Retail banks are embracing the rapid emergence of technology and innovative ways to connect with customers. Here, Virginie Fauvel of BNP Paribas, Ashley Machin of Lloyds Banking Group and Anders Carlström of SEB detail their distinct strategies to balance necessity with invention.
The ways in which banks are actively trying to relate to customers are changing nearly as fast as they're being created. Special teams within organisations devote themselves to how banks can evolve to make the customer experience smoother, safer and, if possible, more enjoyable as digital banking becomes the norm.
That's easier said than done in many cases, and the costs associated with remaining competitive - from strengthening back-office security to structuring personalised homepages -continue to rise. But for those at the forefront of digital banking innovations, nothing is impossible - especially when reputation is at stake.
Finding the right balance between form and function, however, is the ongoing challenge.
Virginie Fauvel, director of online banking, BNP Paribas
We understand how important it is for BNP Paribas to talk to customers through social media. In retail banks, there are fewer people going into the branch and using the call centres, while there is more email and social-media interaction, so it's very important for large retail banks to understand how digital works.
We launched our Facebook page three years ago and today we have more than 140,000 fans. Last year, BNP Paribas launched a customer service on Twitter - the first bank in France to do that. Facebook and Twitter are the two dominant social media for business and interacting with customers.
This year, we've put all of our branches on foursquare, which is a great new way to interact with the 'SoLoMo' (social, local and mobile). It's very important for heads of branches to understand the customer when they talk about their specific branch in real time. At all our branches, we provide the means of seeing what the customer says through foursquare and the ability to interact with them.
So it's a tailored approach between the branch and the customer. We've launched an app for Android and Apple. Before we launch an app, we test it as an LAP and ask customers for feedback, so there is interaction for a couple of months before we launch the apps for all customers. It's a way to make banking and social media improve our apps through customer experience.
BNP Paribas Mobile has also launched a partnership with Orange and a smartphone with dedicated apps and dedicated means of payment to exchange with customers on their daily banking.
Social media issues
There are two very big issues with BNP Paribas through social media. First, listening to what customers and the public are saying about us, and second, interacting with the customer. If a customer asks a question, we have to answer very quickly.
I like [Amazon CEO] Jeff Bezos's quote that a brand is what people say about you when you're not in the room. I think Twitter and Facebook are like that. If you have dedicated people, you can be in the room and hear what people are saying about your brand.
But we don't have to be intrusive. When people are talking about us, they might not want us to interact, so the first Tweet we give is always, "Do you want us to help you?". Sometimes it's better not to intrude and let the customers answer each other. It's easier to believe another Tweeter within BNP Paribas than the brand. And we never speak without saying that we are BNP Paribas - this will establish the relationship and it's important to be honest.
We are moving more to social media with people trained in that type of interaction. It's important to BNP Paribas that we improve the relationship between the customer and the bank.
Ashley Machin, digital banking director, Lloyds Banking Group
We tend to look at digital on a point-in-time basis, so a lot of conversation is about what's happening and what we should be doing today.
But when I see what's happened at Lloyds over the past four and half years since I've been looking after digital, I think what it should bring home is that this is not a point-in-time discussion.
The interesting debate is where we think the end state is. Look at what Lloyds has done: less than three million of our current account holders were active internet users four and a half years ago, and by the end of 2011, we reached eight million.
Just to put it in context, in the first ten weeks of this year, we saw an increase of 250,000 in the net-active number of customers using internet banking; also, when I started we had a team of 25; we now have 600.
Digital is more than just a channel; it's a way of life and a way of doing things in a fundamentally different way.
One of the things that transformed our ability to operate was recognising that the old model of business IT simply didn't work in a digital age and you have to integrate business and IT teams, which is what has driven our numbers. We now do over 20% of our total retail sales online.
Around four years ago digital, was being looked at as the great white hope that never happened. We're very much there today and the issues now are how far we go and how quickly.
We're struggling with anthropomorphising, and our instinct to define a relationship as something that was defined 25 years ago with the interpersonal relationship between a branch manager and a customer. The first question when talking about a digital relationship is to ask what is meant by a relationship, and how are we going to measure it.
