Point of View Customer Advocacy in Financial Services: Rebuilding Confidence After the Banking Crisis

Point of View

Customer advocacy in financial services: rebuilding confidence after the banking crisis

Retail banks need to reassess their has been the change in the relationship The good news for customers is that sales, service and customer origination between banks and their customers. some banks have already started to move strategies as they move towards a in this direction. Lloyds TSB has invested revenue model built on strong customer Put simply, many customers lost faith in ‘needs-based’ selling strategies1. Under relationships, rather than on ‘piling high in their banks. Their opinion shifted. the approach, when a customer buys a and selling cheap’. Previously, banks were viewed as product, the customer receives the right trustworthy institutions that looked after information to help them select the right By Nic Merriman, Director and Chief money. Now, customers are questioning product. Others have started offering Architect Financial Services, Avanade UK whether the banks have their loyal loyalty-based products that reward account holders’ best interest at heart. valuable customers. Two years the world will not forget: 2008 and 2009. A global economic crisis So what does this mean for retail banks? gripped the planet. Businesses watched in horror as profits plummeted and the Simple. Banks must rebuild relationships financial services industry lived through a with their customers. They need to waking nightmare. provide real customer service; offering products customers need and that Venerable retail banking institutions they can understand. They also need disappeared in all but name. Their fate to work harder at customer service. foretold when the bad debt pigeons Customers should occupy the centre of born out of poor lending decisions came their interest. All too often, customers home to roost. As the crisis worsened are expected to make sense of their thousands of panicked-gripped own financial complexity, dealing with a customers desperately withdrew billions bank’s disjointed channels and processes to protect their capital. to form a view of their portfolio and to make sense of their next best action. Despite the magnitude of the crisis, Banks that can simplify the customer signs of improvement have emerged. interaction process and provide clear Government cash injections restarted the advice will create closer, more trusting economic cycle. Banks began to function relationships. This, in turn, will lead to again. But things are not what they were. more profitable banks. One major side effect from the crisis

1 ‘Lloyds TSB: ‘Your finances’ sales process is used in all Lloyds TSB branches to drive a needs-based selling approach based on customer information http://www.lloydstsb.com/about_ltsb/financial_inclusion.asp Point of View Rebuilding customer advocacy in financial Service: Post the banking crisis

In October 2009 to fight the rising desires and financial position, they made rejects their application through their bad debt RBS restricted all credit card recommendations on products customers credit risk platforms. The result? An applications to existing customers only. 2 needed and enabled them to meet their unsatisfactory customer experience, goals. They worked out that satisfied a wasted sales effort and missed In November 2009 Abbey announced customers buy more products, bringing opportunities. that it would be offering lower mortgage in more revenue. The bank delivered this rates to customers who have held current through a channel strategy that put the The situation is often no better when it accounts with the bank for more than six customer at the centre of the relationship comes to servicing customers. Customer months. 3 and enabled them to interact via the information is held in disparate platforms channel of their choice. and managed by different applications. These early improvements are only part of The result is a disconnected experience the answer. In addition to providing more This example, while powerful, was for customers. They are looking for a view competitive products, as well as selling unfortunately rare in a price-conscious of products across the bank. They don’t them through needs-based analysis, market where debt was cheap. Many want to phone several numbers to service banks must also work harder at customer banks didn’t see, or refused to invest, to different products that appear to them as service. Banks need to treat customers as realise the value of relationships. Those being delivered by the same organisation. valued customers. They should recognize times are gone. Now all organisations the potential in courting good customers. must better understand and service their “Ultimately, the management of customer Inevitably, customers buy more if they feel customers or they will struggle in the new information at the point of interaction is they are valued. world that they now inhabit. about service, about keeping the customer Put simply, if banks want to remain happy, and, simply put, about keeping the Banks also need to improve their self- competitive and grow revenue, they customer. It’s about strengthening the service and assisted service channels. must get to know their customers again, relationship and showing the customer By delivering consistent and coherent providing a coherent servicing strategy. that the bank’s knowledge can lead to real processes and experiences, they benefit. It’s about increasing the bank’s negate the need for the customer to Technology benefit as well, and doing it in a way that be the ‘glue’. All too often banks expect Are the banks capable of responding? Can does not sacrifice the customer’s long-term customers to dial multiple call centres their technology support this new era? well-being. Finally, it’s about trust as a result or they force them down a particular Do they have the capability to deliver an of knowing the customer and not as an channel to service accounts. In the new enhanced customer service? Will they excuse for misusing information.” world of banking, such experiences will provide more relevant products and offers increasingly damage their relationship that will develop a deeper customer Jim Eckenrode, TowerGroup with their customer. It leads to customer relationship? attrition and it makes it difficult for banks to attract new customers as their Today, much of a bank’s technology competitors begin to deliver better exists in silos. It’s spread across different service. channels and product platforms. As a consequence, many of them find There is an internet bank in the UK it difficult to cross sell effectively. In that has provided an example of taking addition, the diversity of origination the right approach. It put together a systems means customers can be offered strategy in the early part of the decade products that they either don’t need designed to maximise the profitability or want. Indeed, in some instances, of their existing customer base. By customers have been persuaded to accept understanding their customers’ needs, an offer. Then the bank subsequently

