BofA and MIT Look To The Future Of Banking

Bank Of America and the MIT Media Lab announced the creation of the Center For Future Banking. BofA has committed $3 to $5 million per year to the effort. Here’s some of the questions the research plans to address:

  • How can every customer be empowered with the knowledge and tools to take better control of their financial futures?
  • How will banking interactions evolve as a customer’s physical and virtual worlds become completely intertwined?
  • How will social networks and mobile platforms transform customers’ banking experiences, making it easier, more convenient, and better integrated with their daily lives? 

My take: I applaud the move. In my research report called The Financial Services Survival Guide from July, 2006, I highlighted the need for large-scale change in the industry. In particular, I defined five new skills that needed to be developed across the industry. Here’s the executive summary from that report:

Forrester’s customer advocacy rankings show that retail financial services firms aren’t meeting the current needs of customers. What’s causing the problem? Organizational silos. But Forrester sees an end to this status quo. The changing needs of customers, increasing competitive pressure, and emerging technology capabilities will push leading firms to break down their internal silos and create innovative new products and services.

Here are the technologies that I highlighted in that report:

Technologies That Are Changing Financial Services

Here’s an overview of the five new skills that I outlined:

  • Skill No. 1: Customer-centric DNA. Every company can meet customer needs some of the time. But to consistently deliver great experiences, firms need a deep-seated, companywide focus on customers. Rather than customer relationship management efforts that often focus narrowly on data warehouses and technology, firms should master customer-centric DNA, which consists of two elements: customer familiarity and organizational engagement.
  • Skill No. 2: Solution management. Today, firms develop new offerings for customers by tweaking the features of specific products, such as a new interest rate for a savings account, a different affinity group for a credit card, or a lowered price for trading in a brokerage account. But these product-centric efforts miss the opportunity to meet the financial needs of customers who cross the boundaries of a single product.
  • Skill No. 3: Cross-channel process agility. Customers want what they want – when and where they want it. A consumer may check mortgage rates online, verify terms over the phone, and then go into a branch to fill out the paperwork. While customers regularly cross over channels, many firms design their retail delivery models one channel at a time. To meet the needs of consumers, firms need to provide a seamless experience across channels using a skill that we call cross-channel process agility.
  • Skill No. 4: Integrated merchandising. In many financial institutions, marketing efforts are heavily focused on new customer acquisition. But firms are recognizing the importance of selling into their current base of customers as well. That’s why so many firms are now pushing products at customers – in the name of “cross-selling.” Rather than throwing products at customers, firms need to develop an integrated merchandising strategy that puts the right offering in front of the right customer, at the right time.
  • Skill No. 5: Interactive education. Let’s face it, financial services are complicated. How many consumers fully understand the difference between a variable and fixed-price mortgage, a Roth and a traditional IRA, or an ETF and a variable annuity? Rather than crafting marketing communications to push consumers through buying cycles, firms need to provide interactive education – information and tools that help consumers make good financial decisions.

The bottom line: The future of banking ain’t what it used to be.

Advice To Students: Keep It In Your Pants

I’ll bet you’re wondering where this post is heading. But it’s probably not going where you thought it might be going…

The Service Employees International Union (SEIU) and the League of Young Voters sponsored a “Keep It In Your Pants” contest for all ages of students (middle school through grad school) to create a public service announcement about the threat that “Debt Disease” poses to American consumers. The winner receives $5,000.

Here’s what Stephen Lerner, SEIU Assistant to the President and Director of the Private Equity Project had to say about the contest:

Credit card debt can ruin your life, spreading and growing like a disease. We’re warning young people of the dangers of ‘Debt Disease’-and urging them to protect themselves the same way they would against any other dangerous and contagious social epidemic.

Here’s my favorite video of the five finalists:

The bottom line: As the old saying almost goes: “Better save than sorry.”

Citigroup Splits Out Credit Cards; Now Get To Work

There’s a story on the wires today that Citigroup is splitting off its credit card business. If that’s the case, here’s some advice for Steven Freiberg (who will likely run the newly independent business) that is very similar to advice that I gave to Vikram Pandit, Citi’s CEO: Fix Citi’s customer experience problem. Why? Because it’s good business.

To start with, I just published a report that examines the linkage between customer experience and loyalty. It turns out that there’s a strong connection in credit cards. Consumers are much more likely to buy another product from a credit card issuer and be more reluctant to switch from that issuer if the firm delivers a good experience.

Our research also shows that credit card experiences, especially at Citi, are broken:

In a research report that just went live late last week, Customer Relationship Snapshot: Credit Card Providers, I looked at credit card relationships across generations of consumers. It turns out that credit card firms have the biggest problem with consumers younger than 40; so that’s probably a good place for Freiberg to focus Citi’s attention.

The bottom line: Splitting the business is an opportunity; hopefully Citi’s credit card business is up to the challenge.

