Accenture: Destination digital - Edwin Van der Ouderaa

Every bank must compete in an increasingly digital market as customers move more of their interactions to the screen. As banks look to support customers' new digital behaviors, they are facing a big transformational challenge: how to marry a dynamic and engaging front-end system with aging legacy systems. Given that traditional banks have to act fast to compete with new digitally-enhanced entrants in the market, Future Banking asks Accenture managing director Edwin Van der Ouderaa what banks must become in the years ahead.

No one can doubt that the rules in the banking industry have changed. In an age where the mobile internet and the 'cloud' are part of our everyday lives, the interaction between customers and financial services institutions is increasingly screen to screen rather than face to face, and the critical success factor for banks is the quality of customer service.

The pressure is on banks to deliver seamless, high-quality customer journeys across multiple channels - be it in the branch, via the web or through a mobile device - and that means becoming a digital bank. That is a big transition that must be made quickly, and it is one that new entrants to the market can make more quickly than well-established banks that can be encumbered by a complex architecture of legacy systems. Failure to keep up with the demands of the digital age will see customers jump ship.

"Banks must be digital today, so they must transform their back-end systems and customer experience at the front end at the same time. There is much more competition in the industry today, so banks must fight a battle that will play out in the short term on customer experience. Loyalty does not exist anymore," says Edwin Van der Ouderaa, managing director, Accenture Analytics, EALA Financial Services.

"Banks should focus on the customer journey first and foremost. The customer interacts with them through different channels. The digital experience must be smooth and targeted, the face-to-face interaction in the branch must be personal, and customers must be able to switch between channels during an interaction, so all channels must be integrated," he adds.

Even a bank's touchpoints with customers in the branch are defined by the incorporation of digital processes, as the data and the experience must be consistent across all channels. "Every journey must reflect the best way for customer experience to happen. A fluid customer journey is not just about the front-end design. The pain points for the customers come at the back-end, where the bank needs various things from customers without asking them to type in a lot of information on a form for a loan, for example. The bank should be able to prefill forms and simply ask for confirmation. Everything must be ready in advance, ready for when a customer interacts with the bank and across every channel," says Van der Ouderaa.

"The branch must offer the same fluid journey that customers have through their mobile phone. For instance, the adviser and the customer should share a screen in the branch rather than sitting across a desk from each other, as it builds a relationship of trust. The challenge is to create a smooth and engaging digital experience and replicate this in the branch. Both channels must evolve together," he adds.

Competing through customer experience

The adoption of mobile banking, which is seeing many customers skip the step of using a bank's website, is the latest catalyst for change in the dynamics of customer relationships. Only a few years ago, the bank was in control of how customers could access their accounts, but today's successful banks must put customers in control of their finances and allow them to define when, how and where they want to do their banking.

"Banking should be 98% self-service and this is not about keeping costs down, it is about creating an easy, customer experience. Customers are now in charge and even though there is no such thing as loyalty any more, it is important for banks to address the issue of churn," says Van der Ouderaa.

"Banks offering seamless, personalised services - taking into account customer segmentation, location and time of interactions and also the needs of each individual - can create superior brand awareness and preference. By providing good customer experience, the brand becomes a symbol of quality of service, which creates brand enthusiasts and raises net promoter scores. While modelling loyalty has become so complex that the predictive power of the model is zero, churn models are very accurate and we can predict from familiar patterns when a customer will leave a bank. A 'loyal' person is just someone who hasn't left yet," he adds.

At the 'zero moment of truth' - when a customer starts to consider a need that could result in a transaction with a bank - customers have more choice than ever in terms of who to approach. In days gone by, customers thinking of taking out a loan or a mortgage would instinctively go to the bank holding their accounts, but that is no longer the case. Banks need to make sure they capture the zero moment to turn the customer's need into a transaction.

"Banks are starting to work on providing real-time credit to compete with the credit options offered by retailers, with peer-to-peer finance providers and with the shadow banking sector that is made up of non-bank entities that provide finance. They will compete with these alternative sources of funding by providing, personalised services in real-time," says Van der Ouderaa.

"In the payments area, customers often don't see the banking application any more. They pay with the touch of a button or they send money through the retailer's mobile application or website. Banks could eventually become invisible utilities like electricity or gas companies if they do not become part of the digital conversation," he adds.

A guiding hand

To succeed in their process of transformation, banks need to understand what they want to be in five to ten years' time to get a clear picture of what needs to be changed. Only then will they be able to address the really difficult questions around how to transform their systems and their business model without losing customers along the way.

"Getting customer experience right starts with distribution models, which are still not designed to be omnichannel - this means offering a truly seamless interaction between channels. It is a multiyear process to get IT, governance, incentives and sales-force reorganisation right to achieve the omnichannel model. There are many big hurdles to overcome and there is always resistance to any change in culture," says Van der Ouderaa.

"At the back-end, systems are not designed for a paperless environment or the provision of instant credit, which banks must provide to compete with peer-to-peer lending or the interest-free credit offered by many retailers. The back-end must be real-time, which means changing legacy systems. Banks can either start the long process of transformation or take a greenfield approach, and build a new back-end from scratch and migrate over. Whatever they choose, in parallel they need to keep developing the dynamic front-end to meet customers' needs," he adds.

There is no easy way to achieve core systems transformation while balancing the needs of a fluid and consistent customer experience at the front-end, and there is no single solution that suits every bank's unique needs. Nevertheless, Accenture understands every step of the journey and is able to guide banks in their realisation of their strategies for change.

"Every day, we are working with leading banks as well as organisations in many other industries to help them transform into a digital business. With many banks now asking themselves what they will be in 2020, we can help them to define that vision and map out a digital journey - from building an omnichannel infrastructure to the front-end applications - that can help them to disrupt their industry and keep the digital consumer coming back for more," explains Van der Ouderaa.