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Major Technology Investment Needed to Make UK Banks Fit to Communicate in the Digital Future
Friday 21. November 2008 - In the digital age, customers want more informality and more personalisation in the way retail banks market their services. New research shows there's a long way to go.
Retail bank customers across UK are demanding better communications but the retail banks are being held back by legacy systems and processes that simply cant deliver. This is the key finding of the “The Future of Customer Communications in Retail Banks” survey released today by research firm Coleman Parkes. The Xerox sponsored research amongst 1,004 consumers and 151 retail banks across France, Germany, the UK and the Netherlands revealed that:
consumers want more personalised and more informal communications from their financial services providers
banks are being hindered by legacy systems and processes that dont support the one-to-one marketing model
banks need to provide personalised marketing communications to prevent consumers changing banks
Says Mark Eldred, General Manager Sales Operations, Xerox Global Services, Xerox UK: “Over the past three years, weve seen a significant shift in the way retail banks want to communicate with their customers. The perfect one-to-one marketing approach is the Holy Grail for many and the will is there but poor unstructured data, old document processes and lack of integration all contribute to a major communications headache.”
The research shows that European banks want to use new technologies to reduce customer churn and deliver revenue growth. Nearly all the European retail banks surveyed in all four countries (89 per cent) identified a need to drive both the personalisation of communications channels and the communications itself, based on individual customer preference. UK banks also agree that more targeted messages will positively impact sales revenues (90 per cent) and campaign response rates (80 per cent). Similarly, there is widespread agreement that more or better customer segmentation and communication will reduce customer turnover (74 per cent) and lead directly to account growth (79 per cent). Nearly all banks (85 per cent) believe that customer loyalty will improve if they can segment customers and communicate appropriately with them.
But, amongst consumers, there is quite strong agreement (a rating of 3.5 out of 5, 5 being very strong agreement) that bank marketing campaigns do not appeal to them as individuals, as they fail to focus on personal issues and needs. In addition, 38 per cent of all European consumers agreed that “banks are still too impersonal when communicating with me – they need to be more informal”.
So while there is acceptance that changes in segmentation will bring greater benefits, current legacy systems and processes are holding European banks back from progress. 70 per cent of banks report that they are struggling to keep up with the required changes in channel activity to meet customer demand. There is a strong desire amongst UK banks to cross sell, the main drivers being more revenue growth (mentioned by 85 per cent of all banks); prevention of customer turnover (80 per cent); a desire for an increased share of the customer wallet (74 per cent) and new product introduction (85 per cent).
The UK retail banks cited the three main challenges faced when working with legacy-based customer communications processes and systems as: poor flexibility (70 per cent); poor availability of customer data (66 per cent); and lack of integration of communications channels for multiple activities (62 per cent). Nearly all retail banks in all four countries (86 per cent) agree that customer behaviour is increasingly pushing them to use different channels for communication.
Xerox Global Services is already working with eight out of Europe’s 10 leading banks to improve productivity and increase revenues through improved customer communications. Banks are working hard to identify and hold on to valuable customers and, in turn, these customers are asking their banks to have a better understanding of their needs and communicate with them more directly and through the channel of their choice, whether its online or at the branch. Xeroxs Customer Communication Services, part of Xerox Global Services, helps financial institutions locally or globally to implement highly integrated, efficient and personalised marketing communications to improve customer loyalty, increase response times, customer satisfaction and maximise cross-selling opportunities.
The survey also highlighted that European banks intend to try and address some of todays failings with the next generation of banking systems. Across all four countries, 84 per cent of European banks expect to implement customer data systems with software as a service (77 per cent); enterprise wide Customer Relationship Management systems (76 per cent) with mobile convergence/VoIP (75 per cent) not far behind.
Today, in UK, email (69 per cent), direct mail (79 per cent) and call centres (49 per cent) are the other key communication channels. But over the next three years European banks expect to see a major shift toward more digital communications with customers. Mobile device communication will grow from 51 per cent to 78 per cent in three years and email communication will grow from 71 to 89 per cent, whilst instant chat will be part of the communications activity for 58 per cent of banks, compared to only 30 per cent now.
Digital TV usage will also grow from 25 per cent to 55 per cent in the next three years and the survey predicts that the rise in digital will be at the expense of call centre, direct mail and, to a smaller degree, branch communications activity – all of which are expected to fall over the next three years.
Ian Parkes, Director at Coleman Parkes which undertook the research says: “Banks can ill-afford to make mistakes. Poor customer service (45 per cent) and a major error by the bank (51 per cent) are two of the top three issues that will drive a consumer to change banks, so banks need to focus on a high level of customer service and quality of information management.
“With share prices of many financial services technology firms taking a tumble recently amidst rumours that IT budgets will be amongst the hardest hit after the global credit crunch, European retail banks may find themselves hard pressed to meet their customers demands for more personalisation if upgrading legacy systems and processes is stalled by an IT budget squeeze.”