What key actions should the regions retail banks take to ensure they thrive in the near to medium term?
There is no doubt, COVID has further accelerated disruption of the banking and financial sector which was already happening with the advent of new technologies, client demographics and new players coming into the sector. The pandemic has created a sense of urgency and brought forward technology advancements in the sector changing the pace of innovation. We are seeing a race in digital investments as the primary driver for business success. As consumer needs continue to evolve, their expectations grow. Digital adoption has increased at terrific pace driving a reshape of distribution channels. On the backdrop of this, there are 3 critical strategic components that retail banks must focus on to thrive.
- They must look for avenues of revenue growth in a diversified manner
- Be more efficient and optimise their costs
- Make digital the integral part of their business and use it to open new business opportunities, grow revenue and cut cost of doing business
At the centre of all this is the evolving customer needs. Retail banks in the region must use data to understand client behaviours and needs and customise solutions. The advantage is that the opportunities exist, and banks must look at using technology to unlock these opportunities.
How will the co-existence of legacy retail banks and neo banks evolve in the coming years?
Their co-existence will be driven by the evolving needs of customers. The desire to meet these needs will determine how the neo-banks or legacy retail banks will turn out. The two have different approaches but converge at one point which is solving customer problems. What Neo-Banks bring is the new approach driven by design thinking, executed using agile methodology. This encourages creativity, new approaches to product development and alternatives to financial needs. However, they still have a long way to go to build brands that are trusted and can withstand a test of time in an over regulated environment. Incumbents or legacy retail banks on the other hand are not sitting and watching. True they are characterised by slow pace of response to consumer needs, lengthy processes etc., but at the same time, they have built resilience over the years and created trusted brands. Most of them are investing significantly in the digital to transform themselves into entities that can respond quickly to consumer needs. They are embracing new technologies and engaging in partnerships that create value.
In the region, neo-banks are starting to set up. In preparation for their arrival, we have seen legacy banks start on massive transformation programs. You look at what we have done at Standard Chartered, transforming our Africa franchise into a digitally driven business and now recently in Pakistan. We have also seen other banks creating moon shoot digital banks on the back of their brands to leverage the advantages legacy banks have over neo banks. We however cannot avoid the impact of changing demographic dynamics and how younger generations are being influenced by technology. To survive, both Neo and legacy banks must adapt to this new way of thinking which the neo banks seem to have an upper hand by virtue of their set up. In a nutshell, changing customer needs, adoption of new technologies and regulatory framework will determine how legacy and neo banks will exist.
Are new developments in retail customer onboarding nearing their limits, or is there room for further innovation?
What you see so far is just a tip of the iceberg. There is still huge room for improvement. The developments in onboarding you see today are due to the technology we have so far, existing regulatory environment and infrastructure in markets to support these initiatives. On the technology front, I believe the advancements in facial recognition technology or virtual reality for that matter, could further revolutionalise how we conduct KYC which is a fundamental part of customer relationship creation. Partnerships and collaborations between banks and other entities that have client bases will also play a big part in improving this space. The partners have data that can be leveraged. Regulators are also aggressively putting in place frameworks to govern open banking and data, all these will further enable banks innovate more to make client onboarding seamless.
In a time of more options and easier onboarding, how are you encouraging customer loyalty?
Customers will only come to you if you are solving their problem and fulfilling their needs. If you solve these consistently, you will get their loyalty. We are differentiating ourselves, creating unique solutions that are targeting specific client segments. We are obsessed about client experience and everything that goes with the client journey thought process. It is these thoughts that drive loyalty. In line with that, we have been able to do a number of things.
First, we have invested heavily in digital servicing. What this has done is to enable customers to engage with us on a click of a button via their mobile device. As a result, over 80% of our servicing is digitally initiated, and we see this encouraging clients to engage.
Secondly, we have deployed technologies that are enabling us create cohorts of clients in specific segments for us to engage them regularly. This way, we create a community of consumers according to their needs and provide tailored solutions for common needs.
Thirdly, we have invested in our employee experience by providing them with digital tools that simplify customer interactions. For example, our Relationship Managers can access relevant data and information on the go in order to have meaningful discussions and be true advisors to our clients.
During this period of ongoing digitisation, how are you managing the generational differences between your customers?
We have always applied a no single size fits all kind of philosophy to meet the different needs of our clients. We have drawn a baseline on commonalities that delight customers or basic expectations. For example, providing convenience by digitising journeys and make these available on the mobile device, speed to respond to customer queries etc. On top of that, we have differentiated offering and engagements with clients cognisant of the generational differences. We understand the lifecycle of our clients and meet the needs at the stage of the journey.
For example, we are fully aware that millennials are generally big transactors, and their needs are around how quickly they access products and information that can enable them to complete the transaction on their own digitally. On the other end, we have the baby boomers as we refer to them who are at a stage of making meaningful investments. These clients require advisory services and hence our deployment of relationship management model. Our distribution models are also in line with the generational differences. As we attract an increased number of younger populations, we have gone into agent banking distribution models to increase the number of transaction touch points. At the same time, we are remodeling our branch network to convert into advisory centres to cater for those that require investment advice.
At the end of the day, it is all about understanding your customer needs and meet them at every point of their journey. We are striving to do that and make sure that we have differentiated product offering and servicing that meets the needs of different generations.