How to Build an Agile Bank
Retail Banks have a stark choice to make, they can continue to spend 50 to 70 percent of their cost base on distribution models that are out of step with the realities of the digital world we live in, or they can evolve into agile banks, reconfiguring and reinventing their distribution models to include a combination of physical and digital channels and focus on human-centred customer experiences to a point where they serve customers better, reduce costs, grow revenue and thrive.
How to start the journey
I suggest starting by taking a long hard look at your business, ask yourself if you are working in a traditional inside-out bank, or if you are an organisation who pushes the customer-first agenda. A customer-first agenda means that you understand your customers, are focused on serving a ‘customer of one’, that products and features are customisable and communication is tailored specifically to each customer. If this is not you, then change is needed and, as I have mentioned in other articles, changing your organisation's approach is not a simple task. Corporate lethargy, internal systems, infrastructure, a lack of collaboration and poor culture will need to shift in order to move towards agility, it is important that these are not overlooked - and the good news is that the required changes are happening in many of the banks I visit.
The ingredients of an Agile Bank
The specifics of every market and every bank are different however, every bank should move through the following steps in to be well prepared for an agile future:
Step 1: Understand where your network is and how it is performing
Research by management consulting firms suggests that by taking a holistic view of a branch network and running network optimisation modelling, Banks can save up to 30% on their distribution costs. Personally, I find this statement very generic and in some instances in conflict with local market nuances. That said, there is no doubt that, especially in Europe, there are too many branches and in many instances, they are not configured to serve customers the way they want to be served nor are they configured to serve business optimally. Banks should consider how, where and when they chose to reduce their branch footprint having carefully considered metrics like location, footfall, market share, proximity to other branches, customer convenience, the customers the branch serves, their value and potential value, brand visibility etc… This exercise should determine specifically which branches require re-energising and which should close. However, this is not all crucially, Banks need to determine how to best serve customers in their physical environments. This means examining formats - tearing up the Bank branch design rule book and apply fresh new thinking. Look to designers who understand Banking, have experience in the retail and hospitality sectors and can apply their knowledge to think differently.
Step 2: Understand your organisations DNA.
As I wrote in my article ‘Brand DNA: Genuine, Unique, You’, it is important to consider the territory your brand occupies in customers minds, what your organisation stands for, what you deliver and why you are in existence. Having examined these, you may - and it is not unusual to do so - be faced with a dilemma that your existing organisation is, in the mind of customers, just not perceived as an agile organisation that is digitally savvy. I have seen many organisations face this challenge and almost as many approaches resolving it in different ways. In essence, organisations have to decide, will I cannibalise my existing business by becoming more agile? If so, by how much, and are there ways to mitigate against this? Are my customers ready to travel on the journey of transformation (and how many will I lose along the way)? Who am I targeting and how do they perceive my brand? Will a new brand (powered by…), better serve the audience that I am focusing on?
All the time it is important to remember that less agile banks generate business primarily through physical channels and have a complex infrastructure, making them unable to react quickly to changing market demand. Highly agile banks are not like this, they depend on understanding the markets they serve in great detail, rely more on digital channels (supported by smaller footprint strategically located branches or pop-ups), use social media and are hyper-focused as an integral part of their strategy. Realigning your brand and your organisations DNA to a new way of thinking will be a critical determinant in delivering success.
Step 3: Walk a mile in your customer's shoes
Becoming an agile bank involves more than streamlining the existing branch network. It requires a 180-degree shift from traditional approaches to fast delivery, rapid-incremental-innovation, customer-first, market-driven distribution.
How banks invest in the components they need to become agile, can make or break their future. Banks need to consider not only re-designing their digital and physical touch-points through the lens of customer experience, they need to consider how each of these channels compliments one another and drive growth. They need to develop and implement agile, adaptive technologies that help deliver on promises, tools like CRM, analytics, propensity modelling, content management are critical. As I have written many times, the key to success is understanding your customers better than they understand themselves and building products and campaigns around this insight. For example, I recently met a Senior Banker in the Middle East who told me he had seen a 40% increase product uptake following the deployment of an analytics and propensity system linked to the banks marketing efforts… amazing!
Step 4: Test
Presuming that the organisation has made it to Step 4, has an optimised branch network, has reinvented their brand positioning and built the infrastructure needed to deliver a fast-paced agile bank, uncertainty will still be all around it. Whereas in the past, Banks were change-averse, Banks in the new world will love change. They will understand their customers better, understand customer behaviour and be able to accurately model customer stretch - the extent to which customers will be prepared to try new things. By understanding customer behaviour better, new business models will open up, new opportunities for products and services that previously could not be imagined will appear - and be backed up by a strong business model. Segmentation will be a thing of the past. A customer will be a customer for as long as the bank is able to deliver to their needs in a meaningful and personal way. Banks will be able to test new concepts with customers, safe in the knowledge that they will have a high degree of success… and this culture of innovation will feed more innovation, the pace of change will be relentless and, I am happy to say, it will be beneficial for both customers and the banks that drive it.
It takes courage to innovate, particularly in a sector that is beset by inertia and traditionalism. However, those that are bold, those that structure their approach to change in a sensible, strategic fashion will see enormous benefits. Those that don’t will perish.
About the Author
Nicholas Griffin is Managing Director at Principle Global (www.principleglobal.com) Information on how to contact Nick is in the footer of this web site.