Design Thinking to shore up banking

Design thinking involves understanding your customer much deeply...understanding their needs and how and what would interest them with the bank when the product or offer is given to them...this is the true outside-in approach, diagrammatically opposite to what the banks have traditionally been doing. It is much about empathising with the customer and giving it back to them. It is the building block of improving the customer experience that banks are trying hard (or may be hardly trying!)

It is required to do appropriate research to understand what the customer wants...what his needs are...where his needs are. The years of data and analytics investments should come in handy for some initial understanding of the customer. One can even do primary research and focus groups with customers to understand them better. Imagine your goal is to acquire deposits. Directly observe, what do customers do...where are they keeping their money...what motivates them...what leads to their frustration?

In your goal to acquire deposits as a bank, important is to think of where the problem in entire lifecycle of deposit acquisition, and deposit accumulation lies? Essentially what is the problem statement to achieve your goal? It will be worthwhile to stack up the current customer experiences and see what doesn’t and does makes sense?

Product managers need to ideate all the possible thoughts and solutions and see what resonates. There should be a capability to test these out with a limited set of resources. Initially, it could just be simple simulation of various scenarios and checking them out for different situations. And then test launch with either a select group of customers, or even the bank staff, for a limited period of time. It would be interesting to keep a feedback loop, to gather the feedback and improve the offering, before its launched for good to the wider customer base.

The most encompassing theme of design thinking is empathy, and hence, the customer, as the fulcrum of all decision making. Thus, customer needs are paramount. With this belief, product managers will have a customer centred offering, which not only serves the customer’s larger purpose and drives up the customer experience, but also meets bank’s demands of revenue and profitability.

Personalisation of the product or service to the customer needs is one such simple way of applying design thinking in day-to-day banking. To facilitate this seamlessly, banks needs a process and a capability which can enable it across the products and services and customer segments within the bank. Imagine, if the bank is able to personalise the deposit accumulation offer to the customer, who does a lot of month-on-month credit card transactions, or a personalise the deposit rates because the customer utilises the overdraft facility. Important to note, it is for “a” customer.

In the open banking and open economy world, when it can be much simpler and easier for the bank to design offerings for the actual need of the customer, and thereby, own the end-to-end customer experience. Imagine, the bank being able to fulfill the entire home buying journey of the customer, where the actual need is the house, while the mortgage provided by the bank is just incidental. Other services in this journey – brokers, legal services, utilities, white goods, logistics, etc, can become part of the bank’s ecosystem and larger catalogue of products and services that the bank can offer. The customer comes to one stop shop and gets all the services in a package that fulfills his actual need.

Another way to imagine use of design thinking to banking is the movement away from fee-fleecing account based model to customer-centric value based model. Of course, the widespread digitalisation, driving personalisation and value based experiences from other industries, leading banking customers to expect the same. Such value based models are necessitated by such customer desires. At the heart of it is customer empathy and design thinking. Instead of paying high transaction fees on accounts, customers are willing to pay for personalised experience, including relationship based pricing.

Digital companies in other industries have taken such value based models to drive supreme customer experience and brand value for themselves. One such company has recently decided to discontinue the subscription and hence, the subscription fee, for the inactive customers. Their belief to charge only if the value if being created for the customer, is the defining moment not only for their industry, but for the other industries as well.

Similarly, design thinking can be used in multiple other ways to offer curated customer experiences. It is an important management principle that banks are starting to leverage and gain wholesome benefits across the board.

Gamification and banking

Are customers rational? Think about it for a moment… And you will find that like you and me, any customer is emotional at times. At times, he is logical too, but at certain instances, intuitive and inconsistent. Guess what, he gets emotional at winning a “candy crush” level on his mobile, or even at not winning one, and wants to try again, and again, until he wins. Such behavioural aspects and learnings thereof can be leveraged in the world of finance via use of gamification strategies.

Banks can leverage simple gamification ideas like “framing” – where one presents the options carefully in front of the customer and with consistent reinforcements. It could simply be offering a positive bias for a particular financial behaviour, or, a negative bias for a different behaviour. Bank can also use “herd instinct” – where banks can drive customers like a herd towards an objective. For e.g., steering customers towards a particular goal or a financial behaviour. Goals based ideas are already picking up in many markets to achieve better personal finance objectives. However, underlying principles of gamification are at play.

Banks can use gamification to entice customers to bank with them in groups and apply these behavioural biases to guide customers to an objective that is a win-win for both the sides. For e.g. a simple offer for a family, where, as a family if they spend, say, $2,000 on their credit card each month, they get bonus cash back, and if they do more, they get more. And all along the month, one keeps track of these spends at the customer or the family level and communicates regularly to shore up the required behaviour from the customer. Such simple yet powerful strategies have given banks tremendous success in the mid to long term.

