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How Banks Can Capture New Customers by Adopting a Digital Strategy for Mortgage Lending

Banks are experiencing market disruptors attacking from many angles. They’re facing competition not only within the financial services industry, but also from non-traditional banking institutions that are delivering new mortgage lending models and innovative digital services that provide the convenience and personalization consumers want. Unless banks adopt these new models as well, they risk losing customers and revenue to competitors and emerging market disruptors. In this blog, I’ll focus on how banks can implement a digital branch strategy for mortgage lending that enables them to deliver greater value to their customers, improve productivity among their advisors and even increase profitability.

In mortgage lending today, there are common “gaps” where consumers are most likely to abandon the process or go to a competitor. From the consumer’s perspective, acquiring a mortgage is likely the biggest purchase they will ever make. They spend time researching it, getting their finances in order and gathering the necessary documentation. If the consumer visits a bank branch wanting to apply for a mortgage, only to be told that the mortgage specialist is not available right now or to make an appointment for next week, they are likely to walk across the street to a competitor and not come back. Banks are seeing “leakage” in the mortgage lending process as high as 70% in these scenarios. Once a customer has left, only 30% are likely to return. Read More »

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How Banks Can Begin the Journey to IoE Readiness

Cisco’s recent survey of 7200 banking customers in 12 countries left me with a crystal-clear takeaway: consumers are ready for the Internet of Everything (IoE) — and they want it now.

But to meet that demand, banks need to assess their own capabilities as they begin to light up their own “dark assets” with network connectivity and embark on the journey to IoE readiness.

In our survey, we tested five key IoE-enabled banking concepts related to advice (virtual financial advice, virtual mortgage advice, and automated financial advice) and mobility (branch recognition and mobile payments). These concepts resonated with customers globally: 75 percent of all respondents would move their money to another provider for one or more of the five concepts. And while the interest is significant everywhere, in emerging markets, respondents are twice as likely to move their money. Read More »

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The Future of Retail Banking

During your morning workout at the gym, a device on your arm measures each step and connects with…your bank. By monitoring your healthy lifestyle, the bank can then arrange a lower rate on your health insurance. Later, when walking toward your office, you notice an apartment for sale in a neighborhood you have been scouting for real estate deals. So you point your smartphone at the building to view an augmented-reality image superimposed on the building. In turn, you see the price, square footage, and a live link to your bank’s virtual mortgage advisor.

These kinds of scenarios could become commonplace, once banks embrace the opportunities of the Internet of Everything (IoE) era. While today’s digital consumers demand experiences that are relevant to their current context, many feel that banks don’t understand their needs. Contextual interactions may be common when buying books or streaming movies, but customers sense a “value gap” with their banks. And many are willing to trust disruptive innovators from outside the traditional realm of financial services to fill this void.

Banks can keep pace with customer demand by adopting IoE-enabled solutions that offer expert advice, value-added services and convenience, whenever and wherever customers need them — and do so securely. Wearables and augmented reality are among the more forward-looking innovations that banks should be exploring today. But there are many other ways for banks to reconnect with customers.

In a recent Cisco survey of banking customers in 12 countries, respondents were extremely receptive to five core IoE-enabled banking solutions centered on advice (virtual financial advice, virtual mortgage advice and automated financial advice) and mobility (branch recognition and mobile payments). Seventy-five percent would move their money to another provider for one or more of the five concepts. In emerging markets, respondents are twice as likely to move their money.

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IoE Can Help Banks Restore Trust and Close the Value Gap with Customers

“Let the buyer beware” is a sentiment that dates back well before consumer protection and truth-in-advertising laws. Yet, the issue of trust continues to permeate all areas of society today. A few weeks ago, I wrote about the “trust cliff” that affects the amount of information consumers are willing to share with retailers in order to have more relevant interactions.

Now, a new Cisco study on retail banking in 12 countries reveals a different kind of trust problem: consumers are getting less value than they expect from their banks, and this “value gap” is impacting customer trust.

The global financial crisis of 2007-2008 greatly damaged consumer trust in financial institutions, and brand equity has fallen along with it. In 2009, one year after the financial crisis, the world’s top 500 brands saw the value of their brands drop by 32 percent. For many banks, their brand value has yet to recover from pre-crisis levels.

But the roots of distrust go deeper than that. Our study shows that there is a fundamental disconnect between banks and their customers, and many customers no longer look to their banks to help them meet their financial goals. In fact:

  • 43 percent of customers say their bank doesn’t understand their needs
  • One in four would choose another provider for their next account or service
  • Only 40 percent of respondents worldwide turn to a financial professional for advice, and of these, 28 percent believe the advice is ineffective

IoE Trust and Value Gap graphic

Meanwhile, a growing cadre of disruptive “non-bank” innovators is exploiting this value gap between banks and their customers. They range from technology companies such as Apple and Google, to retailers such as Amazon.com and Tesco, to mobile and digital-only banking services, payment companies, and automated investment services. A surprising 80 percent of consumers surveyed said they would trust a non-bank for their banking services. In eight out of the 12 countries surveyed, more consumers would actually trust a non-bank than their own bank.

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In Emerging and Developed Markets Alike, Banking Customers Demand IoE-Driven Services

Around the world, banking customers express similar frustrations: they believe the value they receive from their banks is declining, at a time when their trust in those banks already has eroded.

What’s more, according to a Cisco survey of 7,200 banking customers in 12 countries, four out of five customers would trust a non-bank, such as a technology company or retailer, to handle their banking needs. Some of those disruptive competitors are succeeding where banks fail: by engaging customers with convenient transactions and value-added services.

The Cisco study found that Internet of Everything (IoE)-enabled services can help restore the value customers expect from banking institutions. IoE — the networked connection of people, process, data and things — makes it possible for banks to offer a more relevant, engaging, and convenient experience for customers.

Of the $19 trillion in global economic value Cisco estimates IoE can create over the next decade, 7 percent ($1.3 trillion) is accounted for in the finance market and could be addressed with concepts included in this survey.

The digitization of business and society is happening at a rapid pace and people are looking for improved, digital services that make life easier. Banks need to embrace this pace of change and deliver relevant services or risk becoming obsolete in a market where other providers are stepping in to fill the gaps.

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