In my previous blog I introduced the series with the idea that financial services firms are now being expected to operate and be “Open 24 Hours.” Underlying this is the transition from the physical business model to the digital business model. This principle can be built upon by exploring the factors that are driving this change and some of the challenges that need to be addressed.
The explosion of digital devices, mobile apps, Wi-Fi everywhere, cloud computing and broadband internet together, provides consumers with increasing ways to explore and shop online. With increased use, shopping and buying online is quickly becoming the normal approach, especially with younger consumers. In fact, a recent study found that 64 percent of generation Y pays half or more of their bills electronically.
Increasingly, consumers start their purchasing journey in the digital space – primarily on the internet. This initial step is usually preceded by a referral from a friend, colleague or family member based on a superior experience. Regardless, the trend for consumers especially in the retail industry is to shop online and purchase offline.
How is this manifesting for retail banks? Just look at the forecasts of usage patterns and changing transaction mix across banking channels. Recent industry surveys all confirm that the volume and mix of transactions is forecasted to change over the next five years. Specifically, the internet, through mobile channels, is increasing in usage. The branch channel is expected to flatten and in developed markets, expected to decrease. In addition, the nature and type of transactions traditionally conducted in the branch is shifting to digital channels, as more technology-enabled solutions are deployed.
All new innovations start out with limitations and quickly become more robust overtime. Customer expectations of what is provided also increase as these innovations become more mainstream. Financial services customers are beginning to expect that they will be able to complete banking transactions, such as online purchases, in the digital channels just as they are able to do in the branch.
With more customers choosing to engage using digital channels, banks will need to work through the challenge of bringing the full range of capabilities now in the branch to the digital channels.
Today, banks must deal with new logistical challenges, as the power of when and how to interact shifts to the consumer. With these challenges in mind, there are a number of questions that must be considered:
- How do banks structure and staff in order to deliver services in a 24 hour/anytime operating model?
- How do banks guarantee that customer experience is superior and consistent, regardless of the channel chosen to initiate interaction with the bank?
- How might banks be able to transact in every channel versus just at the branch?
- How do banks ensure that they have the right resources/expertise at the point of interaction, now controlled by the customer?
- How do banks optimize operating costs while expanding the operational footprint?
The good news is that the technology of today and of the future will create new and more options for how banks overcome these challenges. It is important to note that the operating model and logic for service delivery and distribution must be reconceived based on new capabilities that current and emerging technology innovation brings.
In my next blog, I will discuss the ways in which banks could develop capabilities enabled by technology to address the operational and logistical challenges inherent in operating in a customer-driven 24-hour world.