Gamification is about designing the curated customer experience that matches the needs of the customer and takes them on a journey. There has to be a sense of self expression of the customer, hence, this has to be personalised, has to be competing in nature, for e.g., competing for a campaign benefit against fellow customers, and has to be transparent to the customer, especially in the progress made at any point in time.

Simple ideas like providing comparison savings rates for similar customer population, or progress gaps shown in temperature gauges, or collection and management of individual or family savings goals, can go a long way in utilising gamification to drive right customer behaviour and achieve business benefits. Imagine, the goals based constructs discussed above, can not only help customer build their emergency funds (and improve personal finance), but allow banks to get low cost funds with them.

Gamification is not just about points and badges (ofcourse, getting name on the leader board does give one a lot of satisfaction!). More and more are engaging in these games. In such times of work-from-home, even more. According to research, 53% of the regular gamers are young, between the age of 18-49, which is a sweet spot for the bank. Engage them early for a long term relationship. Bulk of them (more than 65%) play games on their mobile devices, which would have surely gone up even more in today’s world. This opens up tremendous opportunity for banks to use gamification to direct customer behaviour.

Banking in these unusual times…

World around us it totally different than what was 8 weeks back. On one hand, all countries are working tirelessly to control the spread of Covid-19 and thus limit its ever-increasing and far-reaching impact on their respective economies, and on the other, the very countries have returned to the low interest environment, to fuel in the economy, already reeling under.

All the lockdown, work from home, is already putting pressure on banks to driver better self-service digital experience for their customers. Thereby, hastening the speed of digital transformation at the banks. Banks who are thinking to drive digital experience from front to bank, will continue to survive and come out with flying colours. This would mean, banks need to be nimbler in their systems and operations, agile in their ability to respond to the customer’s requests, and in many cases anticipate the requests beforehand, and deliver a curated experience. This could well lead to complete self-service offerings through digital channels, where customers can create their experiences, their pricing plans by themselves – based on what they want and how they want, or better be, how much they are willing to pay or commit to.

Such times will surely bring in more regulation and compliance towards customer transparency and customer experience delivery. This would lead banks to be more open with their customers in terms of what is communicated, when is it communicated, and how is it communicated. Banks will have to have automated processes of experience orchestration, which is not just jazzy front-end channels, but more around product/service, pricing, offer delivery. They should be able to deliver these on-demand and still maintain the required levels of transparency and controls. The capacity to orchestrate such experiences with compliance would segregate the best from the better.

For long, we have heard that data is the key in today’s digital world. And guess what – banks have possibly the best data on their customers – be it their demographic information or their transaction data or their balance data. To top it, Open Banking adds to such already existing data, as now you can even get information on your customer’s balances, transactions with the competition next door. Leveraging this huge amount of data to your advantage is the key. Using such data to create targeted campaigns, offers, pricing, potentially using the data to change or drive the customer behaviour, is going to deepen customer relationships, drive loyalty and delivery sustainable value for both the sides.

Such data can be used to create personalised curated offers for the customer. If we can link up the household or any such network/group, we may hit a gold rush. Imagine, a bank being able to draw in funds from the entire household, by giving a personalised pricing across the household. Banks also have one of the biggest intangible assets with them – their customer’s trust! Envision the power of data leading to targeted offerings, enhancing the customer’s experience and thereby their trust in the bank!

A micro-segment (to the segment of one) targeted approach where the special pricing and offer is linked to the profitability and propensity to accept the offer, could be a game changer in these tough times. Customers get what they prefer or want, and banks get a more sustainable business for the longer term. And this potentially creates a virtuous circle of deep relationships and better revenues and profitability.

A bank in Asia, has been able to drive family-based offers to link the funds and spending across the family. This has successfully drove up the balances and card spend multi-x and has made the bank believe in the delivery of curated experiences for their customers as the way forward for their business.

Already the world over, the banks were being forced to work on better customer outcomes, and that could mean foregoing fees and delivery of better customer experiences. Such approach to banking would orchestrate the paradigm shift from the high fee model to value-based model – wherein, you charge the customer for the value you deliver. Value through what is being delivered is what the customer wants, how he wants and when he wants, and thus the customer is okay to pay for such value being delivered. This hyper-personalised, per-customer approach, coupled with the data that banks already have, can deliver the true customer experience the customers of today desire from their banks.

