The focus on social and mobile as means of engagement is increasing, but the way we understand and use these technologies is still evolving and there is still huge potential to be realized in them.
In banking, where the switching costs across banks have gone down considerably, and banks more than compensate for any cost to hoppers, technologies around social and mobile are not just means of addressing the needs of convenience, reach and engagement, but also to “cement” relationships and hold on to your customer base.
With 50% of smartphones connecting to FB every hour, every day, and smartphones and tablets making up 60% of IT spending, there's no way banks could survive until 2020 unless they lead this wave and cement strong relationships with clients through these emerging channels.
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Studies show those between the ages of 18-34 are open to moving to non-conventional banking institutions that are more driven by pure digital means of engagement, such as branchless banks, telco’s, Google, Amazon, and peer-to-peer lenders for their banking needs. Forty percent of North American bank customers would switch to an online-only bank, while nearly that many say they would be comfortable banking with a technology company, according to a survey from Accenture. Customer behavior & preferences are changing. They are no longer siloed in thinking and expectations.
Almost one-third of Americans say they haven't set foot in a bank or credit union branch in at least six months, according to a Bankrate.com study. Compare that to mobile/online banking users in the U.S. (33% of mobile and 51% of smartphone users), who on an average log on to online/mobile banking once a week. With over 72% of adults keeping their mobile device less than 5 feetaway from them the majority of the time, it’s no surprise that banking is shifting from branch to mobile and social. This shear frequency of customer presence on bank’s digital site and their intimacy with these digital devices and channels, provide huge client engagement opportunity.
To convert these digital channels to “digital cement” requires banks to train their staff on skills around engaging on these digital channels instead of branches. The success of these digital channels would greatly depend on how close an experience a bank can provide to that of branch banking.
This will require a new approach and innovative ways to think about transformation at banks. A recent Accenture study found that banks that can achieve improved agility and innovation potential could consistently reap pre-tax ROE levels as high as 18-25% by 2020. That represents a huge jump over the average 11% pre-tax ROE that the largest banks in North America managed at the end of 2012. So this isn’t just the need of the hour; it’s smart business and the road to growth.
Banks that will succeed in the future are those that engage, listen and preempt client needs, and seamlessly deliver and communicate in real-time while ensuring that delivery met customer expectations. It's no longer one-way or two-way communication but a close continuous engagement cycle. It's no longer about institutions but about every customer having his unique needs with an expectation that the bank will understand him, reach out to him in real-time and serve him. The ability of the bank to effectively do this is what will cement a long-lasting relationship.
The day is not far when the mobile device could replace the key, wallet and mobile as the only things a person carries when leaving the house. That means mobile and social will be the key to connecting with your customer. Branches will still exist, but mobile will gradually become dominant as technology matures and provides a compelling advantage.
Navin Gupta is a business development executive at IBM.