Banks Need A Youthful Overhaul

In a post from late last year, Banks Have A Gen Y Blind Spot, I discussed that banks aren’t serving young consumers very well. Well, we found the same thing in a recent research effort, Customer Relationship Snapshot: Banks.

This analysis examined feedback from 5,000 consumers across 5 generations (Gen Y, Gen X, Younger Boomers, Older Boomers, and Seniors) on overall customer experience; satisfaction with Web, branch, and phone interactions; as well as consumer plans to stay loyal to their current banks. Here’s some of what we found:

  • Seniors have their needs met most frequently
  • Seniors are the most satisfied with phone and in-branch interactions
  • Gen X are the least satisfied with phone, in-branch, and Web interactions
  • Seniors are the least likely to switch banks
  • Gen Y are the most likely to switch banks; Gen X the next most likely

The bottom line: The battle for the next generation of banking customers is wide open (check here for some ideas: Gen Y Design Guide).

State Bank And Trust Pays It Forward

This past Friday I saw a very inspiring news report about State Bank and Trust in Fargo, N.D. In what it called the “Pay It Forward Challenge,” the bank gave each of its 500+ employees $1,000. The only stipulation, according State Bank’s chief operating officer Michael Solberg, was as follows:

There were three rules. You can’t give it to your family. You can’t give it to a co-worker. And you have to document your good deed. Other than that, the sky’s the limit.

The bank also gave every employee a video camera to document their gift.

When employees were asked what they hate about working at the bank, here were some of their responses:

  • What do I hate about management? They’re just too nice!”
  •  “I haven’t found anything yet.”
  • I have to go home.”

Why is this important for customer experience? According to COO Solberg:

That’s our mission statement: happy employees, happy customer.

My take: State Bank highlights a critical concept: Customer-centric DNA starts with employees.

The bottom line: Don’t you want to do business with a bank like State Bank?

Chase Can’t Advertise Its Way To Customer Friendliness

J.P. Morgan Chase is planning to unveil a new campaign called “Chase What Matters” in an effort to reposition itself as being more customer friendly. Here’s a quote from a news release on the topic:

“We’re launching it across all lines of business at Chase, working in partnership with our retail side so all branches and all Chase-branded products will be under this campaign,” said Sangeeta Prasad, svp-branding and advertising for Chase

My take: First of all, lets look at some data that I’ve published about Chase:

Chase certainly has its work cut out to be viewed as customer friendly.

But is the firm’s problem really its advertising slogan? Will a high recall rate for “Chase What Matters” make customers think that Chase is customer-friendly? I doubt it. To change customer perception, Chase needs to follow the second principle of Experience-Based Differentiation:

  • Reinforce brands with every interaction, not just communications. Traditional brand messaging is losing its power to influence consumers — that’s why branding efforts need to expand beyond marketing communications to help define how customers should be treated. To master EBD, firms must articulate their brand attributes to both customers and employees, clearly describing how the firm wants to be viewed. That’s just the first step, because companies must go on to translate brand attributes into requirements for how they’ll interact with customers.

The bottom line: Don’t waste money on brand promises that you can’t keep.

Two Words For Vikram Pandit (Citigroup CEO): “Customer Experience”

Citigroup recently announced that Vikram Pandit was appointed CEO and that Win Bischoff (acting Chief Executive Officer) will become Chairman. I won’t get into my opinion of the move, but here’s what the Washington Post had to say about it:

But some investors expressed concern that the 50-year-old, India-born executive has never run a public company, let alone one as big and complex as Citi. Pandit also has no experience leading a consumer business, which at Citi generates more than half of overall revenue.

My take: Over the past several years, I have analyzed the retail financial services sector and worked with many large financial institutions. And, let me tell you, Citigroup needs some major work in its consumer business. To get a sense of how bad things are, here’s a recap of some Forrester research (remember, only Forrester clients can get full access to the reports):

So why am I writing about this? To pick on Citigroup? No.

Hopefully this information will make sure that Mr. Pandit understands, beyond any reasonable doubt, that Citigroup’s consumer business needs his attention. Since he does not have a great deal of experience in this area, I’ll offer my advice:

Focus on customer experience, NOW!

As a starting point, I suggest that Mr. Pandit read my post: The Best Of Customer Experience Matters, Volume #1 which provides a summary of things that can help Citigroup (there’s also a .pdf in that post that someone on Mr. Pandit’s staff can download for him). In addition to that “best of” post, I suggest that he also read Banks Prepare For Customer Experience Wars.

The bottom line: Citigroup’s consumer business needs a customer experience overhaul.

Customer Experience Execs Help Banks

A recent post, Lessons Learned From Chief Customer Officers, highlighted some of my findings from discussion with a number of senior customer experience executives. It was clear to me that these execs were making a difference within their organizations.