Enterprise Loyalty for banks and financial services – Part 2

I strongly believe Loyalty should be more than just point calculation and gift redemption. Banks should use Loyalty to give a fair deal to their customers. This in turn can deliver on capturing share of the wallet and increasing stickiness.

A loyalty program should allow banks to establish a 360 degree view of their customers, by looking holistically across multiple dimensions – Customer relationship value, relationship tenure, product ownership and usage, desired channel behaviour. In fact, loyalty programs should allow a blend of customer’s demographics, banking behaviour, needs to deliver on loyalty. This should be a program which uses products, channels, and customer demographics as a mix to achieve holistic rewards program success.

Such a holistic loyalty program will use a harmonious combination of various “customer attributes” like – customer segment, age, lifetime value, credit rating, demographics, etc; and, “account attributes” like – account type, balances, currency, etc; along with “product attributes” like – product type, frequency of product used, no of products taken, etc, and, “transaction attributes” like – transaction channel, location of transaction, time of transaction, etc. This combination will assign rewards for a desirable behaviour and no rewards (or even deduct) for an undesirable behaviour.

These rewards can ideally be accumulated and used against benefits which can be broadly classified as – financial or lifestyle rewards (monetary or non-monetary, as mentioned in my previous post). A lifestyle reward can be anything from – gifts from a catalogue, movie tickets, gift vouchers, lounge access, etc. And a financial reward can be cash back, fee waivers, discounts, special price plans, higher free limits, etc.

Loyalty program would also give flexibility to accumulate rewards on multiple grounds. Banks can reward their customers contextually on events, transactions, even lifecycle. One should expect capability to reward for customer birthdays, anniversaries, new year, festivals, etc. These events can potentially lead to more sales and transactions. Banks may also want to reward their customer for relationship anniversary, or may be a new product subscription. Such a holistic program also drives customer experience.

Given the market around us these days, the banks can go all out and develop relationships across multiple lifestyle franchises to deepen their redemption catalogue. These can be Jewellery, Hotels, coffee shops, Air Miles, restaurants, gym membership, lounges, club membership, etc. All such redemption options not only gives customers options to choose from, it also strengthens the loyalty program and goes a long way in creating a strong brand value.

To add to this, a holistic rewards program should allow for points adjustment, points transfer, points aggregation, points acceleration and even points expiry. This is something that again adds to the depth of the loyalty program and drives customer experience again.

A loyalty program should also give banks flexibility to run partner or merchant loyalty program as well. This should be run as usual customer loyalty scheme for a single partner or merchant. These schemes can be run as multiple tariff schemes for revenue share or commissions. Banks can even reward their merchants to do more transactions with you.

Another use of a holistic rewards program can be using it for Sweepstakes or Raffle draws for customers. This again goes a long way in building the customer relationship and stickiness.

All in all, a holistic rewards program should enable banks to get close to their customers and align the entire organisation around the mission of enhancing overall customer experience. It should bring in competitive advantage, improve operational efficiency, and enhance overall revenues and overall drive up overall customer satisfaction.

Enterprise Loyalty for Banks and Financial Services - Part 1

When we speak of loyalty and loyalty points, most of us today would know what I mean. Not only that, one is quickly reminded of a credit card and a POS machine J Traditionally for banks, loyalty was synonymous with credit cards and vice-versa. As end consumers of credit card facilities, we always associated a credit card with the loyalty points and benefits that it would bring. And we were or even today happy using such loyalty points against some gifts or merchandise or voucher, etc.

Keeping the omnipresence of credit cards and their loyalty points away for moment, let’s understand what loyalty is and why one needs it.

Literally speaking, “Loyalty” would mean, “being loyal to someone” and hence, continuing the relationship. Well, banking relationships are all monetary and not so much by conscience. And with the ever growing competition, how does one make sure, their customers are loyal to them and stick to them and continue to do and bring in business day in and day out for long-long years? Well, that is where you need a holistic rewards solution which can help you meet your objectives. You give a monetary or a non-monetary benefit as a reward for being loyal and drive desirable customer behaviour in tandem.

Not only this, with growing financial literacy among customers and ability of customers to consummate easy and real-time information over social media, they also think holistically across their banking relationships. They also think that they should be rewarded appropriately for the overall relationship and not just credit cards.

All such market and customer driven behaviour dictate a need for a holistic loyalty program for a bank. Such a program should definitely cut across all the banking products and services (including credit cards) and help the bank achieve their key broad objectives from their loyalty program.

Using a loyalty program, typically, one would want to “Reduce churn” by retaining the existing customer base and help wade through the competition. One would also want to “Increase revenue” by increased use of products and services and increase share of wallet and support cross-selling. And overall, one would surely want to “Attract new customers” by an attractive referral program and incentivised marketing program to aid direct walk-ins.

