Five Strategies for Implementing a Smart Bank

Smart Banking promised to herald in the convenience of digital technology and more personalized customer service. Today most would agree what was imagined as utopia has yet to materialize for banks pioneering this new branch format. Early attempts have demonstrated that consumers remain attached to in-branch human interaction and are skeptical of the merits of large interactive digital walls, video ATMs or the newest technologies such as VR and AR. Most initiatives that removed the access to staff resulted in strong customer dismay (with some actually closing), while those banks introducing digital learning hubs to train customers on a wide range of banking digital tools have been met with mixed reviews.

The initial term “Smart Banking” was coined to better describe a digital-first omni-channel experience that links mobile, online and the physical branch into a seamless banking ecosystem. For all of the merits of digital banking as a means to drive customer convenience, banks should not underestimate the importance the physical experience plays in building engagement and loyalty.

In our book Think: The Future of Retail Banking, we shared a major study which supports the idea that the branch remains the most critical channel to grow a bank’s business and build customer loyalty. Customers who use all of their bank’s channels tend to be the most loyal, with small business owners leading the way in their reliance on the physical experience.

As banks renew their branch network strategy, they should not overlook the value of Smart Banking, since this emerging customer experience allows financial institution to test, train and evaluate new digital technologies prior to a full network deployment. Ultimately Smart Banking locations are an agile and flexible form of real-world consumer research that can be used to evaluate how technology can enhance and build customer loyalty. They also serve as a reinforcement of a bank’s commitment to innovation and the need to remain relevant with younger, tech-savvy consumers. Ultimately, if well executed, this new branch format reduces the burden of conventional, low-margin transactions by allowing the frontline staff to better engage with customers on higher value loans, mortgages and investments.

In our previous blog, we outlined how Smart Banking is evolving towards a more personalized customer digital experience. The use of AI and machine learning, in addition to new forms of digital assistants such as Alexa, show new emerging opportunities to create unique customer experiences. However, balancing current learned customer behaviors with these new technologies creates some challenges that will require a longer view and approach. To assist, we have identified five key strategies that we believe will ensure banks gain the desired value from a Smart Banking branch initiative.

1. People matter

Customers visit physical branches to interact with bankers to resolve issues, gain knowledge and help solve potential financial anxieties. Handled poorly, a visit to the branch can also be one of the key reasons for customers to defect, putting a greater importance on delivering the right experience. While ATMs answer the need for convenience, a trip to the bank is ultimately made in order to interact with a person. Smart Banking branches will need to understand there is still a need for staff who, through enhanced training, are effective in providing a higher degree of financial advice and service.

This higher need for expertise will also push the new emerging “universal banker” service model, which has served as a transition from a conventional teller model to handling more complex transactions, to new heights. Banks wishing to create greater engagement as part of the customer experience will need staff with superior interpersonal skills and more in-depth understanding of financial services and product knowledge, with the ability to understand how they relate to different personas. Digital training tools, customer sentiment analysis sensors and tracking devices will ensure the right metrics and behaviors are consistently delivered as part of the sales choreography.

2. Better definition of the customer

Not all customers have the same financial needs. Any smart banking program will need to define which customer has the greatest need and will derive the largest value from a Smart Branch. A content strategy program can help banks understand what topics are of interest to their target customers. Each targeted persona will need to align to an ideal banking experience with a well choreographed staff role supported by digital technology, ensuring each moment of the banking journey delivers on customers expectations. For example, if we are targeting a young Millennial family demographic, we might organize content topics into categories such as “First-Time Home Purchase,” “Budgeting for Baby,” and “How to Start and Run Your Own Business.”

To develop a content strategy, each persona must have defined key areas of interest. The content categories should be broad enough that banks are able to produce a significant amount of content on the subject. Content can range from blog posts and videos, to research papers or podcasts. A bank’s core audience’s preferences will determine which formats to use, and adjustments can be made depending on performance. Defining the right persona who seeks the benefits of a Smart Bank experience will also help define the ideal customer journey and overall layout of the branch.

3. Learning from Fintech

Banks can learn from fintech companies that have disrupted the banking industry by fulfilling unmet customer needs. These companies often outcompete traditional banks on specific services by being easier to use, faster, more seamless, and more innovative. Whereas traditional financial institutions are often burdened with slow processes of approval and change, regulations, a wide range of products and services and a risk-averse culture, fintech providers are agile risk takers that focus on a specific need. These qualities enable them to quickly capitalize on new opportunities through innovations such as open banking, APIs, biometric authentication, artificial intelligence and blockchain.

To overcome this challenge, many banks have chosen to partner with or acquire fintech providers rather than compete with them (i.e. Chase’s acquisition of WePay). Another strategy is to learn from fintech attributes and prioritize innovation within an organization. An agile and focused team dedicated to developing ideas will put a bank in control of improving their services. Smart Banking branches will also serve as a strong test-and-learn platform to validate and improve new processes and technologies.

4. AI and Machine Learning Digital Signing API

As banking continues to be transformed by digital technology, the role of staff interactions will be amplified through the use of AI-enabled digital tools. Through improvements in artificial intelligence, having technology “humanize” digital services and making them more intuitive and natural is finally possible. Banks are focused on leveraging AI technology as part of key back-office operational needs allowing for better security and ease of on-boarding customers.

However, the real benefit of AI as part of a Smart Bank experience is that it will allow for curated messaging, ranging from targeted mobile messaging to digital signs that speak to the specific need of each customer. A great example is Umpqua Bank, which recognized the strengths of human financial advisors in their human + digital strategy. Their Go-To financial expert app allows customers to choose a dedicated advisor based on their profile and text them with questions and concerns. This service gives customers a more personalized experience where they feel cared for by a real person who knows their history. AI will allow Smart Banks to deliver curated service and act as the agent to deliver personalized messaging through in-branch digital platforms and mobile devices.

5. Leveraging a transformation trust ladder

In our book Desire by Designwe explore the steps required to ensure customers embrace any type of experience transformation. Smart Banking branches will continue to evolve as new digital technologies allow for more customized banking services, making what seams leading edge today look outdated tomorrow. As such, it’s important banks establish a transition journey allowing their customer to feel comfortable with the move to more automated digital experiences. A drastic change, such as quickly removing staff in branches, will result in a backlash from customers who become confused if disruptive processes and technologies are not introduced incrementally.

As part of a planned transition journey, banks must look closely to ensure the changes are consumer-focused. There are reasons why video ATMs have received little interest within the branch. They have greater appeal as part of drive thru locations, where the consumer perceives the additional benefit of being able to converse with a representative. If the changes are not addressing a friction point and are instead seen by the consumer as a way to reduce cost, the benefits are lost – and so is the customer. Creating a transformation road map for Smart Banking initiatives with key supporting steps and metrics will ensure the journey towards a new experience is seen as a smart move.

Smart Banking branches, if designed with a focus on improving the customer experience, will provide financial institutions new ways of engaging with customers and recognition for innovation. However, the journey towards transitioning to smart branches should be taken with great caution since the physical branch experience remains a critical tool in gaining market share and customer loyalty.