2 ‘Confused.com: Weighing up the best credit card deals for you Publication Date: Monday, October 12, 2009 http://www.confused.com/featured- articles/money/credit-cards/weighing-up-the-best-credit-card-deals-for-you-3550723835 3‘TotallyMoney.com: Abbey launches reduced mortgage rates for existing customers Tuesday, November 10, 2009, 17:06 http://www.totallymoney com/news/index.php/2009/11/abbey-launches-reduced-mortgage-rates-for-exisiting-customers/

A better way To date, a few banks have started to Taking the opportunity To address the challenges banks face, address the gaps - developing services It is increasingly important that organisations need to look at their sales that can be reused across channels. organisations start to develop their and service platforms. They must revisit However, increasingly banks are looking channel strategies for customer sales and their customer origination strategies. at how they can use customer-centric service now. They also need to develop a vision that applications to service their customers enables them to become more of a more effectively, offering them Retail banks need to work with their customer-focused, relationship-oriented products tailored to their needs. These business, architecture and strategy banking organisation. Taking advantage organisations will start to steal a march teams to develop their vision. They must of cross channel sales processes that on their competitors as we move out develop a roadmap that will be capable of focus on gathering the right amount of of recession and they need to actively delivering deeper customer relationships. data needed to make firm and relevant compete for a ‘share of wallet’. Then they must work with their offers to customers will be important. technology partners to deliver. Failure to In addition, they need to capture and Example – Charles Schwab do so will leave them lagging behind their utilise the information they have on their more enlightened and forward thinking customers to make relevant offers. That’s After stumbling badly in the early 2000s, competitors. what many retailers have done for years Charles Schwab bounced back, thanks to a and it is these retailers are now becoming strategy built around customer advocacy a threat as they enter the financial and loyalty. The strategy of driving services sector. organic growth by doing what’s right for customers led senior management Specifically banks and their IT to sharpen pricing, improve service, and organisations need to start looking at offer more investing help. technologies such as: The result: More customers are willing to • BPM (Business Process Management): consider Schwab for a future purchase. To provide the ability to automate and The firm set new records for income and drive consistency into sales processes earnings per share in 2007.

• Single Consolidated Desktops: Source-Charles Schwab Storms Back By To deliver coherent sales and Focusing On Customer Loyalty, by Bill service platforms on top of legacy Doyle applications without the need for a huge programme of redevelopment.

• Customer relationship management: Not the huge CRM implementations of the past, but a more strategic, targeted approach integrated into core customer systems to provide mechanisms for more personal sales and service experiences.

Getting started running business processes executing The Avanade difference Embarking on a new customer sales and in operations. These differences Avanade is a professional services service strategy can seem like a huge require different implementation organisation with a team focused on undertaking however by starting slowly, approaches. Selection of the right architectural delivery in key sectors and building experience, the journey can technology to support is critical as including financial services. The Industry be more evolution than revolution. forcing a one size fits all approach will Architecture and Design (IAD) team lead to inflexibility in your processes consists of a core group of highly skilled • Understand existing processes: Get a and costly implementation architects tasked with working with clear understanding of current sales organisations to develop strategic and service processes, identifying • Develop a roadmap: Work with your architectures and associated roadmaps those are most key and those that architects to develop a clear roadmap that can be realised. cause the most pain for any changes. Everyone involved needs a clear idea of the destination In financial services our architects • Identify and assign process owners: and journey required to reach it, so have a range of experience including IT will deliver the processes, but that solutions are developed in line product selection, strategic architecture shouldn’t own them. Processes need with business needs definition and, most importantly, real to be owned by the whole business, world implementation experience in under the guardianship of someone • Invest in a Proof Of Concept: Do not areas such as front office transformation, who can ensure that any new dive in at the deep end or be over multi-channel architecture, business processes directly support overall ambitious; all too many initiatives process management and SOA. Our real- business goals fail because of miss understanding world delivery experience coupled with between the business and IT. By Avanade’s technology delivery expertise • Develop a clear customer strategy: developing a POC both IT and the gives Avanade a unique capability to help Understand who owns the customer business can learn and develop a clear your organisation to develop and deliver relationship, and decide how to view of the challenges ahead. your strategy. manage it. How are you going to integrate with existing customer • Work with an experienced partner: About the author platforms to give a single view of the Real knowledge around customer customer? experience, process management and Nic Merriman is Director and Chief channel delivery is essential. Utilising Architect for Financial Services at • Select the right technology to manage third-party expertise will reap real Avanade UK. Prior to joining Avanade process: Process exists at many levels dividends. It will help you to avoid he held roles across financial services within the organisation from the common issues as well providing including the Head of IT Architecture for front office through to the back- objective advice and real delivery Retail at HBOS, Head of Architecture and from processes being executed by a experience: all essential elements of Strategy for Wealth and International at single user in a single interaction at success. LBG and the Chief Channel Architect at their desk through to a complex long Egg.

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