A loyalty program would have 3 basic tenets around which it will revolve – Transact – Transact and capture all the transactions that a customer would do; Earn – Earn loyalty benefits or loyalty points based on the nature of the transaction; and Transaction more & Redeem – Transact more and increase your earnings and then use these earnings or burn these earnings or redeem your earnings against certain set of benefits, both financial and non-financial.

A loyalty program would also give you a chance to drive a desirable customer behaviour and test and create opportunities. Let’s take simple customer behaviour, say, “purchase of a new product”, to understand this. A typical “call to action” could be – “Buy Product X and receive Y points”. By such a call to action, you are driving your customers to buy that product. You are enticing them to gain those loyalty benefits by purchasing the product. This not only gives a chance to generate more revenue by sale of a new product, but, also gives a chance to deepen the relationship and increase share of the wallet. Let’s look at similar such scenarios.

Another key desirable customer behaviour is “increase in spending” and you may ask your customers – “Spend X with us within this week and receive Y rewards”. This is a very common strategy to increase spending. At times, banks use it to increase credit card transaction volumes over a short period of time. This gives an opportunity to increase average spending and have a psychological edge, where the customer feels related to the bank. On the similar lines, if you use such a strategy over a longer period of time, it has a potential to change the customer behaviour and further deepen the relationships. It also helps reward long-term relationships, which in turn creates more brand value.

Such a holistic loyalty program can also help banks drive their customers towards low cost channels like internet or mobile banking or ATMs. All that banks need to do is add channel of transaction as a parameter to drive rewards or even disincentive undesirable behaviour. Banks adopting such a strategy have been fairly successful in achieving their objective to move away customers from costly channels and allow them to self serve.

To increase volumes and create recurring sales, banks usually would entice their customers to transact a specific number of times in a specific time period. They would usually say – “Do A of X in Y time to get Z rewards”.  Such strategies can help drive products like bill payments or fund transfers. There are many such strategies which can be adopted to drive desirable customer behaviour and achieve other objectives from a loyalty program.

OROP - is NaMo that foolish?

One Rank One Pension (OROP) has been taking media and political stage for a while in India. It was a sort of clarion call from Narendra Modi (NaMo) during last year's General Elections, where, he committed to OROP and confirmed its application, as the leading PM candidate.

However, its been more than a year - barring a few mentions of commitment towards OROP by PM Modi, Defence Minister Parrikar and a slew of other central ministers, there has been no public confirmation of any sorts which can placate the protesting ex-Armed forces personnel.

There have been many views and arguments on its financial implications and economic sense, especially the fiscal burden on the Central Govtt. Read an article, which said, for all the forces included, at best this could be in the range of INR 25,000 crores. And half of which is already addressed by plugging the LPG subsidy leakage. So 50% is already there, rest can easily be addressed by plugging many such subsidy leakages that the Modi govtt anyway intends to go after aggressively. This surely makes a strong case for its implementation.

Well, the other important aspects would be the long term fiscal effect and challenges that it will bring in, atleast for say next 5-10 years at a minimum and what happens after this demand is met (these protests are now making is like a big demand). How will other forces and govtt departments react to it? They are already rumoured to sit on the periphery and look at the current drama. This will likely snowball into a bigger problem and will be politically fanned as well. How does NaMo handle it?

Now on the current protests, there are reports that these are being politically managed. Knowing that is difficult to be practically implemented and NaMo having committed to it, all political parties are using it as a good canvas to paint their sympathy and empathy picture. Some reports also say that a sr. ex-army officer, close to the grand old party of India was parachuted to lead these protests by RaGa.

Knowing NaMo, he understands the political problems that it can bring in and also the possible political benefits he can reap, he wouldn't ideally let it go thus far. Based on back of the envelope estimates, this currently affects 25-30 million people and NaMo is too sensible a politician to ignore or not understand what does that mean.

My personal sense is that had there not been some serious internal tangles and / or issues with it, it would have been announced by now. Given the media fancy to get to the bottom of everything pertaining NaMo, even they have not been able to figure out the real problem in there. Even the protesting ex-servicemen, after multiple meetings, haven't disclosed anything so far.

