The customer experience challenge

Mark Bubar, VP Sales at CA, took time out from our recent summit to explain how banks can better position themselves to meet the needs of customers, with input from Tom Vicknair, Chairman of the FSTC.

Perhaps there is something in the air. For a while now it has seemed like the ‘hot-topics’ at any industry get-together have been dominated by what might be called ‘mechanical’ issues such as managing risk and compliance or security. If our recent FST summit was anything to go by though, the agenda is shifting back towards the question that ultimately underpins everything that any financial services institution hopes to achieve – how can my business make more money?

This is certainly the view of Mark Bubar from CA. And having worked in the financial services industry for over 20 years, and given that he heads up sales for a firm that already services 96 of the top 100 financial institutions in the world, he is an observer who brings some expertise. “The issue of the day is actually coming back towards the common sense of actually making money,” Bubar argued when we caught him at our recent summit. “Be it stockholders or boards of directors, they’re all looking for companies that can make money in a fair and honest way by returning value. Be it a bank, any brokerage, an insurance company, or diversified financial firm they are all facing up to this challenge.”

This is a refreshing change – after all, the executive who dreamt of tackling legislative compliance challenges at business school is a rare breed. However, if the industry as a whole is shaking off the shackles of meeting compliance needs it probably means that games have to be raised in terms of holding and growing market share and profits. “We believe the differentiating factor is something to do with customer experience,” Bubar argues. “My personal belief is that sometimes that answer is found in your ability to understand the issues of the customer and articulate answers.”

Changing landscape
This is a point-of-view echoed by Tom Vicknair. Vicknair is the Chairman of the Financial Services Technology Consortium (FSTC), and also finds time to head up JP Morgan’s Payment Strategy Group. His experience in the payment area is applicable to most other parts of the industry. “Our customers want to know all of their transactions, they’re expecting us to give them a holistic account of their debits and credits,” he told us.

The implication of this is the need for internal silos of the business to integrate information better, in order to present a unified view of customer accounts. A point taken up by Bubar: “There are companies out there that sell purely in a horizontal fashion,” he states. “A lot of research shows that those companies need to verticalize and understand the customer’s business better.”

It is a fair argument, and we asked him to expand on what he thought the crucial factors were in meeting the customer experience challenge. “The number one dimension is security,” he says. “If there is not security in the transaction, be it a physical or an electronic encounter, it is unlikely to be a transaction.” To illustrate he gives an example that will resonate with many of us – that of elderly or cautious friends or relatives who will still not do electronic transactions. “They won’t do electronic transactions because they essentially do not feel they’re secure.”

The second dimension is the actual efficiency of the transaction. “I don’t want a complex painful process. I want to be able to get in and get to where I want to go quickly,” Bubar argues. And the partner of efficiency is of course speed. “The customer wants speed from the time they log on to the time they get the responses, the time they get through on the phone,” he continues. There is no getting away from this basic truth – the customer expects and demands speed.

Speedy, efficient, secure payments. This on its own is a compelling offer. And on the ground it is an area in which the industry is always working on. Discussing the payments landscape, Vicknair predicted to us that in the next five years “90 percent of the checks we clear with other banks will be cleared electronically.” So change is definitely afoot.

And yet, shifting the needle on any of these points incurs cost. And in a commoditized market like financial services, a couple of fractions of a basis point on a loan rate can be the difference between acquiring a new customer or losing out to your competition.

This side of the challenge equation is not lost on Bubar, though he is bullish on the prospect of customers paying a premium for quality. “Customers don’t mind paying for a relationship, in fact, they expect to,” he suggests. “If they’re looking for a mortgage, they might be looking for the lowest possible mortgage – they certainly do not want to be paying the highest amount. But when paying for the overall relationship, in most cases, they don’t want to be paying the lowest amount either.”

So what is they do want? “They are after value for the money they spend – which for the institution means that the IT management must have a good handle on cost infrastructure.”

Demanding customers
It is often said that the customer is always right, but anyone who has worked in a customer-facing environment might include an addendum: the customer is always demanding. As Vicknair articulates it, this means one things for the financial services firms: “We’ve got to give our customers what they want.”

And what is it they do want? Part of the answer, suggests Bubar, is the feeling of working with a trusted partner. “As a customer myself, I would like the feeling that I’m dealing with an ethical and compliant partner,” he says, and this is a typical point of view. So getting the IT controls for operational risk management right is crucial.

But it is the action at the customer facing coal-face itself that will define the success or otherwise of each bank’s offer. And while modern technology has revolutionized the range of possible customer interactions, this has been a double-edged sword in some ways.

