost of running a branch network is estimated at between 40% and 60% of total retail bank operating costs.40%


    2. Digital is a higher touch channel than the branch

    SOURCE: British Banking Association/YouGov, June 2014, is the highest touch channel for retail banking customers.


    3. Banks enjoy limited and static customer satisfactionSOURCE: Source: Accenture UK Financial Services Customer Surveys 2011, 2012 and 2014 Satisfaction, advocacy and loyalty levels have not changed in 3 yearsSatisfaction, advocacy and loyalty levels have not changed in 3 yearsSatisfaction, advocacy & loyalty levels are staticAround 40% of customers are not satisfied with their bank


    4. Customers trust local branches more than national brandsSOURCES: CBI/ YouGov: Confidence in business; Fieldwork Time: 26th - 28th November 2014; ; YouGov Public Trust in Banking, Spring Symposium, April 201373%Think banks have a bad reputation67%Trust local bank branch staff33%Of people say they dont trust business as a whole across the country.81%Of people say they trust local businesses in my area.

    Trust is probably the most important asset in retail banking.

    Without trust, no amount of customer experience design or service excellence will produce advocacy.

    Consumer trust in banks was generally damaged following the credit crunch. Branches are (or should be) a key part of the strategy for rebuilding that trust.


    5. People still value branchesSource: Gallup, May 2013 (note US data)People prefer branches for new accounts, problem solving and guidance.People prefer digital for routine transactions and information.Day-to-Day/frequent transactionsAd Hoc transactions


    6. Branches are important for new customer acquisitionConvenient branch location is still the primary reason for switching personal current account.New customer acquisition will become increasingly important as a range of factors drive up switching rates. These include regulatory and competition enquiries into market concentration, which seek to address perceptions that too few banks hold a disproportionately high market share in current accounts.Sources: GfK Financial Research Survey, 12 months ending December 2013, Branch LocationDissatisfactionWeb/phone bankingRecommendation34%15%14%14%

  • How well do banks deliver omnichannel today?


    How we assessed banks omnichannel performanceWe studied the omnichannel performance of 11 High Street and Challenger banksWe looked at two important bricks & clicks channel transitions: Digital to Branch and Branch to DigitalWe studied the experience from the perspective of a new current account prospectMISSION: Open a new current account.

    CHANNELS: Digital discovery, branch purchase.


    Banks offer broken journeys from digital to branchComparison SiteSupports online purchase journ