There was a rumour that OROP might be announced by NaMo on his Independence Day speech. Which, ofcourse didn't happen. And pat came a tweet from the CM of Delhi - PM should announce OROP on Aug 15. Everyone wants to bake their bread while the flame is strong ;) And ofcourse, the brickbats are for NaMo anyway. And not to mention Congress and others, already playing political games, knowing very well that they have nothing to loose here. NaMo is sitting on a political hot potato, which will hurt him more than taking them far ;)

No one until now knows if it will implemented or not. Or by when it will be implemented. May be, what might be useful for NaMo would be to come out and address everyone on OROP and give a full clean statement on where it is and possibly its timeline for implementation. And most importantly, why its being delayed.

Nathan's dilemma

Nathan worked with his team and got the proposal ready. Well, submitting a proposal during a formal tender process is a different ball game, where you submit a lot of hard copies and a lot more. However, this one was a bit different, as the prospect wanted Nathan to make the submission in soft copy over email. One may think that to be an easy game. However, it comes with its own challenges. Preparing the soft copy proposal was easy for Nathan, as he was writing it in MS word and then saving it in pdf file, all looked easy. All was ready, he sent it to his manager to review and approve.

And then came the biggest dilemma so far in Nathan’s career. His bossed tossed a question so pertinent that he felt for long confused with the response he made. Given that the proposal was to be submitted in soft copy over email, the dilemma was whether to submit it in this fashion or not. Soft format, gives you ease, however, it opens up possible problems due to blatant sharing of such emails across the organisation and probable leakages of sensitive techno-commercial information. You don’t usually know who will lay their hands on such emails and information and when all these eventually come into the public domain.

All these were very logical questions and doubts and they came to Nathan’s mind, only when his boss asked him – should we share such information on email and risk it becoming a public property? They even discussed doing the Non-Disclosure Agreement (NDA), for which they didn't really have time, hence, doesn't work now. Nathan thought for a moment and replied that we as a vendor now and a partner in future should believe in our potential customer and give them the benefit of the doubt and take this risk. Not that submitting in person was not an option, it was always open and Nathan could have easily travelled to the prospect’s office and submitted the proposal in person. But then, Nathan’s idea was not only to showcase their belief in the prospect and her process but also give them the confidence that they are ready to abide by their process. He said that if we cannot believe in our customer, then, how can they believe in us? Nathan’s boss really liked it and agreed to move ahead and submit the proposal on email.

Though Nathan made the decision and his boss also agreed to it...but deep inside, he was quite confused. Confused, because this could potentially create more market problems, where their sensitive information changes hands just like that. He was scared too, as it was his belief in doing so, which his boss too agreed to, and if their fears come true, he lands himself in potentially bigger soup. All such thoughts kept going through his mind. He thought again and decided in favour of his previous decision. And believed if something bad happens, he will stick to his decision. And will fight, if the need arose. Nathan finally and rightfully submitted the proposal...on email :)

What lay ahead was a series of discussions and calls with the prospect on the proposal and days full of anxiety, as Nathan wanted to seek ‘real feedback’ from the prospect. After a few days post submission, he called up his point of contact at the customer’s place and sought feedback. He was told that it’s under review and with the sr. management to consider. He also sought some competition related information, as he learnt that there are 2 more vendors who submitted their proposals – one incumbent and one, a new like Nathan.

Nathan discussed this feedback with his boss and learnt that this may not be the real feedback and there might be something cropping up behind the scenes that we are not privy of and may not learn that ever. He understood that all this is not because they are against us and don’t want to share this information, but, because that’s how things will always be. To gather such information, we need to develop some good relationships and good connects who can always share such information with you on and off. And you need at least 2-3 such connects, so that you can gather more information and cross check each other, to be sure.

This was sooner than later becoming a much needed learning for Nathan, as after a few more days he learnt that the incumbent vendor has been asked to review his proposal, as the evaluation team felt the need to do so. That was quite baffling, to say the least, as at least Nathan was sure, he wasn't asked to review his proposal. His mind was full of a few more doubts – why would anyone do that? Probably, they want his to match my proposal or may be even better it. Or the third one was the best and the incumbent has been asked to review it. Sounded a bit confusing, but, in sales, anything is possible. Nathan had heard stories of people being smug about the deal getting through, while, the competition enjoying a luxury resort and signed the contract, and the former is not even aware. These were stories which were heard of and in sales folklore, such stories were aplenty. But, this time, Nathan was experiencing such things all by himself.

Here was a situation where Nathan thought he had worked up the relationship and connects quite fast and he stood a fair chance to give a tough fight. But suddenly, he is met with a situation which he hadn’t experienced thus far and was a bit stuck on how to get more information and validate this piece. He decided to travel to the customer place, stay there for a few days and try and meet more people to access more information. He discussed with his boss and they agreed and off went in search of more information...or probably learning the ropes of enterprise sales.