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Interactive Voice Response (IVR): The missing link

Why banks miss a critical opportunity for more effective digital engagement

The way banks go about customer service needs to change. Interactive Voice Response (IVR) as we know it is no longer suitable for a modern and evolving world. People demand information that is personalised and delivered fast. Even though the banking industry has made substantial investments into improving customer engagement, particularly across digital channels, IVR remains among the worst offenders in terms of customer satisfaction. Customers don’t have the time or patience to listen to prerecorded messages which fail to meet their needs.

Although banks are aware of the problems associated with IVR, many of their services still force their customers to use it as an alternative to the other methods. According to research conducted by the Genpact Research Institute with YouGov, IVR and chat had the lowest reported customer satisfaction and adoption rates across age groups and regions while the web, ATM, and branch had the highest. This was particularly true among older generations, who were most dissatisfied with using IVR to interact with their bank.

The service offering, for all intents and purposes, is designed to make the customer’s life easier, but in most cases appears to be achieving the opposite, leading to customers dreading having to phone up their bank. In some cases, customers even find talking to a real person frustrating as they lack the required knowledge to help.

But why should this be the case?

Banks have been investing heavily into customer engagement solutions to improve service standards. For example, in 2015, the global banking industry spent an estimated $85 billion (£60 billion) on digital technologies, with a heavy focus on customer interaction. There is no question that the banking landscape is evolving dramatically and that digital investment is a must; however, realising the true return of these projects remains a challenge for many.

The root cause of poor returns on digital investments often is due to attempts that force-fit new technologies onto legacy processes and systems, resulting in the digitisation of ineffective or broken processes. Too often, banks focus on the front-end digital applications to engage with customers yet do not effectively transform the middle- and back-office processes to deliver a seamless, convenient experience as a whole. As the perception of IVR and chat shows, consumers don’t want technology inserted into their experience when it doesn’t enhance customer satisfaction.

Over the past two decades, the financial industry has been severely disrupted by digital innovation, starting with the emergence of online banking, followed by multi-channel and now omnichannel models. Each new technological breakthrough brings both opportunities and challenges.

Banks now risk falling behind due to the emergence of innovative financial technology start-ups. These start-ups are not constrained by the powerful legacy systems that were previously essential to banking, and which are now handicapping traditional banks. So while banks need systems to process cheques, bank drafts and much more, ‘digital only’ banks can deliver end-to-end digitised services – more rapidly and cheaply for customers. These new companies are able to undertake specific parts of banking more efficiently than traditional banks, such as customer service, as they have technology integrated into their systems from the start.

The only way that banks will be able to compete and improve their IVR and customer engagement is to design new systems from scratch, and not just bolt on technology to an already lagging process. Banks have been left rushing to keep up, resulting in an industry with a well-digitised front office supported by an antiquated operating model. The future success of the industry will rely on how well banks are able to delight customers by improving customer engagement not only in the front office, but also in the middle and back office operations supporting them.

What can be done?

Many top-tier banks that have integrated cognitive computing, artificial intelligence (AI), and other leading edge digital technologies into their operations have found that, while voice technology that authenticates identity is nice, customers really want tools that can solve complicated and useful challenges. While it is great that a virtual assistant told them how much they spent at Starbucks last month, a more useful tool for customers would take a prescriptive approach to spending, estimating when they might run out of tuition money for their children, or tell them what to do if they exceed their credit limit.

One way to achieve this is by incorporating cognitive computing, where computers learn over time, with a related type of AI known as natural language processing. By developing a 'neural chat' solution, banks can listen to people’s voices better to determine what their customers want. An ambiguous question can now be answered effectively using a machine, delivering better results. When customers call their bank, the question is rarely black or white but falls into a grey area. Current IVR systems are unable to deal with these requests, but by using machine learning algorithms which can make predictions using both structured and unstructured data, questions which fall into this area can be easily answered. This will provide banks with vast amounts of customer data which will allow them to leverage 'intelligent assistants' to improve customer engagement.

An example of this would be customers’ asking different questions hoping for the same result, such as what their bank balance is. These questions may be 'How much money is in my checking account?', 'What is my balance in my checking account?', or 'How much is remaining in my checking account?' By using natural language processing, these questions, although written very differently, all mean the same thing and would result in the same answer.

In today’s increasingly fast paced and interconnected world, and with so many companies competing for a share of the market, customers are in the driver’s seat to dictate an experience that delivers exactly what they want, immediately, and in the delivery method they prefer most. Banks will fall behind unless they better understand how to take the customer journey beyond the initial engagement with a front-end digital app that might be a fancy 'shiny object' but not create the entire seamless experience with integration through the middle and back offices to quickly meet customers’ demands. If financial institutions fail to do so, emerging start-ups, that can often more easily offer customer-centric 360-degree experience through technology not burdened by the back end, will capture a bigger share of the market.

Sherry Comes is a vice president in the Digital practice at Genpact

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