Today, many bank processes are anchored to how banks have always done business—and often serve the needs of the bank more than the customer. Something went wrong while submitting the form. It’s not surprising errors happen. Banks have realised that they don’t have all of the skills and capabilities to remain competitive in today’s digital-first environment, so they’ve been expanding their banking innovation capabilities through their fintech partners. The COVID-19 crisis has thrown the need for focus on banking innovation into sharp relief. Thank you! This has led to drastic change in corporate customers’ expectations from the bank. Only the best curated content, straight to your inbox. This is a new paradigm in which customers will receive personalized advice, relying on a simpler organization. Please click "Accept" to help us improve its usefulness with additional cookies. Instead of a major cost center, operations of the future will be a driver of innovation and customer experience. Your submission has been received! Organisations are expected to meet customers’ needs and expectations at every interaction, in return for customer loyalty. Use minimal essential With the right platform capabilities, teams will also be able to develop new products and services, launch new journeys, refine the customer experience without the need for massive time and budget consuming technology overhauls. It’s time that banks position contact centers as experience centers … With a journey-based model, banks will ensure operations resources own the customer inquiry or problem until it is solved. Banks are fully cognisant of the fact that in order to remain relevant and competitive, they need to be on a flight path to a completely customer-centric operation. Exhibit When the current crisis passes, the pre-COVID operational innovation priorities of competing through customer experience, boosting profitability, increasing ROE and freeing up resources will remain. COOs today need to have visibility into the ever-changing needs of the customer and the ability to measure the right metrics that drive success in meeting those needs. In ten years, back-office operations will look starkly different. Automating these and other processes will reduce human bias in decision-making and lower errors to almost zero. If you would like information about this content we will be happy to work with you. Finally, banks will need training approaches to develop not only technical skills, but also empathy and the ability to impress customers in every single interaction. A variety of operational roles are charged with supporting these products and managing the rules governing them. The customer can then be alerted about the mistake and informed that it has already been corrected; this kind of preemptive outreach can dramatically boost customer satisfaction. Innovation in operations offers several advantages. For starters, far fewer people will be needed. Instead of evaluating credit risks and deciding on mortgage approvals, operations staff will work with automated systems to enable a bank to offer its customers flexible and customized mortgages. In the last year alone, more than 600 bank branches were closed in the UK. The key to achieving this is a comprehensive and effective programme of banking innovation, focused heavily on optimising and digitising banking operations.Â. It can also boost revenues by enabling banks to provide better products and services to customers. Innovating Banking Operations with Customer-Centric Mindset By: Banking CIO Outlook | Monday, July 29, 2019 . Customer journey-based smart operations. Customer-centricity isn’t as simple as asking customers what they want and making good on it, though that’s certainly part of it. We strive to provide individuals with disabilities equal access to our website. But not all partnerships are created equal and leading banks are starting to realise the additional benefits offered by technology platforms. In future, these activities will be automated, and employee roles will shift toward product development. Learn more about cookies, Opens in new For example, instead of tracking just average handle times and customer satisfaction at a call center, banks could drill down to see how much time millennials or residents of a particular state spend on the phone with reps. And with good reason. ServiceNow banking solutions deliver transparent, compliant, customer-centric experiences in banking to help you stay focused on your priorities ... middle, and back offices. The key to achieving this is a comprehensive and effective programme of banking innovation, focused heavily on optimising and digitising banking operations. Banks that successfully transform operations to focus on customers rather than products will survive…and thrive. You can’t ignore an entire group, says panelist Jill Hudson, VP of loan operations at Vision Bank. It is apparent that focus on the customer is of paramount importance to the banking executives and that customer centricity is no longer just a buzz word. What should banks be doing to explore this further? Operations might not be the most likely place for customer centricity – it’s not usually a profit centre, for a start. It’s a high-level goal that can be easily attained if banks address the way in which they structure both their operations and their business models. In this digital age, it is tempting to focus on technologies that enable such a shift, but being customer centric is about more than just technology. Reinvent your business. collaboration with select social media and trusted analytics partners Secondly, operations consumes large chunks of banks’ annual budgets and the efficiency gains achieved through the use of digital technology