While Sacha is casually browsing mortgage deals on her bank app, the chatbot sends an alert asking, “Did you know that 80 percent of customers who have recently taken out one of our mortgages would recommend us to a friend?” Sacha types, “Tell me more,” and receives a link to a mortgage calculator that helps her understand what she can afford.
Not long after, Sacha finds her dream home and needs a mortgage to seal the deal. She opens the bank app, scans in a code from the real-estate listing, and clicks “Get mortgage options.” She sees three personalized offers and clicks on one of them. A human-like conversational chatbot asks whether she prefers to submit her application online, video-call a remote adviser, or meet an adviser in person. Using the app’s live calendar, Sacha books an appointment at her nearest branch and receives a confirmation with a photo and profile of her adviser, Steven.
Two days later, Sacha checks into the branch via the app and meets Steven, who shows her a digital simulation of the mortgage journey and answers her questions. Happy with the process, Sacha e-signs the mortgage application using the app’s biometric verification. Next day, Stephen messages her with great news: her application has been approved. Soon after, the bank sends her discounts for three local moving companies and a click-and-go home insurance offer that exactly fits her new living situation.
This smooth and swift journey exemplifies a new distribution model for retail banking: one that positions mobile as the orchestrator promoting conversational customer engagement and integrating digital and human interactions so seamlessly that channels as we have always known them cease to exist. Taking their inspiration from consumer companies and retailers, banks experimenting with this model have seen impressive early results, including a doubling in digital sales, a threefold increase in cross-sell, a 40 percent rise in customer activity, and the elevation of customer experience from a middle ranking to top quartile.1 And in an industry where distribution accounts for a hefty 20 to 25 percent of operating costs, there are considerable savings to be made; one bank reduced its cost to serve by two-thirds.
Achieving such dramatic performance improvements is attractive. To do it, banks need to break free from legacy biases and take a clean-sheet and customer-centric approach, leveraging new technologies such as artificial intelligence, to radically rethink their customer interactions, reimagine the role of mobile, reevaluate bankers’ roles, and redraw their channel landscape.
Tackling distribution pain points
As banks’ distribution models have evolved over time (Exhibit 1), the challenge of orchestrating customer interactions across channels has greatly increased. A typical large bank today is likely to have a call center for voice, branches for in-person interactions, a sales force for mortgages, relationship managers for key customer segments, a mobile app, internet banking, and a website. To facilitate the flow of customer data and foster collaboration across silos, it has detailed key performance indicators (KPIs), carefully engineered processes and governance mechanisms, and advanced customer relationship management (CRM) solutions. Now imagine the bank is introducing a remote advisory service. It adds a new channel, criteria for determining the clients served, customer ownership, revised KPIs to prevent competition between video hub and branches, modified CRM solutions, an additional employee interface, and new adviser roles.
This complexity multiplies every time a bank adds a new channel to the mix, increasing costs and time to market. As channels expand, customers also may struggle. They may find it harder to choose the right interaction mode for their needs, get stuck in ping-pong between channels, and lose track of the status and ownership of their requests. In some cases, they may abandon their customer journeys altogether. These challenges can only intensify over time as new channels such as the metaverse and AI-enabled virtual assistants enter the mainstream.
Solving the distribution challenge: The integrated-channels model
Although customer interactions in banking, as in many other industries, are shifting to digital—and especially mobile—channels, human interactions remain critical. Our research indicates that a significant number of customers seek out and value human interactions and that these interactions also continue to make a considerable contribution to banks’ sales.2 Getting distribution right involves guiding customers to the form of interaction that best meets their need, adapting to it, personalizing it, and turning it into a distinctive and satisfying experience.
To manage this complexity, banks can establish an integrated-channels model. This model combines a truly customer-centered approach with a radically simplified client service setup.
The mobile app evolves to become not just a channel but the primary customer interface. Customers use the app not only to buy any product or resolve any issue but also to access human support at any time and oversee all their journeys and bank communication in one place. The app helps banks to internally orchestrate touchpoints along entire customer journeys, obtain a 360-degree view of each customer, improve tracking along the sales funnel, and provide a better customer experience while optimizing sales productivity and cost per interaction.
