Originally posted by Melanie Friedrichs on The Andera Blog. Follow us on twitter @AnderaInc.
Everyone in retail banking today talks a lot about “customer experience,” but usually, we don’t specify exactly what we mean. In reality, customer experience can mean many different things, and the exact definition depends on who you want your institution to be. Creating a coherent experience is essential, but what type of experience are you trying to create? Do you want your customers to see your institution as a friendly neighborhood shop, a financial version of Apple, or a five-star hotel?
Deciding who you are isn’t easy; in fact, it’s probably the hardest and the most important decision financial institutions make. In today’s low interest rate and highly competitive environment, it’s increasingly difficult to differentiate on products or rates. Jeff Stephens, the CEO of Creative Brand Communications and Tribed, argues that the only way that banks and credit unions today can “decommoditize” is to cultivate a unique experience that appeals to a targeted niche. (For more watch Jeff’s webinar with Andera in February). Customer experience is the new battleground of competition.
Once you’ve decided on the type of customer experience you want to create, how will you create it? Usually our clients tend to fall into one of three buckets: full service, self-service, and mixed-model. Each model attracts different types of customers and members and uses different technology to serve them.
Full Service
Of the three models, full-service exhibits the greatest continuity with traditional banking. Institutions who embrace the full-service model usually consider branch based transactions to be the core of their customer experience, and position themselves more as a financial partner than as a financial service provider. Full-service institutions may target affluent customers or businesses who rely more on high-touch investment services and whose greater average profitability can fund personalized staff time. Alternatively, full-service institutions may focus on a specific locality, using in-person transactions to build a sense of community between customers or members.
Although full-service models pivot on the human-to-human interaction, technology must still be an integral part of their strategy. Institutions that specialize in complex products or financial advisory may want to invest more in robust tools for staff and focus less on customer or member facing portals, but they still need to provide minimum functionality and make sure their technology isn’t painfully difficult to use. Full-service institutions can also leverage technology to improve the branch experience. Umpqua Bank provides a great example; they’ve given their staff tablets so that they can sit next to customers and review their accounts or apply for new products sitting side by side. Here is an article from Marketwatch with a few more examples.
Self-Service
Most of the banking start-ups we see today embrace the self-service model. They focus on creating easy-to-use online and mobile interfaces and discourage customers and members from using branches or the phone. Many don’t have branches at all. Where the full-service institution focuses on fostering community and creating deep relationships, the self-service model aims to provide basic banking services as efficiently as possible. Like most technology start-ups, they have a three part business model: small margins, small costs, and big scale. Andera clients who are most successful in online account opening and lending unsurprisingly tend to fall into the self-service bucket.
For the self-service model, user experience (discrete from customer experience) is king. Self-service models can’t compete with established institutions on product variety, branch network, or personal attention, but they can delight customers and members with easy-to-use tools and unique features. Self-service institutions usually invest more time and money into their online and mobile banking platforms, increasing functionality and optimizing automated processes to reduce the need for human intervention. Startups like Simple and Movenhave achieved early success by paying meticulous attention to details for a subset of core products and services.
Mixed Model
Mixed-model, of course, falls somewhere in between. Most of the mega-banks fall into the mixed model category, because if you want to appeal to everyone you need to offer both full-service and self-service. (Interestingly, big banks are increasingly creating separate, self-service brands: PNC’s virtual wallet, Capital One 360, BNP’s new Hello Bank.) Many credit unions also follow a mixed model; many credit unions have historical roots in a particular locality, but have evolved extensive digital services to serve members who have moved away, or to lower costs.
Financial institutions that follow a mixed model are at once both the most inclusive and the most vulnerable to failure. It’s hard to do everything, and it’s impossible to do everything well. Vendor partners are essential for mixed-model institutions. They can’t afford to make all transactions human interactions like full-service institutions, and they don’t have the time or money to obsess over details of digital services like self-service institutions, so they need to outsource their technology needs. Outsourced systems are always less flexible and less personalized than custom systems, but they can provide a good user experience for a fraction of the cost.
We believe that it’s possible to create a great customer experience using any of these models. The greatest risk is not thinking seriously about what model you want to follow, and which customer experience you’re trying to create.