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Why Now Is The Time To Embrace a Bank Transformation

The word transformation gets bounced around a lot, and like any other word that starts to become part of our marketing vernacular, it can start to lose its true meaning. That being said, when it comes to what’s happening in the world of retail banking, there really isn’t a better word to describe what’s going on. For banks leading this revolution, we’re seeing fundamental shifts in their model that are truly transformative. But for many banks, catching up with digital innovations has been enough of a challenge, and if you add COVID on top of that, it might seem like this lofty word is unachievable.

Today, we’re talking to strategist and President of SLD, Jean-Pierre Lacroix, who has worked on numerous bank transformation initiatives, about why the time to embrace transformation is now, and why it’s more achievable than you might think.

Transcript

Melinda: Hi, I’m Melinda and you’re listening to Think Retail.

The word transformation gets bounced around a lot, and like any other word that starts to become part of our marketing vernacular, it can start to lose its true meaning. That being said, when it comes to what’s happening in the world of retail banking, there really isn’t a better word to describe what’s going on. For banks leading this revolution, we’re seeing fundamental shifts in their model that are truly transformative. But for many banks, catching up with digital innovations has been enough of a challenge, and if you add COVID on top of that, it might seem like this lofty word is unachievable.

Today, we’re talking to strategist and President of SLD, Jean-Pierre Lacroix, who has worked on numerous bank transformation initiatives, about why the time to embrace transformation is now, and why it’s more achievable than you might think.

JP, thanks so much for speaking with me today. Can you start us off by telling us a little bit about your history of working with banks and financial institutions?

Jean-Pierre: Oh my God, Melinda. First of all, thank you for inviting me.

My career within the bank industry started 40 years ago when I worked on the transformation of Canada Trust, one of the leading maverick financial institutions. And since then, have worked on hundreds of financial institution programs, from some of the largest banks around the world to some small credit unions. And so, it gives me a great perspective of kind of the challenges behind the scene that banks face, as they embark on digital transformation.

I think what’s important is that we think that digital transformation is something that has been accomplished by banks, and there was a recent McKinsey study that identified that only 30 percent of financial institutions have actually fully embraced and are implementing digital transformation. Many financial institutions, actually, are either in the planning stages, or actually haven’t even budgeted digital transformation. So, although the leading banks, obviously, the larger banks are leading the transformational charge, there’s a lot of room for opportunities for smaller banks.

Melinda: So, as we record this, the planet’s in the second wave of the COVID-19 pandemic, and some might think it’s a bad time to start a process like transforming your bank’s entire experience. Tell me why you think it’s actually the perfect time.

Jean-Pierre: In a way, the pandemic has been a godsend for banks, because it actually forced customers, their customers, to embrace new behaviors, new digital behaviors. So our study on COVID for the bank industry, clearly identified that older consumers who were very reluctant to use their mobile device, or their online platform to do their banking, have now been forced to embrace this platform. It’s like everything else, once this habit is formed, they feel comfortable with it, they’re not willing to go back to the old habits of going to the branch. And so, we’re seeing a major shift to digital platforms for the banking industry.

The other area that we’ve noticed and there’s some great platforms out there, like TimeTrade, who have demonstrated that one of the other facets is the need to make appointments for customers going to the branch, or to act as financial advisors. And that’s actually driven better planning for financial institutions. It’s allowed for customers to have a lower level of anxiety going to the branch, because they know that there are going to be fewer people in that branch. But it’s helped financial institutions also manage their staffing levels. So, all in all, you know, yes, there has been a lot of death, which is extremely sad, and it has significantly destructed the economy, but on the flip side, the silver lining is it has accelerated the move to digital and the digital transformation.

Melinda: So if we were going to pinpoint a few key opportunities that COVID has presented banks, you started to touch on that here, what else can they do that you would highlight that has come about as a result of COVID?

Jean-Pierre: You know, this whole transformation, digital transformation, has happened to provide a higher level of convenience for the customers, but also to reduce the transactional cost banks have on the conventional side of their business, savings, checking. And so, you know, banks have embraced this digital transformation earlier than the consumer is willing to buy in. And so, banks have an opportunity through their branch network to educate consumers on the use of the platform, use those centers as learning platforms, to onboard customers on the use of mobile and digital, would be number one.

Number two is that the shift towards digital has created a vacuum or relevancy issue for the bricks and mortar part of the channel strategy banks have embraced, and as such, they need to really rethink, what is the role of the branch? And how can we leverage the branch to network, to better engage with consumers, and to drive those higher value relationships that are the foundation for growth for banks.

And so there’s this need, as consumers shift their behaviors, to redefine the customer experience. And it was really interesting that in our most recent study where we interviewed 500 executives in the banking and retail sector, that their number one priority was to rethink their customer experience. That’s important.

Melinda: You know, that was a question I was going to ask you a little later on, but let’s get to it right now, since you’ve mentioned it. Tell me why the physical branch is still relevant, and how banks can ensure that it remains relevant into the future.

