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Helping banks close the value gap and regain customer trust

Malcolm Ng, Director for FSI at Cisco in Singapore | July 29, 2015
Banks should leverage the Internet of Everything (IoE) – the networked connection of people, process, data, and things – to close the value gap.

This vendor-written piece has been edited by Executive Networks Media to eliminate product promotion, but readers should note it will likely favour the submitter's approach.

Within the next five years, the number of digital-banking consumers in Asia is projected to grow three-fold, hitting a high of 1.7 billion in 2020. This generation of customers, the wealthiest in Asia's history, is comprised mainly of digital natives who prefer to use online and mobile platforms to perform transactions and purchases. As a result, branch usage across Asia has fallen by 27 percent; giving way to mobile and Internet channel usage, which has increased by more than 35 percent in the past three years.

Most banks in Asia recognise the opportunities that digitalisation can bring, but it is also essential for them to understand the risks. McKinsey research found that the digital disruption could undermine the value of banks; up to 50 percent of their net profit could be at risk. More alarmingly, Cisco found that 28 percent of bank consumers globally do not believe banks represent their best interests, and four in five consumers would trust a non-bank, such as Apple, PayPal, or a retailer, to handle their banking needs. It is evident that a number of banks today are not in an optimal position to capitalise on the wave of digitalisation that is sweeping across our societies.

The lack of trust between customers and banks can be attributed to the fact that many banks continue to lag in providing contextual, relevant, and convenient experiences to their customers. Today's bank consumers are used to online and mobile experiences that reflect their likes, dislikes, past histories, and even their future plans.

However, it is not always the case for bank services. While many customers yearn for personalised financial guidance, a Cisco survey of 7,200 smartphone users and bank customers in 12 countries found that for too many bank customers, the choice is between either no advice or what they perceive to be generic advice delivered inconveniently. As a result, bank customers often try to attain their most important financial goals on their own, via "friends" on social media, or from non-traditional providers of financial services.

So how can banks close the "value gap" with customers while regaining their trusted advisor position? The answer lies in leveraging the Internet of Everything (IoE), the networked connection of people, process, data, and things. Cisco research discovered high consumer interest in five IoE-enabled banking concepts, namely virtual financial advice, virtual mortgage advice, automated advice, branch recognition, and mobile payments. These solutions closely align with banks' core strengths, including their physical branches, financial expertise, and rich customer data.

Through the convergence of digital technologies such as mobility, analytics, and video, banks can return to what they once did best, and what set them apart: providing streamlined and secure management of transactions, combined with offering advice to guide customers' most important financial decisions. Banks can use their size to great advantage, offering advice through a wide portfolio of offerings at scale, thereby reaching more customers, at more times, in more places, and with more relevant information than ever before. Despite their vast stores of customer and transaction data, many banks have failed to turn that data into actionable customer insight. The IoE solutions address this shortcoming by focusing on ways to deliver better advice (virtual financial advice, virtual mortgage advice, automated investment advice) and more valuable mobile services (branch recognition, mobile payments).

 

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