“Whether as a consumer, or as a wholesale customer, or as a partner, I now expect 24/7 service, 24 hours a day, anytime, anywhere, any place,” says Bubar. The need for workload automation is thus key to allowing a bank or brokerage to operate in this modern world. “For example,” he continues “the CIO in the trading environment loses a lot of sleep over the welfare of the traders. If the trader experience is upset for any reason the business is at risk.” The same ‘customer experience’ philosophy applies to the ‘trader experience’ – to provide for the best trader experience software is needed to balance mainframe and distributed jobs so that the workflow is even and on time. And as the recent turbulence in Japanese markets last spring shows, this issue has become a priority for the industry.

But its not just ‘always on’ service that the customer has come to expect. There is now an expectation in the market of a continual stream of innovation and new applications. A good example of this is the push to develop mobile payments. Elsewhere in these pages Illevia Ageenko from Wachovia talks about the Wachovia Mobile service it launched last year. And from the industry wide perspective, the FSTC has recently launched an initiative to help facilitate mobile payments.

Vicknair explains some of the thinking behind this initiative. “The whole philosophy of the FSTC is to solve common problems that need to be discussed at an industry level,” he says. Mobile is important for the FSTC because there is now a generation who don’t carry check books, but do carry cell phones. “When you talk to a younger customer they say ‘help me expand what I can do on my mobile phone’, so we think there is a good opportunity at an industry level – you don’t want a customer turned down at a certain merchant because they’re with a certain bank.”

Bubar comes at the issue of innovation from the perspective of a customer: “Every month I expect to see whatever is hottest that week coming out to me as a consumer or a wholesale customer. The financial institution has to be in the lead in bringing out these products.”

Meeting the challenge
To recap then, the challenge for financial services to grow and prosper in the coming years is to offer secure, fast and efficient payments and services, 24/7 365 days a year, while acting with the highest level of integrity and continually delighting the customer with new innovations and applications. All of course while keeping product costs at a level that, if not the best in the market, are competitive.

“As we see it, the big challenge for the financial services firms is to simplify, unify and manage their enterprise IT systems in a process that will move them to a customer centric architecture,” Bubar says. Indeed this is a challenge for every sector of enterprise – he explains how CA itself, which traditionally was structured on a geographic and product basis, put a huge investment 18 months ago into organizing itself as a vertical.

In the financial services space issues of enterprise organization are common across the industry. “In most cases financial institutions have multiple silos of legacy systems from the past – either they’ve grown through acquisition, or frankly they have just developed that way. And many times, despite what some customers might think, these silos are not connected,” says Bubar.

It’s a familiar analysis, so how does Bubar suggest shifting this architecture to the more customer-centric space that is necessary. “We have developed the philosophy of ‘Enterprise IT Management’. The essence of this philosophy is that it shows a way to link these silos and manage, secure and govern them at the same time. And that’s what we mean by architecturing for customer-centricity.”

Customer expectations
Tom Noyes has just left his role as the International Internet Head at Citigroup. In this role he was responsible for Global Direct Bank and Mobile Strategy outside of North America, owning the P&L for ‘remote channels’ across 27 major markets. FST picked his brains over how a global giant like Citi has faced up to meeting the ever-changing demands of its international clients.

FST. You’ve just left a role in which you were responsible for global internet services. How do you see the market developing?
TN. Citi is largely an affluent bank outside of the US, so PC/Browser was the predominant interface for most of our users, and the mobile phone is the primary internet channel for most non affluent customers in the world. This makes mobile an important channel for Citi as the mass market for retail banking services is expected to grow between 500 million and 800 million customers during the next 10 years.

Generally customer expectations of the “remote channel” are moving from service to transact – the customer’s ability to instantly pay and move money any time and anywhere, securely. So going forward I’d talk more about ‘remote’ banking services rather than online, which seems to imply a PC. Customers are also forming online communities, and web 2.0 services are becoming more prevalent.

Customer behavior is changing, expectations are changing, online communities are developing, demographics are changing, and competition is increasing. Banks need to deliver the best customer experience through remote channels in order to grow the business. Online must become the preferred customer channel because it is awfully hard to build the branches to support the mass market growth.

FST. In what ways do global banks like Citi leverage the online channel for areas of customer satisfaction?
TN. Convenience. Solving customer problems with technology. Responding to customer requests as fast as possible with an emphasis on proactive communication. Making customers aware of changes in their accounts.

The retail banking business is growing tremendously. People that had very little access to credit in emerging markets now have credit available. The amount of assets within the affluent population is also growing tremendously. Citi has the widest footprint of any bank, in terms of products, customers and locations. Its challenge, as for any bank, is to leverage its global excellence in each local market to deliver the excellent service each individual customer deserves.

FST. How is technology playing its part in helping to achieve a better customer experience and what future developments on the horizon are you excited about?
TN. Technology is a tool to meet customer needs. The most exciting thing is that customer needs and behavior are changing at a rate never seen before in the industry. Taking into account the needs of new retail markets like China and we have a constant quest to learn what we can do to improve the lives of our customers.