Jean-Pierre: You know, when you look at banking and where banking needs to go, they need to migrate their platform from transactions to providing financial advice. In our stealth attrition study that we did in 2017, it clearly identified there was a significant vulnerability by financial institutions on not being seen as the place for financial advice. And so, when you think about providing financial advice, you don’t think of Google, you know, you think of people, you think of experts. And that’s where the branch network plays an important role, it is and remains the primary growth engine for banks. It remains the place where you convert a customer from your competitor to your financial institution. It’s a place where you can educate customers on the range of products that banks have.

And so, the branch network, physical bricks and mortar, play a pivotal role, remain a pivotal role, and even within our stealth attrition study, where there was a lot of fake news about “millennials don’t go to the branch, they do everything online.” That’s not true. They go to the branch, but the role of the branch shifts from transactional, which they can do on their mobile device or online, to more financial, providing financial advice and guidance, and reducing their level of anxiety.

It’s interesting that when you look at financial anxiety, and putting aside the impact COVID has had, that 63 percent of Americans have a high level of anxiety towards their finance, and part of that anxiety is they didn’t go to school to learn about finance. They don’t know about savings or what’s the best way to invest in their future. And that leads to a lot of anxiety about how to manage money, and that leaves an opportunity for banks, through their channels, specifically, their bricks and mortar, to build that bridge of knowledge for the customers.

Melinda: So, let’s talk about the word transformation, because it is a big word, and it might be intimidating if you are still just trying to shift consumers to using ATMs or a mobile app. How can even a smaller financial institution embrace this big idea of transformation?

Jean-Pierre: You need to understand, digital transformation really started from an operational standpoint, reducing transaction costs, making a stickier engagement with customers through mobile and online. But we’re seeing a shift in mindset, by bankers, you know, moving from an operational centric to a consumer centric view of their business. And if you put the consumer centric view and you are a small bank, that consumer centric view should look at, where are the friction points in the current customer journey, and specifically now with COVID? And things that small, regional banks can do very quickly, is embrace appointment setting. There are so many different platforms that allow banks to integrate appointment setting, to allow the customer to manage and take control of when they want to meet with the banker. And this allows the banks, again, to manage their staffing levels during the pandemic and post-pandemic when some of these rituals and these behaviors become commonplace.

The other thing that they can look at is, better engaging with their customers through social media, ensuring that their message about community involvement, community support, which is so important. Our research clearly identified that consumers today, with COVID, are looking for large organizations and small organizations to support their community through loans, through PPE, through a variety of initiatives. And so, those are two very quick things they can do to help embrace digital transformation, start on that journey. Obviously, they need to look at their apps, look at their online platform, which is critical, and within that, look at the security level of their platform, because that is one of the growing concerns consumers have about online banking and digital banking, is how secure is that channel? Am I vulnerable to be hacked, and to have somebody have access to my funds? So those are really important points.

Melinda: So, when we talk about transformation a bit more broadly, you’ve worked on so many initiatives with banks all over the world, of different sizes. What are some of the specific hurdles that banks face, when it comes to transformation programs?

Jean-Pierre: Well, you know, banks by their nature, are a set of networks. Most banks have multiple locations, different formats, different regional nuances. And so when you look at transformation, the challenge is, how do you develop a platform that engages with customers at the local level? How do you create enough efficiency that you’re not reinventing the wheel for every branch location? And so, transformation should look at, what are the needs of the customers? How do we leapfrog our competitors in the marketplace? What are the services we need to provide? How does that create what we call a financial learning ecosystem? You create this ecosystem as part of the digital transformation that engages with customers when they come into the branch. That would be one of the things that forms part of this really important challenge that banks have that is really an opportunity in disguise.

The other dimension of that is that, we’ve kind of lost humanity. You know, this whole rush, kind of this fixation on digital technology, which was really important and pivotal to how banks have survived during COVID, this kind of emphasis on technology has come at the cost of humanizing the customer experience. And banks need to go back and look at the role their staff plays from sales choreography, through learning tools, to sales tools, to personalization, allowing them to build better relationships with their customers, because at the end of the day, banking is about relationships. It’s about building trust. It’s about people. And this is where banks have kind of erred, if I look back and look at where the emphasis has been, and in the shift they need to make, because they focus too much on technology and not enough about the people.

Melinda: That’s a really interesting point. Just the other day I saw that Walmart had cancelled its contract with its biggest robotics provider and has announced that they plan to hire more people, other than robots. So, I think it’s a really interesting time to see what companies are going to do, and I do think, as a consumer as well, I’ve noticed that I do miss, and especially during COVID, just going out and speaking to a real person is something that, it’s definitely been neglected a little bit, not just in the banking industry.

You work with a lot of Chinese banks. What can the rest of us learn from what’s happening in China?

Jean-Pierre: Great question. I mean, when you look at it, people ask me, why are you in China and why are you working with Chinese banks? I would say that they’re about 10 years ahead of the rest of the world. They’ve done a really good job of leveraging technology for onboarding customers. I can literally go into one of our bank client’s branch, open an account, get a credit card, get a debit card, all through the use of a smart ATM. I don’t have to interact with  bank staff. So a lot of these friction points that you have in a banking network, they have automated.

