What would financial institutions do if, in the next three years, 80% of servicing transactions and half of all new deposit/loan sales still being done in branches moved to digital channels?
Banks have contingency plans for extreme occurrences like interest rate shock, credit turn-downs and all sorts of natural disasters. But what’s the plan in the event of a massive shift to digital?
This is not such a far-fetched question. After all:
In fact, customers have the channels and tools they need to make this transition tomorrow. And if they did, would banks and credit unions be ready to change their branch networks? Could they quickly transfer and/or beef up investments, marketing, support, people and skills from physical delivery channels to digital ones?
First, let’s discuss digital preparedness. If half of an institution’s origination volumes are coming through the digital channel, its origination process better be as smooth as 100-year-old scotch. OK, “Friction-Free” and “Customer Experience” are 1-2 contenders for buzzwords of the year, so we’ll skip the obvious and provide a few specific strategies we advise our clients to look at when evaluating their digital processes:
1. Create Abandonment Analytics
Of the applications attempted, what percentage was abandoned? How is this trending over time? Where are customers abandoning the application? Can the institution get down to the field level to understand what’s really going on? Leverage abandonment data to keep a close eye on where the friction is coming from in the digital experience and continuously optimize the application workflow to remove friction. If “but we can’t access our data or make changes without waiting months for the vendor or hiring expensive programmers” is the organization’s first response, it might be time to look for a new system. Data access and system configurability through a GUI are essential elements of a future-ready digital origination system.
2. Build “Moment of Truth” Metrics
We suggest tracking, at least at a high level, how long it takes to reach the key points in the customer journey. We call these key points “moments of truth” because they can make or break an experience in the eyes of the customer. This isn’t stop-watch timing or querying time entry reports, just a basic understanding of the average time it takes to complete a process or hit important milestones within a process. The goal is to identify the reasons behind the delays and increase speed over time. Here are some examples. How long does it take to:
3. Manage a Batch List
Yes, the bank should keep a “batch list,” a list of batch processes causing delays or negatively impacting the customer experience today. It’s not sexy, but it does clearly identify an action the institution needs to take to improve the customer experience. Let’s be honest, should a customer really have to wait a day to access digital banking when they open a new account, sign up for e-statements or enroll in debit rewards? We think not. Each item on the batch list will turn into a project on a roadmap (or vendor ultimatum) and goes hand-in-hand with the moment of truth speed metrics mentioned above.
Then, let’s look at two strategies for physical channels:
4. Have a Plan for the Lowest-Performing Branches
As volumes shift to digital, it’s easy to hide low-performing branches in the world of artificially allocated deposits and interest income from previously originated loans. A once-thriving branch could sit idle and still appear profitable due to deposit assignments under a traditional profitability model.
So, does it really make sense for branches to get all the benefits from deposits in a multi-channel environment? Or, is this a reporting hangover from the legacy brick-and-mortar era? If 80% of servicing transactions came through the digital channel, would this change the way the institution allocates deposits? It probably should.
There’s no need to abandon traditional profitability models. We encourage our clients to also look at profitability through a different lens, using annual revenue from incremental volumes, deposit related income (FTP & fee income) based on actual channel usage rather than artificial assignment, and direct controllable expenses for each channel. This helps remove some of the noise from traditional branch-centric profitability. It also helps identify low performing branch closure and consolidation candidates to free up capital for remote channel investments.
5. Invest in the Contact Center
The contact center becomes the backbone of digital support and the safety net for digital origination. If 80% of servicing transactions are coming through digital, what happens to chat volumes? Are customers going to be OK with live support until 5pm in a 24/7 self-service world? Who is following up on abandoned applications? When Apple Business Chat becomes the preferred method of communication, who is going to be on the other end of customer conversations? The contact center is going to absorb a lot of the pain, and banks need to start investing and thinking through the implications TODAY.
We think this is a very important topic that needs more management focus. Isn’t something this big worth some focused planning? And we have another question financial institutions might ask: “What if we wanted to make this happen?”