Omni-Channel: The key drivers of this space as it applies to financial services.
Traditional banking models have focused on having a personal relationship with the customer. Emerging technologies allowing customers to access their accounts from anywhere, anytime, is changing that human interaction focus. With customers frequently shifting channels, banks must merge both the physical and digital aspects in order to meet customer needs. The three main drivers for financial institutions to take an omnichannel approach are enhanced customer experience, increased revenues and reduced operating costs.
Enhanced Customer Experience
A recent global survey done by CGN Research & Advisory Group asked participants if some of the most well-known technology companies offered banking services, how likely they would be to work with them. The market data showed that 53 percent would use the banking services of PayPal, 49 percent would use Apple, 39 percent each for Facebook and Google, and 31 percent would use Amazon. While these companies do not currently offer banking services, they have set a standard in the omnichannel platform. From these technology giants, customers have come to expect unlimited availability, individual customization, seamless transactions, and quality innovation.
Currently, 65 percent of banking customers use multiple channels to interact with their bank and about 46 percent of all banking customers are omni-digital only, meaning they do not use a physical branch at all. This omni-digital number is expected to rise to 68 percent of the overall banking customer base by 2020. To meet this growing demand, banks and financial institutions are moving towards more digital platforms that offer convenience, accessibility and innovation. In addition, banks are making more products and services available over multiple digital channels that work together as a consistent connection.
From 2012 to 2016, there was a 25 percent per year increase in active mobile channel users for US banks while the number of active online users remained about the same. Mobile logins have grown at an average rate of 12 percent per year. Banks with the most seamless mobile platform see greater growth in mobile logins. This has driven banks to design and develop for the mobile channel a top priority.
With a digitally savvy consumer base, increasing with the rise of millennial, financial institutions realize that they must get the omnichannel approach right. Customers are aware of the market offerings. If things are too complicated or require too many steps, they will simply move on and find a better digital experience.
Having an omnichannel presence can increase customer awareness of product offerings and produce greater closing rates resulting in higher product penetration and revenue.
Many banks are using their digital platforms to deploy sales prompts in order to increase their customers’ awareness of product offerings. CRM technology allows banks to customize offerings based off of the customer’s history. Sales prompts include banner ads, product offering pages, hyperlinks, and interstitial ads. Banks that use at least one sales prompt have a 77% higher sales volume per customer than banks using no sales prompts.
Omnichannel formats also offer the opportunity for banks to follow up on incomplete digital applications for products such as checking/savings accounts, loans or credit cards. It is estimated that only about 10 percent of customers who abandon a digital banking application return to complete the application. Banks that are integrating webchat or linking their digital sales process with a call center are experiencing a 43 percent conversion rate on abandoned applications.
Both a survey by PwC and McKinsey found that customers that use multiple channels to access their financial institution typically report a need for a larger range of financial products. In fact, customers who use one channel have on average 5 banking products. Customers who use 3 channels average 7 products and those who use more than 3 channels average 9 products. As far as revenue, 3 channel customers generate 97 percent more revenue than single-channel users. Customers using more than three channels generate 110 percent more revenue.
Reduced Operating Costs
On average, physical branch channels cost about $4.00 per transaction. Digital channels cost between $0.09 to $0.19 per transactions. US banks are experiencing a 95 percent reduction in costs per deposit transaction over digital channels. Withdrawal transactions processed digitally see an 88 percent cost reduction. Annually these reductions amount to about 3.5 percent. Properly utilizing omnichannel resources could save a small regional bank about $2 million and large banks up to $12 million yearly.
The primary drivers for omnichannel innovation in the financial sector are enhanced customer experience, increased revenue and cost reduction. The omnichannel presence in other sectors has led to a growing demand in the financial realm with consumers expecting easy, seamless transaction experiences.