By Vincent Bezemer
With the COVID-19 outbreak forcing closures and limiting operating hours of in-person locations, enhancing banks’ digital sales capabilities is critical to business health. Keeping the pipeline of digital sales flowing for new clients, increasing digital product origination and facilitating those cross-sell journeys to customers is the most effective remedy to increase ROI.
Digital take-up
Delivering seamless digital customer journeys was already a fast-growing priority for banking and wealth management organizations pre-pandemic. As Capgemini noted in its analysis of the top retail banking trends for 2020, customers want their banking platforms to provide the same experience they enjoy from digital lifestyle applications offered by big tech players. In response, banks have been investing in digital technology and collaborating with third-party providers as they strive to offer a superior customer experience and stay competitive. But the global lockdowns—which have restricted many people, at least initially, to banking digitally, while increasing demand for activities such as balance checking—have turbocharged these trends.
For example:
- In April, new mobile banking registrations tripled in the United States, while mobile banking traffic rose 85 percent, reports FIS.
- Online account openings at community financial institutions have also jumped 14.5 percent since social distancing was introduced, according to Kasasa.
- And a survey by Novantas found only 40 percent of respondents expect to return to bank branches post-coronavirus, indicating the shift online is likely to stick.
Increasing demand for digital onboarding, and digitized services to support the ongoing customer journey, must be matched by effective capabilities. Research shows only 8 percent of financial service onboarding applications (including personal account opening) can be completed on mobile devices. And the penalty for substandard digital offerings is high, with more than 30 percent of consumers saying they would leave their existing financial institution for better mobile capabilities elsewhere.
The leakage problem
Conversion leakage is a particular problem during the digital client acquisition process. Oliver Wyman research, which we confirmed, found that only 30 percent of customer prospects who visit bank websites looking for an account will carry on through to the product details page. Just 13 percent will then complete the application. In branches, leakage is much lower, with 85 percent of customers completing an application, since they are more likely to make the physical trip with the intention of opening an account or buying a product.
With branches shuttered during the coronavirus lockdowns, and subsequent openings and customer footfall likely to be severely limited for the foreseeable future, this leakage differential presents a major, and costly, challenge as institutions seek to convert digital sales and boost their return on investment.
Plugging the leaks
The Backbase/Oliver Wyman research identified three main reasons for leakage in the digital sales cycle:
- Switching from a customer’s current provider is too difficult (for example, in transferring bill payments and direct debits).
- The digital process is too cumbersome (particularly where existing offline processes are simply put online).
- Customers lack human touchpoints and advice when they need it (especially for more complex products).
Combating these levels of leakage requires firms to take an outside-in approach, to see the process from the customer’s perspective. From this viewpoint, they can design a more customer-friendly experience that streamlines the job at hand.
One way to simplify the acquisition journey is to incorporate human/AI advisor interventions at points of friction, where customers may become stuck. Another is to adopt re-targeting strategies that address customers who abandon the application process partway—for example, by storing their details in a CRM system and sending them notifications to complete the application. Or referring them to an outbound call center employee who can pick up the process by phone. Such approaches can boost completion rates by 15-20 percent.
Done well, digital onboarding can then deliver substantial benefits. Whereas retail client acquisition in a physical, siloed world costs an average of $280, shifting to digital onboarding reduces the cost to $120 and in subsequent years for additional clients to $19. A similar story exists in corporate banking, where acquisition costs can be slashed from $4,000 to $1,200.
Better banking health
Banks’ return on tangible equity has plateaued globally at approximately 10.5 percent over the past decade, and the lower-for-longer interest rate environment will add to the pressure. Addressing cost-income ratios has become a matter of urgency.
Firms now face a strategic inflection point. Continuing with old business-as-usual practices will leave institutions struggling to attract new (especially younger) clients, while grappling with an exodus of existing customers and an overburdened cost base. But by digitizing processes to enhance the client experience, banks and other financial institutions can increase their revenues and reduce costs, thereby improving their cost-income ratios and ROE.
Vincent Bezemer leads the Backbase North American strategy execution and corresponding sales initiatives, focusing on building exceptional teams, instilling operational excellence and building industry alliances and partnerships.
