Are We There Yet? The Impossible Journey Towards A Fully Digital Banking Future
The Canadian finance sector is increasingly adopting on-line processes spanning everything from paperless mortgage applications to insurance claims. But as much as things have progressed, are we really ‘there’ yet when it comes to relinquishing our brick and mortar touchpoints and in-person interactions with our service providers?
Canadians are apparently not yet ready to give up in-person banking, according to data from the Canadian Bankers Association. Branch banking is still in place for the personal touch says the Association and, “Despite the growth in electronic options, branches remain a vital part of banking in Canada.” The Association reported in September 2018 that the number of bank branches in Canada decreased from 6,205 to 5,907 from 2012 through 2017, which does not constitute a remarkable shift.
What has changed, however, is the role fulfilled by brick and mortar locations, which are now also being increasingly used as advice centers as well as day-to-day banking facilities. “As demand for day-to-day banking has decreased, branches have become more specialized, where a variety of financial products, services and advice are also available,” the Association website states.
What does that mean? For common transactions such as withdrawals or cheque cashing, etc., Canadians are increasingly using online, ATM or mobile banking. But for more sophisticated transactions, it seems many Canadians still want to interact in person with a banking specialist. The McKinsey 2016 Retail Banking Multichannel Survey, which involved input from 20,000 customers in 10 countries including Canada, found that while 56% of Canadian banking customers were willing to try digital product purchases, less than half that (21%) were willing to accept advice remotely rather than in-person.
Canadian customers are not alone in their reluctance to fully embrace digital banking. The McKinsey & Company study found that even in the Netherlands – the most digitally-advanced country surveyed – 32% of respondents still preferred visiting branches and ATMs for all their banking needs.
“Even as digital marches on, the branch is not dead. Markets are at different stages of digital development; human touch is still important in most markets,” according to McKinsey.
These results beg the question, what will it take to completely transform the way Canadians do their banking and enable a further shift to digital solutions?
The main reason cited for preferring in-branch visits is security concerns, says the McKinsey study. Participants responded that they had “low trust in banks and the financial system”. Banks adopting technologies that can assure customers of the security of digital banking will be the key to growing trust and confidence for major transactions outside the confines of the bank branch.
Customers’ level of sophistication in using remote tools varies by demographic.
According to McKinsey, seniors with less technical acumen accounted for a large customer segment favoring banking in person at bank branches. The Canadian Bankers Association reports that 17% of Canadian customers 55+ years of age primarily bank in-branch, whereas only 8% of customers under 35 prefer to bank at a physical location. Ensuring that processes are streamlined to ensure ease-of-use will be necessary to ensure more people take advantage of remote banking.
Complexity of Transactions
The McKinsey study found that for sophisticated transactions in particular, customers prefer face-to-face interactions over single-channel options like phone calls where customers can only talk to the agent, or on-line banking, where customers can only look at information. Banks that adopt omni-channel solutions that can provide multiple, simultaneous means of communicating – for example talking to an agent while reviewing and signing documents on-line – will have a higher success rate of transitioning customers to digital channels by providing a similar experience to face-to-face banking.
Motivation to address these hurdles and adopt more streamlined technology for digital banking is strong for both banks and customers. Banks realize the potential cost savings of implementing smart, innovative services such as, for example, paperless mortgage applications which can save millions of sheets of paper per year. In fact, banks that adopt a more digital-focused strategy can achieve 20% increase in revenue and a 30% decline in expenditures – according to a recent study by BCG. Meanwhile, customers who use certain digital channels not only benefit from the convenience and flexibility of banking when, where, and how they choose, but they are also less likely to drop out of their customer journey if their customer experience has been optimized for them.
Banks in the future will need to combine the quality of face-to-face interactions with the ability to offer customers the option of banking in their channel of choice. Banks that recognize the needs of customers and the opportunities inherent in evolving their on-line systems stand to gain market share and customer loyalty. In fact, there are a number of banks that are already providing solutions to their customers where the customer receives a face-to-face experience in a remote channel, such as through telephony, by using new technologies that allow them to show screens, share documents and sign agreements remotely. By doing this, those banks have seen a significant improvement in customer satisfaction (+20%) and conversion rates (+25%) with a reduction in time of transaction (50% less) and cost of transaction (20% less).
Perhaps McKinsey puts it best: “Digitally savvy banks in each country are pulling away from the rest of the pack. Almost all banks are getting their digital act together; but evidence shows that those who did it first and continue to push hard on their efforts are getting much bigger rewards.”
Bill Safran is CEO of Vizolution, a leading technology provider that helps enterprises streamline complex customer journeys by replicating the qualities of face-to-face interactions through remote channels.