Banks need to refocus on customers in a significant way

At one time banks stood right at the centre of the society they served, their employees were trusted figures and their services figured in the key life decisions of their customers.

In short, banks had a purpose, they were relevant. 

Today, in stark contrast many customers have lost confidence and trust in the banking system and very often the actual dialogue between the customer and the bank has been lost and broken. 

At the same time any number of other non-bank financial service providers are threatening to make significant inroads into the market and providing very serious competition, banks really are struggling to respond, the old adage that “more of the same will not do” was never more true.

I guess the question really is can the banks ever reengage effectively with their customers, rebuild the trust and make themselves relevant again?

One of the great tragedies of the last 15 years is that consumer banking i.e. providing services to “ordinary” businesses and individuals has been marginalised within the banks themselves, its not so long ago that you could look at a “universal” bank and find that approximately 70% of all their profitability came from the SME personal banking businesses. 

Because of the arrival of the investment bankers and “casino banking” from the late 90’s onwards consumer banking was relegated to the 2nd division and the investment bankers ruled the roost and in effect utterly destroyed the business models and trust that commercial banks had worked for decades if not centuries to create.

So what is the way back?  Is there a way back?

I think firstly the “relevant bank” will be technology enabled – this means that many banks will have to go back to square one, dismantle the miasma of legacy systems that they have created and rebuild customer-based, smart IT systems that really provide accurate and timely customer information and allow customers to interact effectively right across their product sets with their bankers.

The “product push” model must change.  It is imperative that banks tailor their offerings of products and services to different sets of customers ensuring that they receive what they actually want and need and through channels and at a price which they prefer.

Banks again must become relevant socially and provide society with a positive, ethical trustworthy example and exercise positive influence in their communities.

They must be relevant economically returning to profit and offering shareholders attractive and sustainable returns over time.  At the present time all we read about is banks closing branches, I think this is nuts!  They are not asking themselves what branch model works?  They are simply down the road with the bean counters and in a very simplistic way taking out and removing capability.  The branch is a key element in the whole distribution channel management structure. 

Certainly, the traditional branch model where it was all things to all people, a processing centre as well as a service and sales centre is ineffective and obviously major changes have been made there.

It is vitally important in order to achieve what will be required in the way of a multi channel offering to ensure that customer information and data is accurate and readily available.  Equally important is the requirement to engage experts in structuring thorough and proper market research, which will drive into the various segments.  The concept of a “market segment of one” is not totally ludicrous! 

There’ll be a requirement for trained and skilled and informed staff, this will cost money but the payback should ease significantly.  If that can be achieved then we can ensure that there would be good quality decisioning at or close to the interface with the customer.

In short, we need to make sure that every element of data and delivery channels and skills are available to interact with a number of segments and deliver discrete customer value propositions.  In my opinion, the branch is an integral of this multi-channel delivery.  None of this is easy of course and will require discipline and investment but the prize is potentially very large indeed!

I believe that banks can be relevant again, I don’t think it is a fantasy, it is desirable, credible and achievable, it can leverage the most positive aspects of the past to create a viable and competitive future in existing and in new markets. 

Making it happen though will require leadership of the highest order with a great deal of vision and courage, the journey needs to start at once!

While banks in the GCC region generally did not experience the massive disruption driven by the global financial crisis that impacted on many banks in the West, there are nonetheless some powerful lessons here for regional banks. 

Bank competition in the GCC region especially for the consumer and the medium and high net worth individuals is intensifying and there is, I believe, a tendency for many banks to “copy” technology driven strategies prevalent in the West perhaps 5-10 years back ie. somewhat dated? 

That being the case then there needs to be a significant repositioning and refocusing on the customer and asking tough questions about the viability of the standalone branch in the absence of a complete suite of other channel access. 

Banks in the region continue to open branches willy nilly, that strategy needs to be reviewed in the light of the thoughts expressed in this article!