reduces costs while freeing up financial resources that can be reinvested in digital innovation. Upgrading the customer experience is essential to remaining competitive in the modern banking market. The accelerated pace of digital transformation in banking has raised several questions about the future of contact centers. People create and sustain change. Digital upends old models. Banks could also proactively reach out to customers whom predictive modeling indicates are likely to call with questions or issues. Most transformations fail. Learn about Engaged customers are the ones most likely to respond to offers, provide useful feedback, participate in positive conversations on social media and act as a resource for other customers, answering questions, making recommendations and providing referrals. Customer-centricity is the discipline of attempting to see things from the customer’s viewpoint rather than your own, including the essential understanding that those who are … Comprehensive data sets will also enable managers to set more KPIs. In the age of fintech, being ‘customer-centric’ means gaining in-depth knowledge about customers and using it to establish sustainable, valuable and long-term relationships with customers. Companies have been trying to adopt customer centricity for nearly 20 years now. No one buys a product that doesn’t respond to needs. Customer-centricity also means having a decent product or service to start with. This evolution in customer demand means that banks are competing based on customer experience and the leaders in this field are already pulling ahead of the pack, with ease of service being cited as the top reason for both choosing a bank and sticking with them. Build a roadmap to accelerate digitization: Banks need to act now to develop an aggressive tactical roadmap that outlines the plan for digitization and automation. McKinsey estimates that 75 to 80 percent of transactional operations (e.g., general accounting operations, payments processing) and up to 40 percent of more strategic activities (e.g., financial controlling and reporting, financial planning and analysis, treasury) can be automated. Something went wrong. If you look at product-centricity as focusing too much on the product instead of the customer, then you fail of course. our use of cookies, and In response, banks are shifting from a largely product-centric viewpoint, to a more customer-centric model. At some US banks, we have seen up to five to ten percent of all debit card disputes processed with errors. Press enter to select and open the results on a new page. The concept of customer centricity and its benefits have been discussed for more than 50 years. Customer expectations demand that every business function be customer-centric—including operations. A customer-centric supply chain is the key to unlocking differentiated service offerings that drive revenue growth. Subscribed to {PRACTICE_NAME} email alerts. Customer centricity is born in the supply chain At the end of the day, a company’s investment in customer centricity means nothing unless they get it right in the supply chain. AI and advanced analytics could also improve dispute resolution. This will lead to a more positive customer experience and at the same time deliver operational efficiencies that mean customer-facing teams will have to focus less on processing transactions and doing administrative tasks. The bank made important progress, but the improvements were scattered and didn’t reflect a cohesive strategy. Same for call centers. Based on our work with major financial institutions around the world and from McKinsey Global Institute research on automation and the future of work, we see six defining characteristics of future banking operations. They will also have tech, data, and user-experience backgrounds, and will include digital designers, customer service and experience experts, engineers, and data scientists. Oops! Flow Designer. To meet those needs, banks need to make customer experience the starting point for process design. Customers interact with their bank in many ways: In fact, they average 53 interactions a month (many are not transactions—where money moves). But soon, operations will use their knowledge of bank processes and systems to first develop customized products and then leverage technology to manage and deliver them. The goal is to make customers feel that their banking needs are being well looked after—to become, in a nutshell, more “customer centric.” Yet to make those two words more than just a catchy phrase, banks that choose customer-centricity as a strategy must figure out how to transform their vision into actions that deliver on promises. We strive to provide individuals with disabilities equal access to our website. Customer-centricity requires banks to re-evaluate what they know about their customers and to better understand who their customers are, what interests them, what they value, and what drives them. Thousands of people handle the closing and fulfillment of loans, the processing of payments, and the resolution of customer disputes. 