Digital banking: How to leverage design thinking?
Updated: Aug 26, 2019
Once, branches were the only channel to distribute banking services and products, but it was a very long time ago. Since then, technology has enabled the development of more channels: call centers to answer clients’ inquiries, and automated teller machines (ATMs) to automate money withdrawal. The first ATM was installed at a Barclays branch in the north of London in 1967. These new channels made branchless banks possible, and the first one was launched in the UK in 1989. Distribution channels proliferated with the emergence of the Internet, smartphones and social media. The number of branchless banks also proliferated, leveraging either the Internet and/or mobile applications.
Payments are undergoing a similar transition, evolving from exclusively cash based to completely cashless in some parts of the world.
7 factors influence clients’ communication channels preference
Today, clients have such a wide choice of channels to communicate with their favorite banks that their customer experience has become extremely rich and varied. Our research found that clients choose how to contact their clients depending on seven distinct factors:
Availability: It is possible to withdraw cash from an ATM, but not from a mobile application.
Pricing: Clients are always attracted by cheaper solutions, sometimes even at the expense of convenience.
Convenience: If the branch is too distant, crowded or difficult to access, customers will turn to other channels.
Criticality: Depositing a check might be critical for a client, and he will select the most reliable channel to do it, probably a branch.
Required advise: Some operations are very repetitive and do not require any advice after several iterations.
Available time: A busy executive will choose a digital channel rather than spending his time in a branch.
Emergency: It is very difficult to beat mobile speed of access and execution (unless there’s a branch just next door).
Because the combination of the above factors constantly evolve, customers may choose alternatively between all distribution channels proposed by their bank. However, changing channels should not alter the customer experience. An account balance, for example, is expected to show the exact same amount whether it is retrieved in a branch, on the Internet or at an ATM.
All these reasons justify building a global distribution strategy including all channels to increase their complementarity.
“Digital channels cannot be developed separately from the physical network”
A good starting point is to determine use cases for all clients based on the above factors. This is what we can call the “customer journey” for each segment. It allows us to envision how clients interact with their favorite bank and to identify their main pain points. Once this first step is completed, the bank can build its distribution strategy based on how it wants to direct its clients, using target use patterns for each channel. For example, there is no reason to develop a feature or service on all channels if it does not correspond to any use case scenarios.
When we look closer at the above factors, we can easily conclude that banks completely determine availability and pricing, and greatly influence convenience – they are the main components of the distribution strategy. The other factors depend entirely on clients’ appreciation and learning curve. As the banks have no control over these factors, they are often neglected, which partly explains why clients do not adopt a new channel as quick as their bank forecasts; this is called inertia. For example, the willingness and capacity of clients to learn a new process is often overestimated.
Other factors, such as delays and required investment, are of course considered in the distribution strategy. This means that management might decide not to offer a bunch of digital features even if they are solicited by clients. In this case, at Stratexis, we propose a degradant solution and wait until adoption is high enough to justify investing in a full solution.
Example of new branch model based on design thinking
Using use case scenarios to explain management decisions to employees can be very powerful in overcoming their resistance to change by putting them in clients’ shoes. It gives the commercial workforce room to increase their productivity and value to customers.
This approach called design thinking presentsmany benefits:
configuring distribution to be truly client-centric
focusing on how to resolve clients’ pain points
avoiding unnecessary investment
forecasting results more accurately
providing visibility and guidance for decision-making
fostering adoption by both clients and employees
The winning strategy is a combination of face to face and digital banking
New models for branches
Based on our experience in assisting banks in 13 countries, at Stratexis we can confirm the following:
Branches remain an important pillar of the banking distribution, they should be dedicated to high-added-value services that require an advisory role.
New models of physical distribution such as agile branches, mobile workforce self-service areas, and information booths in airports and train stations should be developed. They can be more convenient to specific demographics or geographical areas than traditional branches or ATMs.
Offering advantageous pricing and rich value proposals are necessary to persuade clients to adopt a new digital channel, but not enough.
Banks can apply best practices developed in other industries such as Telecommunications
Client adoption starts by ensuring employee adoption. A convinced employee will be able to sell digital services much easier.
Learning to use a new channel usually takes longer than expected because of elements of inertia.
ATM features that do not involve cash can be used as a transition to educate clients and accompany them to use digital channels. Investing in intelligent ATMs can be beneficial if it remains limited and if these ATMs are rotated across the network to serve different clients.
Call centers and social media offer interesting use cases that are widely misused.
Branches can be leveraged to educate clients about digital banking
To sum up, an effective distribution strategy needs to be built with all channels included, from design to implementation. More than ever, the core of any distribution strategy has become the customer experience.
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