In pursuit of cost savings, banks have closed many of their branches and replaced personal service with digital self-service. But they’ve forgotten to ask customers what they want. LanLing Fredell, innovation and FinTech expert at PA Consulting, elaborates on the reasons behind the widespread dissatisfaction among major bank customers in Sweden, revealed in SKI’s most recent Swedish bank and finance survey.
The survey shows that, except for Handelsbanken, satisfied customers are mainly with smaller players such as independent savings banks Länsförsäkringar Bank and Ica Banken. And no wonder. In pursuit of cost savings, Swedish banks have dismantled large parts of their branch chain and replaced personal service with digital self-service. But they’ve forgotten to ask customers what they want.
From an international perspective, Sweden takes a place among the most digitised countries in the world. Services like Bank ID and Swish have contributed to this view, as have retailers' increase in cash-free stores.
But the fact that banks did not prioritise customer needs in the ongoing digitisation creates problems. The big banks need to redo and correct the existing office operations and the devastating organisational silos, but above all they need to develop services demanded by customers.
New role for bank offices
Judging from SKI’s report, closed branches and poor opening hours are part of the widespread dissatisfaction. But how customers use the branch may also be important.
On Stureplan in Stockholm, SEB has opened its vision of future bank branches, where the classic over-the-counter services are just a memory. The branch is more of a temporary workplace with free wi-fi, where the customer can get help with simpler services such as instructions on the bank's website and mobile app. In addition, they are open on Saturdays. This kind of modernisation is a good start but far from enough.
To survive in the future, banks need to rethink the purpose of their physical branches and how they can serve today's consumers. This is a fundamental transformation that affects everything, from branch size and location to service portfolio and mix of digital and physical services. Everything should be integrated throughout the consumer value chain.
Booking meetings with an insurance adviser or a pension expert is old school. Banks must offer services via any channel - digital or physical – so customers can access both simple and more advanced services instantly. Customer service should, with the customer's permission, be able to access all customer commitments in the bank so they can give advice on different types of services at the same time.
Banks need to be selective
In addition, banks - like businesses in other industries - need to understand their core business today and in the future.
A large part of banks’ core processes can and should be digitised. The digital transformation is not easy for traditional banks that have inherited old systems and IT platforms. Therefore, outsourcing all or part of the processes to other, more efficient niche players can be a more effective solution.
The boundaries between competitors, partners and service providers are gradually eroding. Twenty years ago, it would have been unthinkable for a big bank to collaborate with another bank, but it is not today. In the UK market, for example, the NatWest provides services for competing digital banks through its physical branches. The UK’s Royal Mail also offers a similar solution to several banks, where Bank of Ireland customers have access to some banking services at their local post office.
The increasingly EU-regulated financial market allows outsourced services to be a good option for lowering costs and ensuring compliance with standardised services and processes.
The new loyalty
PSD2 legislation, with increased transparency, competition and price pressure on digital services, risks affecting major banks' profitability in certain service areas. This has given room for a new trend over the last two years, what SKI's industry survey called "the new loyalty" – more and more Swedes are choosing to have several banks to address different needs
No less than 61 percent of private customers and 53 percent of corporate customers are in this group. There is a risk that the four major Swedish banks believe their customers are loyal when the customer has already moved their most profitable business to a competitor.
The big banks are sat on a gold mine in the form of a strong brand, a large customer base and, above all, huge capital. But this must be managed over time. What they lack is the right kind of focus.
For banks to become more customer-focused, they must embrace new technology and develop user-friendly digital services. But it's also about being smart enough to hand over less profitable parts to other players through outsourcing. And in the end, the key is to think about what works according to customer needs, not the bank's point of view.