1 However, our 2018 global digital banking consumer survey suggests that these centers continue to maintain their value proposition because customer service plays a key role in customer satisfaction. The need for the tools to enable it has never been greater and the suddenness and severity of the pandemic has forced the pace of change. tab. This calls for three major efforts: Develop a plan to migrate to a journey-based organization: Today, functions such as call centers, payments processing, and risk underwriting are organized by product or segment. Branch closures are not just a trend in the US. Customer-centricity. Banks have always functioned with an organizational trinity: front offices (branches), middle offices (call centers), and back offices (operations). Roles that previously toiled in obscurity and without interaction with customers will now be intensely focused on customer needs, doing critical outreach. This will give operations employees time to help customers with complex, large, or sensitive issues that can’t be addressed through automation. Banks can roll out seamless, end-to-end digital journeys by automating workflows and removing the need for manual intervention, for example during onboarding or loan origination. Firstly, it provides the potential to grow revenues by providing new, better and differentiated products and services for customers. The banking leader of the future will be ambitious right now and be setting out a plan to speed up digitisation by focusing on the operations innovations that will boost customer experience and drive the next phase of growth.Â. With the rise of customer-savvy fintech disruptors and low consumer trust in the financial services industry, it’s no secret that banks feel the pressure to drive personalized customer experiences. hereLearn more about cookies, Opens in new Call centers will all but disappear due to AI bots and automation, and branches will be scaled down in number and transformed in function. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. In the US, the number of bank branches has dropped by 6% since 2009, and is now at the lowest level in more than a decade. Automation and artificial intelligence, already an important part of consumer banking, will penetrate operations far more deeply in the coming years, delivering benefits not only for a bank’s cost structure, but for its customers. Instead of using simple arithmetic based on a limited number of variables to predict demand, demand predictions for specific products and services can be made based on granular profiles of customer segments and customer behavior using dozens or hundreds of variables. Banks are fully cognisant of the fact that in order to remain relevant and competitive, they need to be on a flight path to a completely customer-centric operation. To prioritize their customer-centric efforts, banks must simplify complex operations and infrastructure, embrace intelligent technology and partners to create the right service bundles for their customers, and understand how to leverage customer data to offer service-first models. Please use UP and DOWN arrow keys to review autocomplete results. However, statistics show that banks are slow to accelerate this move from a focus on selling products to selling customer-centric relationships. This often means finding a balance between traditional services and digital innovation. That way, through integrated customer data, it gets optimum effectiveness through enhanced analytics; and in that manner in front of it lies customer-centricity. This website uses cookies as set out in our Privacy Policy. Customer expectations and behaviours have changed dramatically over the past ecade. Please email us at: McKinsey_Website_Accessibility@mckinsey.com. Cultural change of this kind starts with clear communication from bank leadership about making the customer the priority and with the actions that leaders take in carrying out this new mandate. Or maybe a bank decides to offer loans that allow customers to specify their repayment plan and due dates. Typically, US consumers have to wait at least a month to get approval for a mortgage—digit… Today, banks offer standardized products hardcoded with specific benefits, parameters, and rules–30-year mortgages, travel rewards credit cards, savings accounts with minimum balances. If you would like information about this content we will be happy to work with you. To attract this kind of talent, banks will need to expand their geographic footprints and identify talent pools with the required skills and attributes. Never miss an insight. Shifting to a digital-first manner of doing business is essential for the financial services sector to explore the customer-centric landscape. There are two essential strategies to support this. Numerous examples of new digital capabilities rolled out within just weeks and the wholesale move to working from home illustrates just what is possible when there is no viable alternative. Banks, in other words, will look and feel a whole lot more like tech companies. Banks that lack a clear long-term automation plan—one that will result in a fully digital operation a decade from now—will struggle to meet customer expectations. And these employees will have the decision-making authority and skills quickly resolve customer issues. Automation and artificial intelligence, already an important part of consumer banking, will penetrate operations far more deeply in the coming years, delivering benefits not only for a bank’s cost structure, but for its customers. Today’s operations employees are unlikely to recognize their future counterparts. ... improv ement an integral part of their operations. Customers can contact their bank any time through internet, mobile, or email channels and receive quick, real-time decisions. In order to cultivate a truly customer-focused financial institution, you have to consider the variety of diverse needs that customers bring to your bank. Design and implement a new talent model: Operations employees in 2030 will need to know how to code, develop products, and understand data, but they will also need the personal warmth and insight to manage exceptions and deal with complex customer problems. Senior executives realized the bank needed a comprehensive approach that its 22,000 employees could use to create a consistent, customer-centric banking experience across all 18 markets. Client-centric, also known as customer-centric, is an approach to doing business that focuses on creating a positive experience for the customer by … For instance, if a bank notices that its older customers have a tendency to call within the first week of opening an account or getting a new credit card, an AI customer service rep could reach out to check in. To thrive in a world where once-siloed roles like loan closing and fulfillment, compliance, and risk management become an integral part of product development, product management, and customer experience, banks will need to make major organizational changes. