Banks should 'innovate' for customers, not for themselves
The single most frustrating experience for any customer transacting with a bank is dealing with poor customer service. Despite the global popularity of the oldest mantra, the customer is always right, and the belief that customer interest should guide core business processes, customer experience is often overlooked when launching new products and services.
Although a lot has been said about the need to drive a more enhanced customer experience in the banking industry, the truth is that banking still needs to catch-up with other sectors that are setting the benchmark in the customer experience journey. Today, customers can still find themselves in instances where they have to deal with lengthy and time-consuming procedures simply to gain access to a financial product or a credit card. I personally experienced this just recently when dealing with a leading bank in the region, where I had to go through multiple iteration of documentation and after almost a month of back and forth, ultimately had to drive to the courier company's head-office just to collect a credit card.
The banking challenge
Being a banker, I am conscious that there are several challenges to ensuring a seamless customer experience. Unlike other industries, banks are heavily regulated worldwide as part of concerted efforts to clamp down on money laundering and tax avoidance. This has led to several regulations, such as compliance with the Office of Foreign Assets Control (OFAC) and the Foreign Account Tax Compliance Act (FATCA) of the United States, and the Common Reporting Standard (CRS) developed by the Organisation of Economic Co-operation and Development based on FATCA, to name a few, which has made it tougher for banks in terms of client acquisition and relationship management.
One school of thought believes that due to these challenges, disruptors such as fintechs offering more flexible operational procedures, will compete with and ultimately capture the bank's market share. However, my personal belief is that while vanilla transactional traffic like funds transfers, etc. will increasingly move to these channels, it is rather unlikely that the average customer will trust one of these institutions to store their money.
While they provide some conveniences to the customers, they are not regulated currently, and are likely to have greater regulations imposed upon them in the coming times. Furthermore, security in banks is ensured due to the protocols established by the Central Bank of the UAE, capital adequacy ratio, IFRS9 and Basel standards. These regulatory requirements offer the customer peace of mind - that the bank is stable and solvent and that their money is secure. Hence, it is no surprise that banks are generally more inflexible when it comes to know your customer (KYC) and anti-money laundering (AML) requirements in order to ensure that they are operating in a safe environment.
Back to basics
However, delighting the customer needs to gain greater importance in the industry. At the end of the day, the customer wants convenience and does not care if a bank has automated processes at their back-end or high-tech robots to greet and service customers. The customers' primary concern is that their most basic needs are met, consistently and at a place and channel of their choice.
Therefore, the 'on-boarding journey' remains a key differentiator for any institution. If a bank wishes to commit to automation or offer a product that may add value, it should not be at the expense of service. While a bank may offer the best, innovative products, substandard delivery can hamper its success. Research from Doblin found that companies focusing on their business model and processes rather than changing their products created more value. More specifically, companies that pursued innovation had impressive success rates between 35 and 70 per cent - as compared to industry average of only 4 per cent for companies without innovation programmes. The most important requirements customers seek from their banks are service efficiency and quick turnaround time for their transactions. The banks should also remain consistent in their transaction handling, ensure transparency and explain in simple terms what each banking product offers.
Finally, it is important that each institution routinely re-examines their customer interactions at regular intervals. This will help remove redundant processes, and keep every touch-point sensible and hassle free, which will ensure a highly productive business relationship for years to come.
The UAE's smart drive
Living in an advanced and forward-looking country like the UAE means that smart services and smarter banking are a distinct reality for the country's residents and citizens. Everything from electricity bills, phone bills to police clearance can be carried out online via an app, without the need to leave the comfort of our homes and banking should be no different.
The UAE government strongly encourages innovation and its Smart Government initiative has meant that organisations across the country endeavour to improve automation and ease-of-process in service delivery. This has led to the UAE currently being ranked 13th for 'Business Sophistication' in the World Economic Forum's Global Competitiveness Report.
One upcoming innovation could be the introduction of digital signatures, which is being discussed by authoritative bodies such as the UAE Banks Federation. This could make mandatory branch visits to sign documents a thing of the past. Given such evolving trends, banks need to step up and integrate smart and customer-focused initiatives. Gone are the days where banks focused on innovation solely to reduce costs. Only banks that innovate for their customers are set to flourish in today's intensely competitive financial landscape.
The writer is head of operations at Noor Bank. Views expressed are his own and do not reflect the newspaper's policy.
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