Traditional product-centric banking is a thing of the past. The transformation to customer-centric, relationship-based banking has already commenced and pace is not slow. Banks are forced to focus on customer(s) and they are not geared up for this. Historically
banks have been structured around products, so their internal systems. These are under pressure to restructure and align to customers, but bank’s past investments restricts this movement and is one of the biggest hindrances. After all banks have invested Billions
of dollars in creating these mammoth systems, how can they just let it go? Even though banks have realized that past ways of doing business may not hold good for future, they are just not able to act upon it quickly. If this was not enough, non-banking players
are increasing the heat.
Any bank, irrespective of their target market, geography and size, has invested heavily in multiple banking systems and undoubtedly many of these remain as the most important IT systems. However the same assets turn into liability, when current systems act
as a constraint instead of supporting the need of agility to respond quickly to changing market conditions.
A study done by Ernst & Young in 2014 explains how important fees are in customer experience. They stated “transparency of fees and simplicity of offers and communication” as one of the key improvement areas for banks. Additionally, rates and fees were stated
as the reason 32% of customers opened or closed accounts in the past 12 months. It was the second most important reason after experience and lagged behind only by 1%.
Customers were noticeably less satisfied with one of the most important benefits: transparency and clarity of fees. This presents a burning issue for banks to improve upon, as customers who switched providers last year also cited rates and fees as an extremely
important reason for closing accounts. And it is more than an irritant - two of the top five problems for which customers requested assistance related to unexpected fees and disputed charges. This takes time and effort for them to pursue, and even then only
20% of those reporting the problem were very satisfied with the resolution, and a full 42% were less than satisfied.
These are not unanticipated issues. Banks are very well aware of these problems and have the biggest stake. They cannot afford to be a mute spectator of customer’s concerns. They would like to move quickly and re-orient themselves to address issues. However
they are constrained with their past investments and are not able to respond to customer’s expectations. Isn’t it surprising to see how past assets are turning into future liability.
Can banks do something about it? Can old age banks really be customer centric? Is there a way for banks to handle this situation without scraping old investments? Can risk of transformation be managed? If yes, what should banks do? Any suggestions?