My parents used to say “If you don’t have the money in your wallet, you can’t afford it.” This was the mentality of the generation before credit cards became pervasive. And we’d probably all be better off if it still was. The Diners’ Club Inc. introduced the first universal credit card back in 1950 followed by American Express in 1958. What started as a novelty, or backup payment form, for travel and entertainment, proliferated into today’s paperless digital economy.
But as fewer and fewer people use cash, and write physical checks, the need for retail bank branches has been reduced to the situations in which the customer needs something more than a simple transaction such as:
- Opening or closing and account
- Appling for a loan
- Seeking advice on an investment strategy
- Seeking help with buying a home, car, or other major purchase
But the day-to-day banking tasks no longer require a bank teller. Many people are using the bank’s website and app to perform basic transactions. Furthermore, many withdrawals and deposits are now automated including: online bill pay, direct deposit, and one-click payments through online e-commerce sites such as Apple iPay, and PayPal.
In the 12 month period from June 2016-2017, the number of retail banks in the US shrank by more than 1,700. And that number continued to grow in the second half of 2017. When you include the recent financial crisis that shuttered thousands of locations, that’s the longest stretch of closures since the Great Depression.
But retail banking is not dying. It is undergoing digital transformation. There will be winners and losers. There are also new challengers from fintechs and new business models for monetizing customer data.
Banks have access to possibly the most robust set of data available about a person. They know all your demographics. They know what you buy and when you buy it. They know how likely you are to default on a loan. They know the details about your most valuable assets and debts. And from this data, they can use analytics to understand even more about you.
This robust data provides the opportunity to redefine and resurrect what it means to be a retail bank.
Opportunities to drive high-value services at retail branches include:
- Higher value workers: Achieve higher productivity through connected devices and services between headquarters, branches, call centers, etc.
- Value-added services: Introduce new services and products that leverage insights from customer data.
- Consultation: Offer in-branch financial consulting with empowered employees that have instant access to customer preferences, insights and analytics-driven recommendations across entire customer portfolio.
Opportunities to monetize connected customers with connected banking include:
- Connected products: Create digital products that help customers perform tasks that are related to banking such securing a loan for a car while in the dealership, or helping find an appraiser for a home inspection).
- Virtual tellers: Connect customers with remote or branch-based tellers through video.
- Modernized marketing and advertising: Utilize customer data and location-based services to deliver highly targeted messages and ads to customers within branches.
- Personalized Customer Journeys: Embrace advanced analytics to build rich customer personas, gain visibility into customer goals and understand customers are on those journeys. Then feed insights and recommendations to frontline systems and stakeholders to deliver the right offer at the right time to the right person.
These and many more opportunities await banks that are willing to be aggressive about leveraging data and analytics to power their business models. At TCS, I am fortunate to represent one such product that supports these use cases above, called Customer Intelligence & Insights for Banking. The software enables business users to ingest all sources of customer data across physical and digital environments, and apply pre-built use cases made specifically for retail banks, to help them:
- Build rich customer personas
- View customer 360 dashboard with banking KPIs
- Predict customer churn
- Understand the channel with which each customer prefers to communicate
- Recommend next best products to offer
- Perform dynamic customer segmentation and build campaign target lists
- Gain visibility into each customer product journey to optimize the onboarding experience
- Receive KPI-based alerts about customer actions
These types of use cases, enabled by artificial intelligence, machine learning, big data and deep analytics, are the key to being able to define new digital strategies, make informed, personalized decisions in real time and take action on the opportunities. I expect that we’ll see many of these functions become operationalized by 2020.
It’s an exciting time to see how retail banks will transform. As they use advanced analytics to connect the dots with data in new ways, consumers will be the beneficiaries. Long live the retail bank!