EPAM’s Alex Jimenez and Dennis Joosten Discuss Trends in Retail Banking: Consumer Trust, Branch Use and Digital Transformation
Banks today compete in an environment that has never been more disrupted. Shifting consumer expectations — driven by digital interactions with businesses like Apple and Google and accelerated by the shift to remote services during the pandemic — have driven consumers to expect always-on, real-time products and innovation. Banking is no exception.
This was a theme we saw play out in our most recent Consumer Banking Report, where we surveyed 26,000 banking customers across eight countries. Our results showed 31% of respondents reported using their bank’s mobile app daily, and a further 33% reported using it weekly. However, physical branches still had a significant role to play. Globally, 85% of consumers reported using a bank branch in the last year, while nearly half (44%) of respondents claimed they used a branch in the last month.
That level of traffic to brick-and-mortar banks felt at odds with the shift toward digital we’d seen both in the banking industry and elsewhere. To help make sense of this, we caught up with EPAM’s Alex Jimenez, Managing Principal, Financial Services, and Dennis Joosten, Senior Director, Banking Practice. Jimenez has a long history of consulting experience in the North American financial services industry, and Joosten, operating out of the Netherlands, has his fingers on the pulse of the latest technology and banking trends in the European market. Together, they were able to shed some light on what, at first glance, felt like a contradiction in our research.
Moderator: So, in our most recent consumer banking report, customers around the globe reported by and large they were happy with their primary banks. In the US that number was 81% of respondents. In the Netherlands, it was 83%. What are banks doing right to garner such favor?
Alex Jimenez: A high level of trust continues to be good news for banks. While anecdotally you might hear from people that they want to leave their bank or start banking with a new FinTech and so on, the reality is, a majority of people are happy with where they are.
Dennis Joosten: Given some of the recent high-profile bank closures in the US, I’m sure the responses to this question would be slightly different now, but indeed in all the countries we surveyed we saw a high level of trust in financial institutions, especially retail banks. And that trust really hasn’t changed much over the last few years we’ve conducted this research. At the end of the day, it’s about security. The industry, and banks in general, must be in compliance with an ever-evolving slate of regulations, all of which help to drive consumer trust. Sure, breaches in security, regulatory failures and scandals will certainly shine a negative light on any particular bank, but trust itself isn’t a differentiator. Banks today will sink or swim based on the experiences and convenience they offer consumers. That’s how they build an advantage.
AJ: True, but I think there’s still an opportunity to stand out, especially in the US. I've seen several community banks putting out messages through social media, through emails, telling their clients that their money is safe. “This is the reason why you're safe, how your money is secured by FDIC insurance, etc.” All of that has been really great. What I have not seen are the big national banks, or even the regional banks, doing that kind of messaging. Interestingly, there's a small bank in Oklahoma, Citizens Bank of Edmond, where the CEO, Jill Castilla, gives out her phone number to customers and advises them to call her if they have questions. Now obviously that's an outlier. But it's a powerful message for a CEO to say, “If you're concerned about us, give me a call and I'll talk to you about how we secure your money.”
I think that for banks that want to maintain consumer trust and turn it into a differentiator, there’s an opportunity to have customers hear from the CEO, or receive an e-mail from the CFO, telling them what measures are in place to protect their money.
Moderator: So, let’s talk about the big differentiator, the digital experience being offered by banks. Consumers in the Netherlands reported the highest rates of satisfaction with the digital experience provided by their banks. This was at 87% approval, whereas US consumers ranked this lower at 82%. What might account for this discrepancy, and what steps should banks be taking to improve their digital experience?
AJ: I think in the US we have gotten so used to just going to the branch for so many things that we just default to that, and there hasn’t been that sort of concerted demand, until recently, to create digital solutions around those branch experiences. You know, most people bank with one main bank and then they might have a mortgage or something else which doesn't require the use of a mobile app. So it might be that many people are comparing the digital experience from their bank with what they see from something like Facebook. People are not comparing banks against each other. People are comparing banks against other digital experiences.
DJ: True. But what we see in the Netherlands, from a technology standpoint, the US is still early in the digital banking revolution, whereas the technology and supporting experiences are more mature in the Netherlands. For example, in the Netherlands we’ve created a payment scheme, adopted by all Dutch banks, making processing digital payments and credit cheaper and more efficient. As a result, most consumers manage their finances digitally — so much so that nearly 75% of the branches here have shut down. Banks have a much smaller physical footprint.
Moderator: So then, is high branch use — like we see in the US— a good sign, or is it indicative of underlying issues? And how can banks improve the branch experience?
AJ: I think high use of branches is indicative of bad digital experiences. I tell this story a lot about my recent experience buying a car. I did everything digitally through my phone. But when it came to actually paying for the car, I had to go down to the branch to pick up a paper check that I could then take to the dealer to pay for the loan. And I talked to the dealer who said, “We could have easily taken a payment electronically, but most banks don't send us payments electronically.” And this is the experience provided by a credit union that’s very well known for a good digital experience, but they're not using digital to the full extent.
As far as improving the branch experience is concerned, I hear from a lot of US bankers, “Digital? We want customers to come to the branch because that is where we can cross sell products and grow our share of wallet.” To me, that’s funny because the folks at the branch aren’t really doing that in the most effective manner, either. The truth is, many banks don’t leverage the full potential of their customer data, so frontline employees don’t have access to the tools and insights that would allow them to more accurately align product and service offers to the actual needs of their customers.
When customers do show up with a unique need like financial guidance, the people at the branches — at least in the US — are not trained to be able to answer those questions. Not all of them, mind you. You might have an investment advisor in the branch that can give advice, but largely, branches just aren’t currently tooled to provide customers with any sort of actionable guidance or insight. I think if we want to really improve the branch experience for customers, banks need to better leverage their customer data and augment that with AI and chat bots, so branch employees can answer more personalized questions without having to make them go through a lot of training. It’s about tooling and empowering branch employees to use customer insights to help customers make the next best move — a loan, an investment, a purchase — that’s aligned specifically to them, providing a more holistic approach to their financial well-being.
Moderator: So, it’s clear then that there’s a lot of room for banks to transform from a digital perspective. That said, in a time when banks are looking to tightly manage expenses — driven largely by the global economic outlook — and accounting for the sentiments we saw in the consumer banking report here, where would it make the most sense for banks to make investments?
AJ: From my perspective, it all comes back to using data. Getting your data house in order so you're able to get insights that you can then use to automate backend processes (something we could talk about all day) or help your customers. All of that. That's the big one that we see a lot of organizations just not doing.
DJ: Yeah, I would agree. I also think there's another angle to the whole trust and advice thing we touched upon. Why have a deposit or loan at a particular bank? If it’s about trust, banks have a real opportunity to demonstrate this to their customers.
It’s one thing to say to a prospect, “Hey, prospect, our data shows you have this type of loan, but we have a better offering for you with a lower interest rate.” It’s another thing entirely for a bank to be proactive about optimizing the rates or products their own customers hold. “Hey customer, we see you use this credit card frequently and sometimes carry over a balance. Let’s see what we can do about getting you a better interest rate since it’s probably been a while since you’ve looked across the competitive landscape. We appreciate you.”
It’s a way to use customer data to look out for the customer’s financial well-being. It’s also a chance to build that trust even more and demonstrate transparency. That's something that I think there's more room for and it’s something I expect a lot of new challenger banks will be turning toward in the near future.
For more insights, or to see how banks can leverage this research to help build a competitive advantage, read the full Consumer Banking Report here.