Omnichannel, not omnishambles

Good article from McKinsey on the problem of multi-channel strategy within banking. Although, I do not think they take the argument far enough. We need now to develop a “Mobile First” strategy for banking. Omnichannel is not good enough now.

Although consumers have quickly adopted digital channels for both service and sales, they aren’t abandoning traditional retail stores and call centers in their interactions with companies. Increasingly, customers expect “omnichannel” convenience that allows them to start a journey in one channel (say, a mobile app) and end it in another (by picking up the purchase in a store).

For companies, the challenge is to provide high-quality service from end to end, regardless of where the ends might be. That was the case for a regional bank that sensed that too many customers were falling into gaps between channels.

Mapping its customers’ journeys confirmed the suspicions (exhibit). Four out of five potential loan customers visited the bank’s website, but from there, their paths diverged as they sought different ways to have their questions answered. About 20 percent stayed online, another 20 percent phoned a call center, and 15 percent visited a branch, with the remainder leaving the process.

Mapping customer flows highlights pain points.

The channels’ differing performance pointed to specific problems. Ultimately, more than one-fifth of customers who visited a branch ended up getting loans. But in the online channel, less than 1 percent got a loan after almost 80 percent dropped out rather than fill in a registration form. Finally, in call centers, a mere one-tenth of 1 percent of customers received a loan—perhaps not surprising, since only 2 percent even requested an offer.

To integrate digital and traditional channels more effectively, the bank had to become more agile, with the understanding that its one-size-fits-most processes would no longer work. Complex registration forms were simplified and tailored to different types of customers. Revised policies clarified which channel took the lead when customers moved between channels. And new links between the website and the call centers enabled agents to follow up when online customers left a form incomplete. Together, these types of changes helped increase sales of current-account and personal-loan products by more than 25 percent across all channels.

 

Latest Household Channel Preference Report “The Quiet Revolution” Released

DFA has released its latest report “The Quiet Revolution”, a study of household banking channel preferences, which is available free on request. The report examines preferences across customer segments, and across the sales and service value chains and also looks at how new online players may disrupt the status quo. From the introduction:

QuietRevCover“DFA has just updated the 26,000 strong household survey examining their channel preferences. This report summarises the main findings.

We conclude that the move towards digital channels continues apace, facilitated by new devices including smartphones and tablets, and the rise of “digital natives” – people who are naturally connected.

We outline the findings across each of our household segments, and also introduce our thought experiment, where we tested household’s attitudes to the various existing and emerging brands in the context of digital banking. We found a strong affinity between digital natives and the emerging electronic brands, and a relative swing away from the traditional terrestrial bank players.

These trends create both threat and opportunity. The threat is that traditional channels, especially the branch, become less relevant to digital natives, and becomes the ghetto of older, less connected, less profitable customers. The future lays in the digital channels, where the more profitable and digitally aware already live. Players need to migrate fast, or they will be overtaken by the next generation of digital brands who are looking towards becoming players in financial services. The game is on!”

Request the report [25 pages] using the form below. You should get confirmation your message was sent immediately and you will receive an email with the report attached after a short delay.

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Banking’s Digital Elephant

A quiet revolution is under way as digital device take-up continues to rewrite the rules of banking. We have just completed a thought experiment with our survey participants as part of our channel preference study, and the findings are significant for current and potential players in the banking sector. This post provide some of the high level findings.

We began by separating our households into Digital categories, based on a series of questions concerning their digital usage. These are the three top-level categories:

DigitalCh1No surprisingly, we see the segments change by age group, with young households more likely to be Digital Natives.

DigitalCh2We then completed our thought experiment, in which we asked households to consider a scenario where a range of well known brands might offer banking services, alongside current players. We used well known brands like Google, Microsoft, Apple, Samsung, as well as Coles, Australia Post. Visa, Mastercard, PayPal and Telstra. We have no insight as to whether any of these players are considering extending their footprint into banking but we wanted to test the relative attractiveness to our digital segments, and see if there were differences between the segments, and across the companies.