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. Unleash their potential. Tweet. Most utility companies are segregated based on front- … They will also have deep knowledge of a bank’s systems and possess the empathy and communication skills needed to manage exceptions and offer “white glove” service to customers with complex problems. The ability to deliver this depends on the extent to which ‘customer-centricity’ is embedded within every single person in your business. Customer needs are rapidly changing. If customers (and ultimately the customer experience) are the focal point of new business strategies, modern operating models also put the customer at the center of how people work. Put customers at the center Future competitive advantage and growth will rest on supply chains that can deliver innovative and hyper-personalized products, services and experiences. With operations consuming 15 to 20 percent of a bank’s annual budget (Exhibit), transforming these functions will lead to significant improvements in profitability and return more capital to shareholders. Instead of processing transactions or compiling data, they will use technology to advise clients on the best financial options and products, do creative problem solving, and develop new products and services to enhance the customer experience. As more customer transactions move to digital channels, front-line branch employees will operate as skilled personal advisors, helping customers get answers to complex questions that can’t be addressed digitally, giving advice about bank products and features, and generally serving as a one-stop-shop for customers in need across journeys. © Nucoro Limited is registered in England & Wales with company number 12080118 and its registered office address is at Spaces, Citypoint, 1 Ropemaker Street, London, EC2Y 9HT. Brings deep expertise in branch sales productivity, collections, and next-generation operating models for banks. Banks need to improve on their quality and service standards and focus on a customer-centric approach to enhance the service relationship with customers. Customer experience has to be both the starting point and the focus for process design and operational innovation. In fact, 68% of banking CEOs believe that without agility, they would be facing bankruptcy. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. In their quest to become more customer-centric, banks are advancing their technology, and the top investment for retail banking is the integration of platforms, regardless of bank size. Regulators across the board have stressed the need for banks to be more customer-centric. Bank of East Asia … Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe, Supports leading financial institutions on strategy, sales and distribution, risk management, and operations effectiveness. Banking is one of the highly competitive sectors, and Customer Centric Approach plays a significant role in Banking these days. Our flagship business publication has been defining and informing the senior-management agenda since 1964. Imagine, for instance, a bank launching a new credit card in which the card member gets to define the rewards points they can obtain–perhaps 30 percent of rewards going to an airline, 30 percent as cash back, and 40 percent at a specific retailer. A lot of banks are behind where they’d want to be on their digital transformation; we take a look at the best approaches to making transformation a success. The future will look very different for banks and their customers in 2030. Learn More. Scale advantages are emerging for the largest US banks; their regional peers need to build highly efficient delivery models in order to compete. As banks increasingly focus on personalized interactions, a journey-based operating model will be required. Customer engagement is talked about a lot in banking. They will need to rethink how the people who make the bank run are going to function. Invest in … Instead of waiting on hold or being pinballed between different representatives, customers could get instant, efficient automated customer service powered by advanced AI. On the back end, systems would perform almost instant data evaluation about the dispute, surveying the customer’s history with the bank and leveraging historical dispute patterns to resolve the issue. Customer needs are changing at a rapid clip and banks are racing to keep up with the pace of change. Banks need to reverse this dynamic and make customer experience the starting point for process design. We use cookies essential for this site to function well. Next, this study continues with a … We believe that a customer-centric retail bank should refine the following core competencies: Understand, anticipate and timely react to customers’ needs. React to customers customer engagement is talked about a lot customer centricity in banking operations banking raised... Than 600 bank branches were closed in the last year alone, more than 600 bank were. 68 % of banking innovation, focused heavily on optimising and digitising banking operations. are just. 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