But what about for banks? They have an uphill customer experience battle — as we can see in this fun video created by IBM:

Earlier this year, Forrester did a joint survey of 190 North American banks with the American Banker which I discussed in the post “Banks Prepare For Customer Experience Wars.” I recently published a Forrester Research report called Customer Experience Execs Help Banks that compared responses from the 54% of banks that have an executive in charge of customer experience (which we’ll call a Chief Customer/Experience Officer, or “CC/EO”) across channels with those that don’t. Here is some of the data from that report:

  • The top 3 obstacles to customer experience success:
    • With CC/EO: Lack of cooperation across organizations (49%), lack of a clear customer experience strategy (48%), and lack of understanding about customers (36%)
    • No CC/EO: Lack of customer experience management processes (70%), lack of a clear customer experience strategy (51%), and lack of budget (40%)
  • Use a single set of customer feedback scores across the company:
    • With CC/EO: 61%
    • No CC/EO: 27%
  • Passed our self-test on principle #1 of Experience-Based Differentiation: “Obsess about customer needs, not product features:”
    • With CC/EO: 31%
    • No CC/EO: 18%

 The bottom line: Change takes leadership — bank on it!

TD + Commerce = Better Experiences (hopefully)

Yesterday, Canada’s TD Bank agreed to buy Commerce Bancorp for about $8.5 billion. I won’t spend any time discussing the merits of the deal (we’ll leave that to the financial analysts), but I do think that this will have an impact on customer experiences with banks — hopefully.

Commerce Bank, centered in New Jersey, has distinguished itself with a unique approach to branch banking —  convenience. The bank describes itself as “America’s Most Convenient Bank.” I can’t say whether or not it lives up to that slogan, but it’s branches (which stay open 7 days/week) do provide a level of service that is well beyond most other banks.

My take: It really helps to have a single-minded focus on a customer-centric attribute like convenience when you’re trying to improve customer experience. Think about Staples’ single-minded focus on delivering interactions that make customers think “that was easy.” Every Commerce employee can ask him/herself: “Is what I’m doing now, or the decision that I am about to make, going to make customers think we are convenient?” This type of focus can be powerfully aligning!

So here’s where hopefully comes into play. Hopefully TD will provide the scale to expand Commerce Bank’s customer-centric approach into a wider geographic footprint. Is this because I want Commerce Bank to take over the world? No. I just want it to create enough of a threat to get other banks (BofA, Citi, Wells Fargo — are you listening?) more serious about their customer experience efforts.

For more context on the customer experience issues with banks, take a look a previous post called: Banks Prepare For Customer Experience Wars.

The bottom line: An expansion of Commerce Bank could mean better customer experiences for all consumers — hopefully!

My Takes On YouTube

A short post today — based on a couple of my recent interactions with/on YouTube.

We just published a research report, Uploading To Video Portals Isn’t Easy, that looked at the usability of five video portals (thanks to Ross Popoff-Walker who did most of the work). It turns out that YouTube’s usability was pretty good. Here’s a summary of the report:

Forrester applied an abridged version of its Web Site Review methodology to the site experiences at five major video portal sites: YouTube, Yahoo! Video, Metacafe, Dailymotion, and Veoh. Our evaluation looked at how well each site supports young adults trying to upload a new video clip. Only YouTube received a passing overall score. Some of the major problems we found across the sites: poor contextual help and deficient privacy information.

I also just found out that someone posted an excerpt of my speech from Forrester’s Finance Forum on YouTube. It was probably done by Forrester’s marketing department; hoping that the video would generate the same buzz on YouTube as coke + menthos or the dancing cadet. 🙂

Well, I can assure you that my video is not nearly as exciting as the running Russian video. But if you want to see a portion of my keynote speech on Experience-Based Differentiation, then here it is.

Unfortunately, you only see me — and can’t see any of the slides. Maybe someone in the audience who was illegally taping the event will post a video that shows the slides as well. You never know.

The bottom line: YouTube makes it easy to upload anything.

WaMu Heads For Simplicity: Follow!

In the American Banker last week, there was an article called Web Simplicity Initiative Bearing Fruit for WamuAs an example of Washington Mutual’s (WaMu’s) focus on simplicity, the article described changes that WaMu made to the online application for its free checking account– cutting the process from 8 pages & 15 minutes to 3 steps & 6 minutes. And to eliminate the need for mailing forms to new customers, WaMu uses the first check as a signature card.

I really, really, really liked the this quote from Richard Blunck, a senior vice president and WaMu’s director of e-commerce:

Simple, for us, is critical

My take: Simple is critical for just about every bank (along with just about every investment firm and every insurer). Many customer-facing processes are based on outdated requirements, overly complex business rules, old technology, and organizational silos that discourage innovation. The result: A complicated experience for customers.  That’s why there’s enormous opportunity for financial services firms to apply a principle that I call ultrasimplicity, which is one of the Five Distruptive Customer Experience Strategies that I’ve written about in previous posts. 

The bottom line: When it comes to financial services, simpler is almost always better.