Bankers and physical locations take on new roles. Universal bankers offer advisory services across the full portfolio of products, switching between voice, video, and in-person interactions as per customer need without handovers. Working from regional advisory hubs, they proactively reach out to offer customers personalized insights and advice, mainly work on scheduled appointments, and selectively deal with walk-ins. These redefined roles increase bankers’ job satisfaction and help banks access and retain regional talent and use their expertise productively while integrating branches, outbound elements of the contact center, and remote hub in one lean human channel.
Artificial intelligence, smart data, and predictive models power the app and enable bankers to develop targeted campaigns and offer customers personalized interactions, insights, and suggestions. Through smart data modeling, banks can predict as well as track customers’ needs and offer them timely advice tailored to upcoming life events such as entering employment, starting a family, or retiring.
A new operating model based on interaction modes rather than channels allows banks to offer customers more choice and flexibility while also simplifying user interfaces, back-end processes, CRM systems, and supporting technologies. With the app at the heart of operations, banks can slim down contact centers and branches, streamline their organization structure, simplify performance management, and minimize channel conflict.
To implement this new model, banks need to make four major shifts: moving the mobile app to the center of customer interaction, changing the role of human interactions, advancing their use of data and analytics, and putting the customer at the center of the operating model.
Shift 1: Make the mobile app the core customer interface for everything
As customers use their smartphones to organize more and more aspects of their lives, a cutting-edge app will become a bank’s primary tool for orchestrating journeys and differentiating itself from competitors. Achieving this requires several actions:
- Double down on in-app service and sales excellence. Customers should be able to resolve any query, satisfy any service need, and buy any product simply by using the app. As well as providing this enhanced functionality, leading banks will use their app to send customers personalized messages, insights, and offers, boosting lead generation, cross-selling, and up-selling. One mortgage lender is reengineering its mortgage journey around mobile as the engine for offering comparison and issuance, execution (including real-time document uploads), and post-sales service. Customers seeking human support can video-call an adviser at any point in their journey.
- Treat the app as the bank’s central nervous system, governing all customer communications and journeys. Suppose a customer is booking an advisory meeting. The app asks about the customer’s specific needs, links the customer to a suitable banker, confirms the appointment, and advises the customer of any documents they need to bring or upload. After the meeting, the app records agreements made, follow-up appointments, and other next steps, such as retargeting efforts. This helps customers keep track of their request, understand the bank’s process, and stay engaged. At the same time, it enables bankers to prepare for meetings, makes them more effective, and reduces no-shows.
- Humanize the app by adding intuitive features to deepen customers’ emotional engagement. These features could include human-like conversational chats; a button customers can click to call a banker; straight-through video connection; appointment confirmations with the name, photo, and bio of the banker; and even personalized virtual relationship managers. One large European bank is considering replacing computer-generated text with voice recordings to give its chatbot a more human touch.
Banks could also consider opening up their apps to third-party providers with complementary offerings to meet broader customer needs. One southern European bank has progressed from offering car loans to engaging actively in car sales, for instance. Participating in these ecosystems enables banks to make their app a one-stop shop for customers who want to make major purchases as well as finance them. Some of the customer services and employee functions such an app can offer already exist in today’s markets at varying levels of maturity (Exhibit 2).
Shift 2: Rethink human interactions, bankers’ roles, and physical locations
Although face-to-face contact is declining (banks closed 9 percent of their branches in 20213), about a fifth of customers still value human interactions for the personal expertise, social contact, or dialogue they offer.4 Moreover, these interactions are often associated with complex, high-margin products that create considerable value for banks. By repurposing human channels and powering them with digital elements, banks can enhance proactive advisory to drive growth. This involves the following key steps:
- Adopt a “one banker” profile. Equipping bankers to work across voice, video, and in-person advisory services and a wide range of products enables them to create a flexible, integrated customer experience without handovers. McKinsey research shows that this shift is already under way, with the number of branch-based universal bankers having increased by 48 percent since 2017. When one European bank introduced universal personal bankers across its branch service operations, front of house, and call centers, it saw a 30 percent increase in customer satisfaction for voice calls routed through these bankers.
