Retail Banks – The New Customer Contract

As the rumbles begin to fade it is clear that the retail banking industry has been through exceptionally turbulent times. The long-standing contract between banks and their retail customers has been shattered.

Those of us who are long in the tooth remember the long gone branch Bank Manager whose steadiness represented the reliability of his bank, and the long term trust that his customers placed with them. It truly was ‘relationship banking’ – building and retaining engaged customers using face to face contact.

We have seen massive job losses and big changes to the branch structures already but have yet to see the regulatory structural outcomes from the recent turmoil. What is as clear as day is that we will continue to see flatter organisational structures.

Retail banking has seen the technology-enabled rush to supply customers with services at less cost – and this trend will continue. Will your bank see that the technology can – if harnessed correctly and coupled to good strategic moves – also help in rebuilding that vital engagement with your customers?

In contrast to this cost cutting approach your customers need your bank to be faster and more flexible in your interactions. They want to be able to tell you how they want to access services, and what types of services those should be, rather than being managed down a systematised straightjacket of rigid processes.

Their needs will change – and change is happening faster than ever – as the pace of development of the enabling technologies shows no sign of slacking. Significantly, the cost of hardware, software and communications is also falling extending the reach of technology to groups who were outside its reach so opening up further opportunities.

The ‘bleeding edge’ of this is the rapid rise in mobile apps and the influence of on-line Social Media. Customers talk about your bank on their terms and on their choice of media. Yes, social media is growing in influence as an advertising medium, but it is the interaction that will become the key to building those long term relationships. Research has shown that your customers would prefer this on-line discussion space to be provided by your bank so that their views could be more certainly heard – and responses provided.

Another blow to banks’ fortunes is that the loss of trust in individual banks means that customers now tend to spread their financial activity over a wider set of suppliers. This puts immediate pressure on your operating margins and has already signalled the demise of ‘free banking’.

If the retail banks are not careful about the way they move forward you could easily become merely ‘white label’ money transactors.

So how can this embattled industry begin to make sense of the new world order – and make a profit too? All marketers know the truism that it is far more effective for both parties to sell more products to an existing customer, so a clear strategy is needed to underpin the rebuilding of your customers’ trust and a route to profit is needed to sustain your business over the very long term.

The answer lies well within your grasp and is with your engaged customers, not with internal management introspection. It is these valuable individuals who hold the key and know what is wanted. By finding out what drives their engagement with you and then mobilising your banking skills to provide it in an attractive and cost effective way you can rebuild that bond of trust. You can use it to find more customers to whom you can provide services effectively and at lower cost.

This will lead to flexible customer segmentation. A segmentation that can adapt to a customer’s current wants and enable different services as those needs change with time. You can only manage this by a regular, vigilant and pro-active review of changing customers’ needs with time.

Measuring the Customer Engagement Index (TM), and then acting on the results of a detailed analysis of those measurements, at both a strategic and operational level, will be the key to rebuilding your strong retail banking service that so underpins your customers’ daily life.