Bank Clients Want Social Media Account Access
By Tom GroenfeldtTom Groenfeldt
The decline in customer experience in banking is reaching an inflection point, said Bill Sullivan, head of global financial services market intelligence at Capgemini . The consultancy has just released its 2014 World Retail Banking Report.
Over the last five to 10 years banks have done enough to keep customers satisfied, but not enough to go further. Banks are usually pretty good on the first move, like internet banking, but then they are slow to fully expand upon it.
Capgemini’s survey showed that customer satisfaction levels were low globally, although the U.S., Canada and the Czech Republic scored above 50 percent. Ratings were down slightly from last year, but in some countries they dropped by as much as 10 percentage points. Even countries, such as Turkey, with very sophisticated internet and mobile banking facilities, had low rates of customer satisfaction.
The problem for banks is that consumer expectations are high, driven up there by companies like Google GOOG +1.73%, Amazon and Apple AAPL +0.33%. The results are especially apparent in the feelings of Gen Y.
“The decrease in customer experience was a surprise, and given that the overall levels were low to begin with, it’s a wakeup call to the banking industry about the influence of Gen Y,” said Sullivan. “They expect to be serviced in the branch, by internet, mobile and they are also starting to expect banking services over social networks. Our spotlight topic this year is social, which we see as cutting edge. We tried to be more forward thinking [in our questions] and the responses from customers were fairly strong — they want to interact with banks through social.”
The increase in customer service expectations isn’t driven so much by other banks as by leading leading technological firms, a point Francisco González, chairman of BBVA, made in an op-ed in the Financial Times.
“If you are looking at banks for leading practices you are probably behind the curve moving forward,” said Sullivan, who expects the numbers to drop again in 2014. Banks are a little lucky that most consumers don’t know what the next model could look like he added, recalling Henry Ford’s famous comment that if he had asked customers what they wanted they would have asked for a faster horse. For now, most bank customers don’t know other ways of interacting with banks, but innovators like Moven and Simple could change that, he said. Both provide banking services through a debit card and smartphone software that allow users to closely track expenses and avoid overdraft fees.
“Moven and its peers, such as Simple, are poised to transform banking by empowering customers with information and advice, providing an advanced user experience, simplifying payments, and focusing on the customer,” the Capgemini report says.
Existing banks face technological challenges, he added, because their legacy core systems have a difficult time supporting mobile and internet banking, much less social network interactions. The U.S. in particular has been slow to adopt mobile; it was only in 2013 that all of the top 25 banks had a mobile offering, the report says.
“A number of new non-bank competitors are taking advantage of digital technology to make improvements upon the traditional ways of delivering retail banking services. Freed from the burden of legacy systems, these non-banks are nimbler in developing new financial services.” the report adds. “Often, they offer price transparency and clarity on fees. By specializing in specific products they can offer best-in-class services that not only cater to rising customer expectations but continually push those expectations higher.”
Meanwhile banks in other countries are moving ahead.
“Turkey’s DenizBank became the first in the world to offer customers access to their accounts via Facebook. Isbank has an iPad app that lets users perform a wide range of banking and investment functions, as well as buy event tickets and download novels. Turk Ekonomi Bankasi is revolutionizing debit with cards that feature a display screen and touch-sensitive buttons, allowing users to enter passwords and view account information, right on their cards.
Internet and mobile banking, and social media, generate a lot of useful data about customers, the report notes. But banks only leverage a small fraction of it. Semi- and unstructured data remains a particular challenge, both for its volume and the difficulty of managing it. At most banks, much of this valuable customer data is not even captured. Customer data offers the opportunity to make intelligent predictive offers to customers and to tie in merchant promotions based on a customer’s location. The report says that banks need an omni-channel approach supported by upgraded core systems and effective data mining. Many of the most advanced banks have built on new technology platforms because they did not have legacy mainframe system.
“There’s no question the legacy systems pose challenges in cost and execution at the larger banks in the U.S.,” Sullivan said. “The likelihood of a core replacement is not extremely high because of the cost and risk. So we find focus on how to work within existing system, how to manage and leverage data, and how get channels to interact seamlessly.”
While digital is growing, branches remain important in banking, although the debate over just how important is a lively one. Gen Y uses branches much less than older customers, Sullivan said. “The role of the branch is decreasing a little, but it won’t go away.”
The issue for banks is how to leverage new technology to enhance the overall customer experience, including the branch experience with features like video contacts and live chat.
He sees social media as the most important new trend, although regulatory ambiguity makes bank action a challenge in many western countries. In Turkey and Asia, some banks are building entire operations around Facebook with two-factor authentication using the customer’s smartphone to provide payments to businesses and other people. RBC in Canada had email person to person payments. Building on that, it did a tie-in to Facebook so the bank still controls the payment, but customers can access it through their Facebook accounts.
The report cautions banks against locking themselves into one particular social media platform, because they could lose control of customer data, and also because it’s impossible to predict which social networks will thrive. MySpace anyone? Or Friendster? Thirty-two percent said they would like to see some form of collaboration through social media from their banks. Social media has lots of useful information, if banks can capture and analyze it.
“Social media brings another level of difficulty to banks’ technology architectures. For the fullest benefit, banks need to seamlessly integrate social media with their other channels, as well as their core banking systems. And they should invest in analytical software packages that can help them analyze social media communications in better support of marketing, cross-selling, customer servicing, and product development activities.”
The report recommends: “With technology advancing so quickly and new options for social networking constantly becoming available, banks should maintain flexible IT and domain architectures for incorporating social media platforms. They should seek to own the infrastructure of social media banking so as not to lose control over the evolution of this channel. For instance, a mobile banking app that plugs into third-party social media platforms and pulls out customer’s social data will offer a higher level of data security and privacy, and also prevent handing over control of customer data to the third party.”
Bank executives interviewed for the report are using social media to monitor what people are saying about their firms but customer want more — they want to make transactions through social media, but more than 40 percent of the banks said they have no intention of offering that. Customers have access to information, so they expect transparency from their banks, and convenience.
Customer experience is important because customers who rank their bank highly are three times more likely to stay (four times more likely in North America), and apt to buy more products and tell friends. When the UK adopted legislation to make it easier to move banks, 300,000 customers took advantage in the fourth quarter, a 17 percent increase over the previous year, according to the report.
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