Banking is one of the oldest, most profitable and most in-demand businesses in the world.
It’s also in a state of upheaval. Due to questionable business decisions and dubious lending practices, the banking system collapsed in spectacular form in 2008. Governments stepped in to bail out under-capitalized banks and prop up the severely wounded. Consumer trust was shattered as a result.
Amid the tumult, Internet and mobile banking became the rule rather than the exception. Traditional banks must now compete with smaller, faster and aggressively priced credit unions, asset light online banks such as ally.com. And they must do so amid the alarming rise of digital thieves, who collectively stole more than $1B this year from 100 different banks, not to mention growing interest in peer-to-peer lending and fundraising.
Of course, consumers haven’t withdrawn their deposits in favor of their freezer or mattress, at least not yet. But if bankrate.com user reviews are any indication, most consumers aren’t overly happy with their bank. And customers switch more now than before, says Steve DeLaCastro, Cognizant’s Vice President of Banking & Financial Services.
What can banks do, then, to increase trust and earn the loyalty of consumers again? Having consulted with numerous global banks, both large and small, DeLaCastro has several recommendations.
Due to stiff competition and multiple security threats, banks must correspond more frequently with customers now. And not just after the fact. Correspondence must be proactive, DeLaCastro says. For instance, Citibank and American Express recently sent out security notifications and replacement cards (without being requested) amid suspicious activity, even before legitimate fraud was found. They did this as a “just in case” precaution and assurance to customers that their money and identities are in good hands. Responsive behavior like that goes a long way towards building trust, DeLaCastro says.
Big data is more than just a buzzword or a cliché item on an organizational checklist. It’s how you better understand consumer demand in the digital era. It raises trust, loyalty and stickiness to the bank. To accomplish this, you need a thorough understanding of modern analytics, well beyond the traditional “Web” analytics kind. In short, advanced analytics allow banks to identify breaks in the transaction process, where and why loans were abandoned, how consumers funnel to which channels and what pleases or frustrates the customer experience. More than anything, this technology is crucial to creating rich, personal dossiers for every one of your customers, an important necessity if you wish to achieve the following. (See “Making Analytics Actionable for Financial Institutions.”)
Trust goes beyond just fraud prevention, DeLaCastro says. The bigger issue is better knowing individual depositors and borrowers so banks can interact with them as a person instead of a pre-qualified statistic. When that happens, consumer confidence goes up. Again, mining and collecting data with advanced analytics enables this. It allows banks to address a customer by name instead of “dear sirs.” It allows them to set pricing and credit privileges based on meaningful insights, not general demographics. Well rated banks are already doing this and more to the delight of consumers. Aspiring banks would do well to follow suit, DeLaCastro counsels. (See “For Effective Digital Banking Channels, Put Customers First.”)
Reinforce the digital vault.
Obviously, nothing is impenetrable, not even sophisticated bank vaults, digital or otherwise (i.e. where there’s a strong enough will, there’s always a way). But forward-thinking banks must redouble their networking and computer security, especially as easy access to branches proliferates to mobile. The best way to do this? Don’t let any one person know, understand or hold sufficient keys to compromise the entire security. For example, disperse responsibility and authority to a large number of managers, DeLaCastro says. Big banks are already doing this; multi-control fail safes help avoid inside jobs, the kind that can lead to deep financial loses and major disrepute. In other words, don’t get beat by one or two dishonest employees. Make an entire, sophisticated and calculated gang beat you.
Know when to avail a human.
Online banking is empowering. Mobile banking is even better. As such, digital natives and immigrants alike reach first and foremost for cost-saving “self-service” apps when it comes to banking. Ultimately, the expectation is that banking will become like Amazon’s or Netflix’s highly curated and individualized menu, DeLaCastro says. A mobile-first mindset can get you there. But when problems arise (and after knowing the personal preferences of each customer made possible by advanced analytics), the most reputable banks can determine a customer’s propensity for engagement and ready a human representative at the tap of a call button. It’s all about seeing and distilling meaning from the Code Halos—the digital code—that surround people, processes, devices and your extended organization, including partners. (Read our series on Code Halo™ thinking to learn more.)
Consider a rebirthing strategy.
Sometimes, a bank’s reputation and legacy is too ingrained for its own good. When that happens, a re-branding is probably in order, DeLaCastro says. For example, he advises a “bank within a bank” rebirthing strategy, similar to what many UK banks have done recently to reinvent themselves. In other words, become the startup that will eventually overtake your current operations before someone else does. Target a different demographic or banking specialty from within, then, let the rest follow. Whatever you decide, banks must reconsider how they’ll operate every step of the way in this brave new world.
Of course, much of the above is difficult to do without strong and bold leadership, DeLaCastro says. But it is possible. And it will take more than just a new coat of paint. To truly regain consumer trust and loyalty, banks need new substance.