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The future of finance is face-to-face, but not as we know it

Why banks will develop differentiated digital communications channels for financial transactions, advice and sales

The news was recently awash with coverage of the news that the Financial Conduct Authority (FCA) has approved robo-advice for financial services on the grounds that it could make accessing financial advice cheaper. A Natwest and RBS spokesperson, the first bank to begin offering this service, said in a statement: 'Our customers increasingly want to bank with us using digital technology.'

That part I do agree with, but as anyone who has tried to negotiate an automated purchasing system knows, listening to a robotic voice read out a list of options is at best boring, at worst infuriating. The fact is that the financial services sector does not has a positive public image since the Libor and PPI scandals broke in quick succession. This reputational damage has cause people to lose faith in FS, particularly banking, and as a result the sector needs to rebuild that trust in order to begin to sell to us again, especially young people.

Millennials are reluctant to engage with big banks, they have current accounts, credit cards, but they aren’t investing their money in the same way as their parents’ generation. Banks need to attract this generation back if they are to drive value from these customers. There’s also wider economic implications for the sector and the UK market as a whole if they can’t rebuild that trust and encourage the public to engage again.

The true cost of banking face-to-face?

Current accounts are, or at least appear, free in the UK, and that is a problem for banks. Around half of retail bank customers are unprofitable. That’s compounded by the fact that transactions in branches cost as much as 50-times as those made on a mobile according to the FCA. It takes a large and costly system to provide current accounts, so it’s clear why banks want to close branches and move us online. However, large value transactions and the purchasing of financial products are usually conducted in branch, face-to-face.

There’s two reasons for this; firstly, we as a customer feel more comfortable making a big life decision and financial commitment when we work with an expert whom we feel understands our personal situation, and offers the best advice. We have to trust that expert and it’s much easier to trust someone we can see than to trust a disembodied voice.

Secondly, financial services organisations have a legal duty to ensure that customers understand all the potential implications of their individual situation, and that the customer is making an informed decisions. Failing to do so can results in reputational damage, as it constitutes miss-selling, and look at what the PPI scandal cost the industry in terms of fines.

The solution

So how can banks get around the rising costs of keeping branches open, whilst continuing to drive profitability by upselling which requires personal contact? In an ideal situation, they would have video collaboration as the standard means of communication, with the option to dial your local ‘branch’ and speak to the same person to build that relationship. It would make it easier for wealth advisors to sell more to their customers. However, the reality is that the cost of providing a pan-video contact centre wouldn’t be the reduction that the organisations are looking for, they don’t want contact centres full of people.

The answer is segmented communications based on type of interaction.

Low value, transactional communications should continue to be web and app based, but by building in the option to launch a video call, not just an audio call or web chat, directly from you web and native apps would help close more product purchases. Santander said that just 28 per cent of those starting a mortgage application with the bank – often simply by seeking this basic pricing information – go on to complete this process exclusively via the web. Customers want to speak to someone about these kinds of purchases, because they need advice. By delivering it in this way advice becomes cheaper to deliver, so you can begin to offer it to customers who might not traditionally have qualified for further sales investment. If the bank sees the potential for someone to become a heavier user of their services they can switch on video channel to them to close the deal. In this sense, video collaboration isn’t a cost-centre, it’s revenue generating because it’s integrated into the workflow.

But banks have to divide up the communications channels by customer need. If you want to make a £10 withdrawal at an ATM you don’t want to be behind someone who is having a mortgage discussion through video embedded in the machine. It’s the same principle behind having a greeter on the branch door to direct you to the correct person, rather than herding everyone into the same queue. It’s not about video everywhere, it’s about video where it matters.

Ray McGroarty at Polycom