The two measures I find most interesting are net promoter score, which is highly correlated to service availability, and touch. We underestimate touch, its volume and importance. We're definitely seeing a correlation between the number of times a consumer touches us and the probability of attriting to a competitor. We're also seeing a correlation with the number of times they touch us and the number of products they choose to buy from us.
So, one of my key messages is that we have to jettison the old way of how we look at relationships. And the more you can get customers to touch you, the deeper the relationship is, even if you don't have a face-to-face interaction. The transition of relationships is what I'm seeing through the digital channel. Customers have expectations of functionality because the majority of them are Apple or Android users. They now have an expectation of ease of use and a visceral understanding of how things should be. It fundamentally changes the net promoter score we're seeing in customers.
Amazon is a benchmark for being able to get data about our wants and interests presented back to us. What digital actually gives you is the ability to deploy your CRM engines in a way in which you can't through a branch network because of the volume of touch and your ability to present unique content to customers according to what you know about them. But what you shouldn't underestimate is what that does in terms of your complexity.
Our busiest day so far saw 3.75 million unique log-ons in 24 hours. Our whole methodology is trying to present customers content on screens that is relevant to them. You start multiplying 3.75 million log-ons by roughly ten pages and you're up to 37 million pages, all of them subtly different in terms of what we know about the customer. Amazon is the benchmark, but as a banking industry, we have to start getting our heads around what that means in terms of how we subsequently evidence to the customer or the regulator.
People fundamentally want control over their finances and it's a core part of their view of the relationship they have with us. As an industry, we're struggling to work out how best to help customers when they're looking for advice. We know they want control of their finances; what we're less clear about, after the financial crisis, is the way we can provide financial advice to consumers who are more trusting of banks than they were at the height of the crisis, but are less trusting of banks than they were before the crisis.
That's one of the interesting debates about what we're likely to see in terms of competitive pressure. Who is going to provide advice to consumers; are they going to rely on the advice that we supply as a bank, which has a huge advantage of using their CRM data to enable us to personalise the advice they get, or will they continue to drift into social media to get their advice?
In a four-week period during February and March 2012, Lloyds had 1.6 million customers use its internet banking. We also see that it's a marketplace where the consumer really displays a short half-life in terms of their appreciation of product. In mobile, what was brilliant yesterday is OK today and by tomorrow is slightly passé. So there's a real challenge for us in maintaining the stickiness of our relationships with consumers because they are used to new functionalities and experiences perpetually thrown at their Android and Apple devices.
Regarding social media, it's very easy to end up like a father dancing at a wedding - you need to understand it's full of young people and you have to engage in a way that fits your personality.
This is the dawning of the era we were all expecting when we first started talking about CRM. The banks have stunning amounts of data on their customers and the digital marketplace gives them the opportunity to deploy that in a much more focused way than they've been able to do before.
People say that digital is the end of relationships, but I think it's the opposite, because digital is the medium through which you're able to deploy CRM in a way that demonstrates to customers that you understand them better than anyone else.
Anders Carlström, head of internet bank, SEB
We've spent a lot of effort and money on online banking, and the reason for that is obvious. SEB has seen dramatic growth in the number of people using its mobile bank, and this year our mobile bank is going to be the most commonly used channel, from almost zero to the largest channel within a two-year period - that's massive.
Given that fact, we need to be invested in that channel to make sure customers are happy because we see that they're really enjoying that channel.
The reasons behind it come down to why you have a bank - is it just a way to pay bills, and what do you need a digital bank for? One reason is the great need to have financial control; for example, knowing how much money you have, what stocks, mutual shares and loans you have, and what you spend my money on.
Financial control also means looking to the future; such as what happens if you need to finance housing, holidays or if you get sick. How can we as a bank help individuals, SMEs and other companies understand their financial situation and help them get financial control? That's a basic need for a customer.
I've seen several examples of non-logical behaviour. With internet banking, 67% of people log in and don't do anything - they log in just to see how much money they have rather than make a transfer or a payment.
