Taamara de Silva sheds light on how customer engagement is being disrupted

Banking is being progressively commoditised globally through standardisation, price transparency and easily accessible alternatives, and Sri Lanka is no exception to this trend. Recent Central Bank of Sri Lanka directives have seen a cap on deposits and therefore, a ceiling on lending rates is inevitable.

For bankers, this means that interest rates will no longer be a determining factor in client decisions.

Meanwhile, the advent of fintech is rapidly disrupting financial services as mobile technology did 10 years ago. Bricks and mortar branches are losing to digital banking channels as customers’ needs evolve at an alarming rate.

The younger generation hardly wants to know how old an institution is. They want agility, innovation and digital tools to connect with them on a daily basis. And they perceive banks as institutions geared to advise them. This presents an opportunity for new thinking.

For this, customer engagement has been highly regarded. Adopting digitally enabled services presents a unique opportunity to strengthen customer relationships – i.e. to go beyond daily banking to managing their financial life cycles more effectively.

Accenture research reveals that in 2016, two-thirds of North American customers considered their banking relationships to be purely transactional. This suggests that knowing customers (enabling interaction using their method of choice) and being effective (resolving issues and completing transactions) are the most important features of today’s customer service experience.

Customer engagement involves customers’ willingness to interact with banks. It’s a two-way street starting with an understanding of providing customers with perceived value. Engaged customers will reciprocate by establishing a sustainable and rewarding relationship.

Unfortunately, customer engagement cannot be achieved in a day, week or month. It’s the foundation of a relationship based on trust and constant dialogue, and leads to steady growth in service ownership. The result is a higher share of wallet – if of course, this is done properly.

Customer engagement starts even before new clients open accounts. The depth of data and processing capability enables banks to find prospective customers with similar characteristics to current clients – including aspects such as income levels, spending patterns and lifestyles. Initial conversations may focus on capturing insights from customers beyond the basics of selling.

Research indicates that over 50 percent of customers are bombarded with misguided information. A personalised approach is required to ensure sustainable engagement in the relationship growth process.

Apart from isolated initiatives, the sector is yet to fully adopt a comprehensive approach. Traditional practices also display growing vulnerability in the face of disruption. Established players outside the financial services industry offer credit alternatives, investment opportunities and charge fees for additional services, carving out a large share of the banking sector.

So how do banks respond?

Although digital banking is offered through a multitude of mobile apps with web and digitised banking centres mushrooming, a reasonable gap remains in delivery across these channels. Branches are still the primary sales channel for clients with more complex requirements. And banks must continue to innovate their application of digital technologies to meet evolving customer needs.

The concept of an ‘everyday bank’ has evolved beyond the traditional boundaries of banking to build a digital ecosystem – one that links partners and other key players across communication, consumer goods, healthcare, travel and leisure.

Banks can initiate pre-sales advice, discounts and after sales service to create cross selling opportunities. Leasing can be coupled with advisory services on which vehicle to buy; housing loans can be accompanied by expertise so that property investments are seamless; and with everyday purchase decisions comes information about the latest offers, integrating closely with the customer ecosystem.

The banking sector should explore digital personalised finance tools. Introducing wealth management products and financial advisory services, in addition to encouraging savings and investment solutions, can lead to lasting customer engagement. The objective must be to meet a client’s daily monetary needs while suggesting strategies to achieve long-term financial security.

By focussing on customer needs and integrating data, analytics and insights, together with product development and delivery, banks must be ready to transform not only their service propositions but also brand perceptions. This will help drive overall engagement and lead to customer loyalty.

The future of banking is driving better valued propositions to customers via omni-channels and by leveraging digital capabilities. The rest is up to the engaged customer.