Now, on the flip side, they love gadgets. They love technology. They’re a culture where, you know, they’re fully integrated with mobile devices, with WeChat and social marketing. And so, there is also an interest in the use of robotics, pretty much every branch we design has a robot greeter. And I think those are kind of playful gadgets if you like, they truly don’t solve a human need. They really talk about leadership from a technology standpoint, and most recently, I think, Communication Bank, launched a new branch, a 5G branch, which is fantastic. But they have a robotic greeter that looks human, and I think that that sends the wrong message.

So the largest banking network in the world is in China. They’re committed to pushing the boundaries of technology, so learning, from our standpoint, learning what’s working and what’s not working. And on the flip side, looking at the role the staff play in those branches, in those networks that are building those relationships. Those are great learning platforms that we have applied to many of the assignments we have had outside of Asia.

Melinda: So you have partnered with Networld Media to produce an educational series about bank transformation. Can you tell us who this series was designed for and what it includes?

Jean-Pierre: Yeah. So, you know, we’ve been at this for over 40 years, helping financial institutions manage their transformational programs and we’ve learned a lot of what works and what doesn’t work. And one of the things we’ve learned is that there is no such course, if you like, where the leadership has been trained on transformational strategies. Very often, branch transformation is delegated to maybe the head of real estate, or the head of operational change, or the head of innovation. And they come at it from a banking perspective, or they may come at it from a digital transformation perspective.

And we noticed that there was a significant void, and that void leads to a lot of pain and agony and friction within the organization, as they manage those transformation programs. And so we’ve put together a nine course, online course, with workbooks and exercises, to help these individuals who have been tasked with transforming their branch network, and integrate that branch network within different departments: digital, IT, HR, marketing. That they have a framework in which the program can be successful.

And we’ve done that targeting the midsized banks. Obviously, the large banks that have a network of 3,000 to 5,000 branches, they have individuals within the institution that are versed on transformational program initiatives. All the smaller branch networks, who will do a transformational program once in their career, or maybe every 10 or 15 years, again, they’re not well-versed on the steps that they need to take and this provides a very detailed, step by step approach to branch transformation.

Melinda: Great. We will link to those courses in the podcast description and the transcript. So if you’re looking, you can go to sld.com and go to the Insight section, and you’ll find it there, or just look in the podcast description.

So, if you could provide us with three really concrete pieces of advice to help banks start their transformation journey, what would they be?

Jean-Pierre: The first and most important thing is to develop a project charter. You know, it’s surprising that typically, a transformational program is initiated by a department for a reason. Maybe it’s, “we need to retool the channel, the physical channel, so we task the EVP of retail or construction design to lead that charge,” but the reality is, it impacts the entire organization if it’s done properly.

And so, having a project charter that aligns everyone within the institution, ensuring what are the right objectives? Ensuring a clear path of process, and what are the key milestones, is pivotal. Because what happens very often is you achieve an implementation program that isn’t working to its full capacity, because it hasn’t factored in a lot of other elements that may have not been included as part of the mandate. So, project charter is number one, for sure. Absolutely. We’ve learned, this is where most projects fall off the rails, even before the project starts.

The second thing is to understand that organizations have historically gone through change. That they’ve done transformational programs. They’ve done local tests on programs. And sometimes, because they were either too early in their initiative or it was led by the wrong individual, or for the wrong objectives, the program failed or didn’t meet the desired objectives. And very often, an organization uses those situations as lenses in how they approach the next project. And so, the second thing I would say is look at your biases. You know, you really need to spend a lot of time debunking those biases and ensuring that you’re using the right filter, lenses, if you like, in making those business decisions.

Number three, which links to number one, which is, have a clear roadmap. Have a clear direction you want to achieve. Have a vision of the ends of state, so you can walk back along the process to achieve that vision. And ensure that everyone is bought in on that vision.

Melinda: Great. Thank you for that. It’s excellent advice and if anyone wants more information on bank transformation, and wants to connect with JP, you can send us an email at info@sld.com. JP, thanks so much for talking with me today.

Jean-Pierre: Thank you. Have a great day.

Melinda: Whether you’re already in the middle of a transformation program, or have one in the planning stages or feel like you’ve been thrust into one as a result of the pandemic, getting your bearings and having some support in the process can be a huge benefit. The Customer Experience 4.0 Master Series is available at Networld Media, and I will link to it in the podcast transcript. This detailed, nine course series to help banks manage transformation is led by today’s guest, JP Lacroix.

Thanks again for listening to Think Retail, and stay well, everyone.

About

Jean-Pierre Lacroix is the President and Founder of SLD. He is seasoned strategic thinker who has led numerous strategies on personifying brands through immersive design.

Think Retail is a podcast where top designers, strategists, thought leaders and business people discuss what’s coming next. For more information, email info@sld.com.

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