There's a huge need for financial control and we have a responsibility to offer solutions to improve customer financial control. It's about getting closer to them and becoming partners with them.
Digital isn't a completely different way of life for everyone. Our customers in Sweden, even if most of them are only digital, still like to have the option of going into a branch or making a phone call to talk to someone who can help them solve a situation.
Many niche banks that are truly online are doing fairly well, but we haven't seen the growth there you'd expect - it's not exploding because the attention span of a digital customer is very short. If you haven't done the service well enough or intuitively enough, they'll turn off and do something else.
We get feedback on how to streamline processes and make it a more efficient, engaging and pleasurable experience for customers.
We work in several ways: we listen a lot and have net promoter scores for customer satisfaction, so we take notice of the scores we get for each channel. That's a rating, but there's also a free text to see what they like and don't like. There are a lot of other feedback channels to listen to what the complaints or wishes are for online banking.
At the same time, it's not only to do what they ask. As Steve Jobs said, it's really good to understand what you want before you know you want it. We go with a gut feeling based on listening and what the customers are doing. Together, that helps you a lot in deciding what you need to do.
Banks have so much information about their customers, so it's a matter of how to manage it and use it to the best possible outcome.
On a serious note: Michael Crespigny, CEO, Information Security Forum
How is the banking industry's presence and vulnerability in cyberspace unique as digital banking evolves?
This is an issue that online banking services, in their many guises, have faced for some time as opposed to one that's emerged as it is for most other sectors. Because of the risk, they've been fairly comprehensive in thinking about security and innovative in the way they've developed.
They've also been unique in that they have been formed with support from government organisations and round tables to share information about threats and incidents. There's an active banking group in the UK facilitated by CPNI that shares what its members are seeing and how they're reacting that's enabling the industry as a whole to better respond to the issues.
In the wider financial services community, we see a lot of informal networks formed doing the same thing, but they're not quite as structured because their risks aren't as significant as they are for banks.
As they rapidly transition from legacy systems, are they more susceptible to attack than other industries such as health and defence?
They're more susceptible to attack than the health industry, but aerospace and defence are particularly susceptible, not so much to traditional criminal hackers who are after assets that they can quickly convert to cash, but they're exposed to threats from other nations. It's a different, but equally disruptive, group that is interested in financial services.
It's reported that European companies are spending significantly more - a 15% increase on 2011 - to protect against cyber attacks as 'denial-of-service' cases increase. Will this trend continue?
There's a risk that activists can initiate these sorts of things. Organisations are using the web to quickly develop defences and cybercriminals are moving just as fast.
You can initiate a widespread denial-of-service attack using Twitter, so I expect there will be new ways that these attacks will be initiated.
Botnets are being used more, and are more actively identified by the authorities. The role of ISPs in identifying compromised machines will change the landscape of botnets as well, and there's a greater concern that ISPs and other participants play a role in notifying individuals and other organisations where they've seen signs that their devices or networks are compromised.
Is there a greater onus on social networking sites to be at the forefront of security control since they're being used as portals for malware?
There's a real challenge in providing very open spaces for people to record comment. Twitter and Facebook are not alone. It's also all the boards where people can comment on anything. There must be greater provision and clarity about how those things are removed, and transparent means for people to investigate.
How is the threat magnified when employees take personal smartphones and computer tablets into the workplace?
It's an issue when an organisation allows the employee to use their personal device to access corporate information. Some companies are seeing a 50-fold increase in the instances of malware on mobile devices since late last year.
The banks need to think about what's really sensitive, so in the event that the device is lost, stolen or the employee leaves the organisation, they're in control. Not many organisations have drawn a conclusion in terms of how to do this comprehensively.
Collaboration with peers is particularly valuable. It's not just a technical issue and it's not about sharing commercial secrets: it's a foundational issue that's important to the trust that customers have in an industry.
You won't succeed in isolation in cyberspace. Intelligence, whether it's from software providers monitoring threats on the web or collaboration at the industry level, is fundamental to success.