Is the Bank back office the key to unlock the next wave of growth and customer delight?
Year after year, surveys have consistently ranked customer experience as the topmost priority for banks. However in a recent survey, 72% of respondents said that their banking provider’s customer service has not improved over the past year. So what does this mean? Are the banks really not doing anything at all to improve customer experience? Probably not. One explanation could be that the customers are now comparing their banking experiences with experiences from tech companies such as Amazon and Uber and therefore banks are falling short of customer expectations despite having made improvements. Another explanation could be the difference between how customers perceive their experience and how banks view “customer experience”. Perhaps while the banks have being adding digital technologies in the front end to enhance experiences customers expect the entire journey to be smooth and hassle-free. For instance, a bank may have a new shiny app for onboarding customers but if subsequently the customer ends up getting charged incorrectly or faces issues in getting his data updated, their overall experience is unlikely to be satisfactory.
While banks are not oblivious of the impact of disjointed experiences, their operating models, siloed structures and legacy infrastructures may have inhibited them. In search of competitive advantage and to improve customer experiences banks have frequently focused on the front office – which typically owns customer interactions. This is a logical place to start but what happens when the shiny new front end interface interacts with the back office? It is in the back office, the engine room of the bank, where transactions are cleared, regulatory demands met and data processed. The Back office records and stores the information arising from the customer transactions. For example, the back office processes loan applications, facilitates payment services, manages various information databases, keeps track of future payments to depositors, receipt of due payments against loans etc.
Operational entities, such as back office processing units are typically viewed as cost centres for banks, and are pushed to drive down costs, while increasing efficiency. Not surprisingly, many banks de-prioritized extending digital transformation to their back-office functions.
However, as more customers engage with banks digitally and as customer interactions with front line staff continue to decline, the lines between front office and back office are blurring. Customers are increasingly using self-service options to interact directly with the bank, submitting requests online and downloading things like transaction histories and interest statements. As the banks’ processes and data become more visible, the back office is no longer a hidden function. Regulations such as PSD2 in Europe and other Open Banking initiatives are making banks expose data, algorithms, and processes to outsiders. As systems integrate with broader ecosystems, the role of the back office will change significantly. Customers will increasingly experience the back-office offerings through digital channels in real-time. Instead of just catering to internal clients, the back office could become increasingly responsible for engaging directly with customers, giving them a direct window into the bank’s processes and data. In this changing situation, the back office has the potential to play an increasingly important role in creating service differentiation.
But therein lies the double edged sword for the bank. The enhanced transparency is a potential threat as it can expose the glitches which were not previously visible to customers, thereby damaging customer experiences. On the other hand, banks could see this as an opportunity and choose to tap into technologies such as robotic process automation, artificial intelligence, advanced analytics and other digital technologies. By carefully applying these technologies, banks can streamline and open up their business models, while making their processes more user friendly and data more transparent. Not only could this help unleash the potential of data trapped in operational systems but it can make the operations more intelligent with faster, insight-driven decision making. With intuitive, transparent, and secure processes and systems, the back office can transform itself into a customer experience front office. It can deliver continuous improvements in customer journey touchpoints and keep up with customer needs. It can tap into trapped data in back-end systems to deliver personalised customer experiences.
Consider Commonwealth Bank of Australia, for example. The bank recently introduced “Ceba,” a chatbot that is accessible from all digital touchpoints and links the customer to traditional back-office functions. Ceba responds to queries and text messages and can help customers with questions about their accounts and bank products. All the while, Ceba is collecting data about customer interactions, which the bank can mine to create targeted offers that drive growth.
This is where the power of advanced analytics in leveraging the treasure trove of operational data in the bank’s back office combined with the real time data comes to the fore. For instance, in retail lending, credit decisions can be more effective when they are made based on predictive insights powered by real time data. A combination of the data from credit bureaus and operational data as well as from alternative data sources such as social media, phone usage and bill payments can help banks develop more accurate credit profiles. Banks can also analyse a customer’s transactional data to customise loan products which not only cater to their immediate requirements but also anticipate future needs. For example, the bank could proactively offer an attractive home improvement loan to a customer who registers a change of address. The cross-selling of financial products represents a huge untapped opportunity for banks, which they could realize through more personalized and above all more contextual selling. In fact, if the Banks don’t proactively seek cross-sell opportunities from customers, the competitors could grab them. For instance, as per a recent survey by Bain, for every 2 banking products bought from the bank, the customers on an average purchased an additional banking product from a competing bank. In the US, for instance, 42% of defectors said they bought from a competitor bank because they received an offer or saw an advertisement. Just as striking, more than half would have purchased from their primary bank if the bank had made an offer.
When the potential for generating additional revenue streams is combined with growing customer expectations of end-to-end, digital processes, it seems clear that banks need to act. Digitally re-purposing the back office for customer engagement is no longer a “nice to have” but rather it is rapidly becoming a necessity for banks in the evolving digital economy. Rather than looking at the negative side – focusing on the risk of being left behind – banks should instead look at this as a way to unlock the next wave of growth and an opportunity to delight their customers.