A survey of 560 executives from leading financial institutions in 17 markets showed that setting up a customer-centric business model was their top priority in renovating banking operations.
Shift focus from product to customer
The reason was that traditional banks had always considered banking products as the soul in their operations. They blindly followed races on deposit rates, credit card issuance, and later, the run on banking mobile applications. They launched a lot of products on the market and believed products had been the best way to serve consumers while lacking serious surveys and investigations on what consumers need. As a result, many types of credit cards failed; many banking mobile applications had quietly retreated.
Massive bank kits were launched, but the differences between each of the same banks were quite vague. Each product ran on its own system, leading to high operating costs and security risks. And customers were tired of being thrown from call centers to customer service in the hope that they would solve their problems.
Also, according to the ‘Retail Banking 2020′ report, in some banks, 80 percent of the revenue came from only five percent of banks’ products, meaning that 95 percent of other products had been very inefficient. The following conclusions could be drawn. First, product complexity was unwelcome. Second, many heritage products, which were no longer available for sale, but had not been withdrawn. Third, banks had not succeeded in customer understanding.
53 percent of chief executive officers (CEO) in the above survey said that simplifying banking products became the most important thing, after a long time of trying to diversify. Also, banks needed to shift focus from products to customers, reducing the number of product quality and enhance the customer experience in each product.
What exactly was enhancing experience or technology demonstration? And how to improve the experience? The answer lied in technology. The world was covered by technology, such as artificial intelligence, cloud computing, biometrics, chatbot, blockchain, robots, multi-channel sales, etc.
However, customers had been familiar with these fashionable words while they were still frustrated when using the most basic banking services, such as opening an account. Another statistic from the PwC report showed that 40 percent of customers had left the bank after a bad experience, and 45 percent of them would actively prevent others from using that bank.
Enhancing customer experience was not about demonstrating and showing off new technologies and new products, but instead using technology to help customers experience banking services easily, conveniently and save time. Customers did not need to know what the name of the technology was; they want to see how the technology was served, said Christian Nguyen, general director of Wee Digital Company operating in the Fintech industry.
To make such improvements that would have a direct impact on consumers, some things would need to be done. First, it was necessary to listen to customer’s voices, especially the younger generation, who grew up with technology. Second, it was a mistake to understand customers mechanically, for example, recommending raising their credit card limit after seeing their salary rise. Third, in an effort to enhance the customer experience, many banks had tried to innovate too many things at once, while their capacity, finance, organisation and technology were limited. Therefore, before renewing, banks should re-evaluate their strengths and cut out ineffective products.
Cooperation with non-traditional institutions
Banks not only competed with each other to retain old customers and attract new customers but also faced increasing competition from non-traditional players like Fintech companies, which were technologically original, identified from the beginning with the customer-centered model.
55 percent of the CEO in the ‘Retail Banking 2020′ survey considered non-traditional players as a threat to traditional banks. But 31 percent of them also believed Fintech as a necessary partner for innovation. The balance of risks and opportunities for cooperation had changed drastically compared to a few years ago, and burgeoning markets like Asia Pacific was more open to cooperation opportunities.
The banking industry was learning success from other industries. Many companies like Adidas, Apple did not own their entire production chain but focused on the stages that made their products unique, which were product design, marketing, distribution, and delivery to partners. Banks had also gradually turned to such a model.
Nguyen Thien Tam, Strategic director of Orient Commercial Joint Stock Bank (OCB) Digital Banking, said that with the strategy of developing, owning digital banking and ecosystems on the OMNI channel, the journey of synchronous investment in technology and increasingly widening with OCB’s partners had been and would continue. The bank’s leader also said that they had researched and applied open platform technology to digitise products and services. Currently, OCB was cooperating with AirPay, VnPay, Momo to provide payment for electricity, water, Internet bills, recharge phones right on the app or transfer money via wallets to purchase services.
Choosing partners to complete the ecosystem was also the way that HCM City Development Joint Stock Commercial Bank (HDBank) became digital banks with the handshake of TrueMoney, a big Fintech of Southeast Asia. Most notably, Sovico, a significant shareholder of HDBank, recently abandoned an insurance company with a sizeable chartered capital of 1.8 trillion dong. Meanwhile, Vietjet Air also planned to make an electronic wallet.
Credit institutions had been increasingly extending the supply chain of services in their way toward a common goal, which was closed and optimal function, satisfying all needs of customers.
