New technologies are transforming whole swathes of the retail economy and traditional consumption models. And retail banking is not immune. Whether it’s online banking, mobile banking, payment systems and more generally the relationship of the retail bank with its clients, the acceleration of the digital revolution begs the question of whether there is a still place in the world of tomorrow for the high street bank.
New digital systems have transformed the time factor, the relationship between customer and bank has become immediate and transactions frequently take place remotely. At the same time, they are encouraging a process of « hypercustomisation » of the service: « The bank is no longer somewhere you go. It is something you do », concludes Brett King, author of « Bank 3.0″.
The compression caused by innovation and the new consumption models it creates translates into breakthroughs we could hardly have imagined even a short time ago. Customers are visiting their branches less and less, increasingly only to discuss significant personal projects.
The bank has to reinvent itself. But first we must separate outmoded practices from those that remain essential as they are the profession’s very essence. The commercial bank is supported by two invariables. Firstly, demand for bank services is not diminishing, it is being expressed differently through new customer requirements. Secondly, the face-to-face relationship remains a fundamental aspect of the profession. The digital revolution is not severing the tie between the customer and the bank advisor. It is diversifying the channels through which the relationship is structured. The banking relationship is not based on products, which multiply in an instant without copyright. Banking is a profession of human relationships founded on the ability to offer sound advice and good service, at the right moment and irrespective of the channel used.
First we must separate outmoded practices from those that remain essential.
We must promote face-to-face banking alongside remote banking.
So what is to be done? Wait passively until the bad times are over? That would be suicide. Reduce our capacity in response to possible or already existing declines in banking revenues? I believe that such a move alone is unlikely to bring a positive outcome. The only way forward is our ability to reinvent local banking, and therefore to promote face-to-face banking rather than rush headlong into remote banking. What do our clients require from the technological revolution? More convenience and more appropriate advice, not products we are determined to sell them at all costs via a succession of undifferentiated advertising campaigns.
Provided that it is more agile, interconnected and proactive, the high street bank has everything it takes to preserve its fundamental relationship with its customers by combining its strengths (proximity) with new tools (smartphones, tablets, the internet, etc.).
In other words, the ability for customers to choose which important matters they wish to discuss with their advisor in person, by phone or via e-mail, without having to go out. The rest, the day-to-day banking matters, can clearly take place via remote devices.
Such a model of face-to-face banking necessarily implies higher personnel costs than those for remote, low-cost banking and is only workable if the customer is prepared to pay for the level of service provided. This must lead our banks to concentrate their resources, beginning with their employees, on an added value basis. And putting a maximum into human capital, the bank’s only real differentiating factor.
These are the major challenges for high street banks. Rise above the problem, not fall back on the lowest common denominator. Find the highest added value for the customer. It can be done.
Olivier Klein is CEO of BRED and Professor of Economics and Finance at HEC