Like I pointed out in my last blog, for many banks, the journey has already begun, yet it is still in its nascent stages. In the last of my series of blogs on Goal Based Banking, I outline the key steps banks should take to succeed in this journey.
A bank, like any organization, is built up of four components – people, process, technology, and customer. Each of these components will have to undergo a radical change to make sure that banks are truly aligned to the goals of a customer, and do not focus on the transactions alone. To achieve this, banks will have to focus on the following four aspects.
Put the customer at the center
Today’s banks are product-centric. To cater to the unique needs of each customer, banks have a huge number of products and services in their product catalog. It is not uncommon for banks to have more than a thousand varieties of their products and services listed on their website. These banks are mostly product-driven, and they focus mostly on the benefits of each product. I am sure you would have seen a home mortgage that is catered to working professionals, ladies, retired people, entrepreneurs, government officials, ex-pats, non-resident nationals, couples and so on which highlight the benefits they offer, especially the rate of interests.
To understand the goals of their customers, or ‘why’ any customer makes any transaction, banks should put the customer at the center, and not the products. To put the customer at the center, banks need to understand the customer more and be cognizant of the fact that the needs, aspirations, and goals of a customer will change over his/her lifetime.
While many banks have invested heavily in each product and the analytics associated with it, very few have spent time or money to understand their customers in detail. For example, plenty of banks can derive the lifetime value of a customer, measure each customer’s spending patterns and make personalized offers, but they would also ‘carpet bomb’ the same customer with multiple offers because either they are not able to derive insights from this data or do so in hope of believing that at-least one offer will click. As PwC mentions in their report, ‘few can analyse a customer’s deposit account, see that his salary deposit has increased, and send a note congratulating the customer on his or her promotion together with an offer of a premium card and a higher credit limit.’ In short, the banks are not customer-centric. It is an irony while 61% of the banks say that a customer-centric model is especially important, only 17% are prepared for it. And I feel that to become truly goal-driven, banks will have to start focusing on the evolving lives of their customers.
Focus on the processes, not the siloes
A product-centric view and a complex product lifecycle has caused a siloed organization, in which products and departments do not talk to each other. I have personally experienced scenarios in which I had to disconnect my call to customer care because they could not transfer my call from one department to another department. I can quote many instances where my customer care representative was not able to provide me with a 360-degree view of the relationship I have with my bank because the customer care representative was from another ‘department.
This siloed mentality is preventing the banks from being able to bring out their collective power to their customers.
The level of silo mindedness across the banks is at such a level that the different LOBs in banks are run as different businesses altogether. Sometimes, the heads of different units even forget that a collective effort is what it takes to achieve the best result for the customer. Sometimes, the siloes are not between products only. The siloes happen between channels also. For example, the team for the online channel is normally not aligned with the team for direct sales.
Because of this misalignment, there is a huge disconnect across each product line and supporting line. If the bank were a matrix, it would seem that the bank was disconnected at each cell level. This disconnection drives complexity across all the levels and the ultimate impact is felt by the customer.
The cost of a siloed organization is huge. Because of the complexity, decision making is not quick, and innovation happens at a slow pace. There are several instances where organizations had to lose out because of their siloed mentality. For example, in Sony, three different teams had built products that could have successfully replaced Sony’s successful Walkman, but Apple, through its single-minded focus and simplicity walked away with the prize through its iPod.
A customer interacts with his/her bank through multiple products or services, and if the bank does not move out of the siloed mentality, they will not be able to map the interactions across the lifetime of a customer.
Create a customer obsessed culture
The current workforce of the banks is focused on helping a customer process a transaction, not find an answer that leads to their goal. For example, if I call the customer care of the bank asking a query regarding using my debit card for a transaction at an online retailer, the focus of the customer care is right now in helping me solve the transaction. But, would it not be better if the customer care representative understood my purpose of making the transaction and helped me find the best way to make the transaction – even if it meant using the credit card of the same bank (which would mean another silo) or using another mode of payment from another institution. (Ever heard of the story when a Zappos customer care executive recommended a shoe from a competitor because it was better for the customer).
This misalignment happens because customer experience is seen as the accountability of one department and not as the primary responsibility of everyone in the bank.
Banks, to become, truly goal-driven, will have to make sure that customer obsession is part of everyone’s job. The banks will also have to ensure that their people develop a superior customer understanding and a culture of customer obsession along with deep knowledge about the profile of each customer.
Become digital native, not digital-driven
A recent survey by Bain and Research Now shows that while people trust their primary banks and banks in general to handle their money, technology firms like PayPal and Amazon are catching up. But, if we dig deeper, younger customers, who are more tech-savvy, but may or may not be digitally savvy, are willing to buy financial products from tech companies. Along with the big tech giants, a new breed of companies has taken genesis in recent years – fintechs. Fintechs do not satisfy new needs. They just perform to the four basic functions banks have been doing for several years, but they do it faster and in a more cost-effective way and give a greater customer experience.
These technology companies and fin-techs use technology to create a superior customer experience which helps them related to the true purpose of the customer. While there are gaps, companies like Amazon, Google, Facebook are using superior algorithms to understand the purpose of each of my transactions. For example, if I search the prices of a flight from my hometown to Mauritius, then these technology giants, based on my search history and browsing pattern, are quick to understand that I am planning a vacation and hence show ads that are relevant to my needs in the vacation.
What technology companies do is not rocket science. They just use algorithms. Algorithms help turn data into insights. Banks can leverage algorithms along with the latest technologies such as big data analytics, machine learning, artificial intelligence, banks can map distinct data points and transactions to create a better picture of the customer.
Banks also need to become digitally native in their internal operations as well as customer touchpoints to enable each transaction in a digital way. Digitalizing the transactions will surely enable the banks to understand the goal of each transaction in a far better way.
If my bank knows me better, then I am sure it will provide me with a product that is more relevant to me at any point of time, rather than a product that was relevant to me two years ago. If my bank offers me a more relevant product, then I will certainly trust my bank more.
How can banks cater to the above statement? What can they do to understand the purpose of each transaction and deliver personalized goal-based banking to its customers? In my next article, I will list out an action plan that banks can leverage to become truly goal-driven.
I believe that the true purpose of any organization is to cater to the needs of their customers. Banks are no different. Helping their customers achieve their goals should be the one true purpose of every bank. To be true to this purpose, the banks will have to undergo a total transformation – from a customer, process, people, and technology point of view. Banks that cater to the goals of a customer will not only create a better customer experience, but also create an increased market impact, and help build more trust. And only organizations that operate on trust will finish the long race. I am sure that banks will definitely win this long race. So that they can help Mark and Sara achieve their goals.
 Retail Banking Strategy 2020; The Financial Brand https://thefinancialbrand.com/56988/retail-banking-strategy-2020/
 How Banks Can Defend Against the Threat From Big Tech http://www.bain.com/infographics/bank-loyalty-2017/