- Upgrade key locations to multidisciplinary regional hubs. Leading banks are ditching traditional distinctions between branch, voice, and video channels and consolidating expertise in advisory-focused hubs to enhance customer experience, make better use of regional talent, work mainly on scheduled appointment, and drastically improve productivity. They are closing some branches while substantially upgrading the “core” to attractive hubs. One European bank transformed 60 of its 240 branches into advisory houses where customers can seek help with complex financial matters, have a coffee, and even work for a while. It has seen a 25 percent improvement in customer satisfaction, a 60 percent increase in high-value advice traffic, and a doubling of sales in key product journeys, all while reducing the total number of branches by 45 percent over three years.
- Radically rethink and resize the physical footprint. A bank with its app at the heart of customer interactions and hubs for advice and complex sales can usually reduce its physical presence. However, it still needs to cater to customers who dislike using the app, get stuck in digital journeys, or have specific needs or limitations to travel. To complement their digital presence, some leading banks are creating “satellites” of mini-branches or independent agents that cluster around hubs and offer walk-in customers limited manual services along with education to help close the digital adoption gap. Not only does this approach create a more flexible footprint, it also can deliver considerable savings: the annual cost of an agent can be as little as 10 to 20 percent of a bank-owned branch. By following this approach, two major European banks have been able to maintain a presence in rural areas that other banks are leaving.
- Accelerate growth by scaling up remote advisory. Remote advice via voice or video is a service that customers highly appreciate. For banks, this capability is a growth engine and a productive way to make the most of regional banking talent. Typically, banks start by experimenting with different approaches for a sample product or customer segment to learn and improve. Then they integrate the new capabilities into bankers’ profiles to achieve network-wide impact. When one global bank launched a remote service that offers investment and wealth-protection advice to high-potential customers, it reached 30 percent more customers than before. Relationship managers use an advanced-analytics engine to identify prospects and craft customized offers.
Shift 3: Embrace smart data enablement
Successful banks are deploying artificial intelligence, data, analytics, and predictive models to power personalization, optimize customer experience and value, and “smarten up” their mobile app and human bankers. They cultivate a smart “brain” by building a central data-modeling and AI capability to predict needs, fuel the app and bankers with customer insights and leads, inform smart routing, and match customers with bankers. Using micro-segmentation techniques, leading banks create detailed personas that predict customers’ preferred interaction modes and products. To monitor performance, they track differences in customer lifetime value by persona, channel, and cost to serve. With data from multiple sources coordinated via an orchestration layer, banks can create a single source of truth, direct each customer to the channel that suits them best, and optimize interactions.
Shift 4: Adopt a customer-centered operating model
Readily available smart data and overall simplification of the operating model will free up more time for customer-facing activities. To realize the full benefits of the added resources, banks should establish a customer-centered operating model in the following two ways:
- Drastically simplify the bank’s operating model. To facilitate integration and foster a collaborative culture, digital and human channels should share the same KPIs. Some banks even create a new role, chief distribution officer, to lead both channels. This enables banks to direct resources into optimizing the interplay between digital and human channels to create the best possible customer experience. After one bank introduced a hub and satellite model and a new one-banker profile, it was able to delayer its regional organization and reduce managerial roles by half.
- Centralize where possible and regionalize where needed. Banks’ traditional model—each branch “owning” a P&L and local customers—can hamper digitization and spur competition between channels. By centralizing the ownership of customer data, customer-experience design, and P&Ls, a bank can harmonize channels, reduce complexity, and free up time. Bankers can then focus on doing what only humans can do: using their empathy and expertise to reach out proactively and generate high-value interactions, provide tailored advice, and turn more scarce human interactions into memorable moments of truth that bring meaning and value to both customer and bank.
Shifting from an omnichannel model to fully mobile orchestrated, integrated channels enables banks to achieve genuine differentiation through an innovative and personalized customer experience. Leading institutions are already unlocking the value from greater customer satisfaction and loyalty, simplified operations, optimized investments, higher productivity, increased revenues, and faster growth. Now is the time for others to follow their example.