We asked questions about Brand, Banking Capability, Customer Service, Technical Capability, Privacy and Trust. We then scored these and created a series of datasets. The survey comprised 26,000 households.

The top-line findings are interesting. Digital Luddites favour the existing fleet of players, but are also potentially interested in Australia Post or Google offering banking services.

DigitalCh3Digital Migrants would be interested in Google or Microsoft offering banking, and these scored ahead of all but CBA from amongst existing players.

DigitalCh4Digital Natives are much more aligned to the new global high-tech brands than to the traditional players, with CBA in first place amongst the traditional players, and Microsoft the highest scoring player of all, followed by Apple, Google and PayPal. Many of the other existing banking players were well down the list!

DigitalCh5

There is a significant shift towards high-tech, and the following chart shows all three top-line scores on the same chart.

DigitalCh6I won’t go into the detailed findings around brand, service and technology capability here, but I will summarise some of the results from the segments in terms of relative importance of different banking capabilities in the chart below:

DigitalCh7Whilst it was only a thought experiment, the message is clear. Existing players need to be thinking about how they will deploy appropriate services through digital channels, as their customers are rapidly migrating there. There is an opportunity for truly digital brands to gain mind-share and disrupt the status quo.

One final piece of data relates to income distribution. We see this migration to digital more advanced amongst higher income households. So players which are slow to catch the wave will be left with potentially less valuable customers longer term.

DigitalCh8

The true elephant in the room is the need for players to adapt more quickly to the digital world. We are past an omni-channel (let them choose a channel) strategy. Digital migration needs to become central strategy because the winners will be those with the technical capability, customer sense and flexibility to reinvent banking in the digital age. Existing brands will be under the hammer in the transition. Privacy and trust will take centre stage.

 

DFA 2013 Channel Preference Analysis – Are Bank Branches Obsolete?

The results from the DFA 2013 Channel Preference Research Program are just in. This program captures data from our 26,000 households over 12 months on their current and ideal channel preferences. This is segmented analysis, and we are already finding some strong themes emerging as we complete the data dive. The final report is some weeks away, but here is our initial take on what we are seeing.

First, we see that households are on average more connected than ever. The Young are connected for more than 100 hours each week, up 10% on the 2011 baseline, whereas Self-Funded Retirees have doubled their time online, to about 30 hours a week. We know what proportion of time is spend in social media sites (up), online media (well up) and other web sites (down).

Hour-Connected

We also looked at household preferences with respect to bank channels. Many segments are now rapidly moving online, and the young are leading the way. The way we show this is using the DFA proprietary Channel Preference Radar. We look at sales and service preferences by channel, and map these against the average. Our take-away is that bank branches are now obsolete for some of the most online and profitable segments. It is a challenge for banks and other financial institutions because the branch will increasingly become the ghetto of less profitable and older Australians.  This same digital migration is also having an impact in Mortgage Brokers and Financial Advisers. It seems to us that households are voting with their devices (mostly smart phones and tablets) and are way ahead of most of the industry in terms of migration. There are profound economic implications for the banks, and a potential impact on the high street, and on the customers of these financial institutions.

CPR_Young

SMEs Are Going Digitally Mobile

As part of the DFA Small and Medium Enterprise (SME) Survey, we asked them about their banking channel preferences. Since we last ran the study, there has been a considerable shift to using mobile devices as the preferred access device for banking services. Use of a fixed PC is down. EFTPOS service by mobile device have also proved popular. Many now use on-line payments more, have multiple mobile devices and also use social media in connection with their business. Our view is that players now need to prioritize the deployment of mobile solutions for SME customers, as they are prepared to switch providers to get more comprehensive digital services. This should replace an omnichannel strategy.

SME-Chart-DFA

Channel Preferences Are Changing Fast

DFA’s Channel Preference research examines how different customer segments are fast migrating from traditional banking channels to the digital channels across the range of sales and service transactions. However, not all segments are moving as fast, and the most profitable segments are moving to digital fastest. As a result unless channels are optimized and adjusted on the fly, banks will be left with significant stranded assets  and costs. Omnichannel strategies need to be changed to put digital at the top of the priorities.

Channel-Small