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Self-Service or Fully Assisted - A Middle Path Holds the Answer to Banking Innovation

Self-Service or Fully Assisted - A Middle Path Holds the Answer to Banking Innovation

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Published by Infosys
Banks have traditionally reached their customers through branches. Thanks to improvement in communication technology and innovation, they now have several ways to contact their customers. Customers now have the option of accessing their bank accounts through Internet, mobile, telephone, ATM and of course, the time-tested branch. Channel diversity is no longer a differentiators, but rather a hygiene factor, expected by every customer and provided by most banks.

The whitepaper discusses why and when banks must adopt an innovative Video banking channel - should it be an early adopter or should banks take the wait and watch approach?
Banks have traditionally reached their customers through branches. Thanks to improvement in communication technology and innovation, they now have several ways to contact their customers. Customers now have the option of accessing their bank accounts through Internet, mobile, telephone, ATM and of course, the time-tested branch. Channel diversity is no longer a differentiators, but rather a hygiene factor, expected by every customer and provided by most banks.

The whitepaper discusses why and when banks must adopt an innovative Video banking channel - should it be an early adopter or should banks take the wait and watch approach?

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Categories:Business/Law, Finance
Published by: Infosys on May 10, 2012
Copyright:Attribution Non-commercial

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05/10/2012

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Self-service or Fully Assisted
 –
 A Middle Path Holds the Answer 
Universal Banking Solution System Integration Consulting Business Process Outsourcing 
 
 
Banks have traditionally reached their customersthrough branches. Thanks to improvement incommunication technology and innovation, theynow have several ways to contact their customers.Communication and servicing models haveevolved to a great extent, and will continue to doso in the future. Customers now have the option ofaccessing their bank accounts through Internet,mobile, telephone, ATM and of course, thetime-tested branch. Channel diversity is no longera differentiator, but rather a hygiene factor,expected by every customer and provided by mostbanks. Self-Service v/s Fully Assisted
 –
The Debate Continues Self-service channels have enjoyed widespreadadoption by customers. The usage ofInternetbanking in U.S. households is expected to grow  22 percent between 2009 and 2014, while theuptake in U.K. is expected to increase 37 percentfrom its 2007 levels by 2012
1,2,3
. Similarly, mobilebanking is expected to have 108 million users inthe U.S. in 2012, up more than tenfold from thecurrent 10 million
4
. It has also been found that 1 in 7 adult Britons banked using mobile phones
5
. The innovation in banking self-service channels isbeing driven by Generation Y, which ischaracterized by its affinity for new technologies.But in the past, banks were not able to effectivelyuse these channels to cross sell or acquire newcustomers, since they lacked the personal touchwhich the branches provided. It was believed that branch infrastructure wouldbecome outmoded with the evolution ofself-service channels. It was also expected thatbanks would cut costs by extending several lowcost self-service channels and going slow onbuilding expensive branch infrastructure. But theevidence is to the contrary. In the U.S. forexample, the number of branches increased by 58percent between 1991 and 2008, while the totalnumber of institutions fell by 41 percent during thesame period
6
. It is obvious that banks stillconsider this to be a significant channel. Branches play an important role in cross selling,right selling, loan origination and the provision ofwealth management/investment advisory services,to name just a few. This channel continues to bethe main revenue driver for banks and hence,remains a key area of focus. A recent research shows that although customers use self-servicechannels to conduct repetitive and simple taskslike paying bills and making transfers, they preferthe security and immediacy of a face to facebranch interaction when depositing funds
7
. The challenge faced by banks today is tomaximize the benefits of both self-service and fullyassisted channels, while minimizing costs.Although branches are more effective in revenuegeneration activities, they are cost intensive.Contrary to this, self-service channels are costeffective but not very effective in generatingrevenue. Video Banking
 –
The Answer Video bankingcombines the benefits of bothself-service and fully assisted channels. Itpresents a middle path which provides banks withavenues to improve customer service and conductadvised selling. It also offers customers theconvenience of banking at their own pace andplace. Imagine that while shopping for a car, oneparticular model takes your fancy. The dealer hasa tie-up with a bank and makes an offer on a loan.But, you would like to check with your bank onyour eligibility and the interest rates they areoffering. All you need to do is to contact an advisorthroughInternet banking and obtain all the necessary details in a face to face discussion.Thanks to technology, it is indeed possible to doso. Banks are slowly waking up to the third option -media conferencing between an impersonalself-service channel and a personalized branchbanking experience. Currently, there are severalbanks which use video banking as an advisorychannel - New England Credit Union in Australia,Rabobank in Netherlands, Barclays in U.K. andBanc Sabadell in Spain to name a few. Thesebanks use video banking on a variety of channelsto reach their customers. Video banking need not be restricted tonon-financial transactions and customer serviceand can open up a whole new world ofopportunities when provided via a kiosk. Thischannel provides numerous advantages both tothe customer and the bank. 
 
Self-service
or
Fully Assisted
 –
 
A
 
Middle
Path
Holds the
Answer 
 
 
Bank at your own pace, without compromising onpersonal touch Video banking provides the true
‘Anytime
Anywhere
 Anyplace’
banking experience,whereby a customer can reach a bank
srepresentative at his convenience. Video bankingcan be made available through the bank
swebsite,Internet banking site,mobile banking  service or kiosk network. Better utilization of experts Typically, when a customer walks in with a requestwhich requires expert advice (for example,mortgage loans, wealth management services),he or she is asked to come back in the future witha prior appointment. Alternatively, an expert visitsthe customer. This model has two drawbacks - it isnot convenient for the customer and is not efficientfor the expert, who is forced to waste timetravelling. Research indicates that only 30 percentof customers who are requested to come backactually do. This means that banks stand to lose 70 percent of such customers if the expert is notavailable
1,2,3
. The only other option is to staff eachbranch with experts, available full time. Video banking ensures that both these issues aremitigated. Banks can have a central pool ofadvisors catering to all branches, at a fraction ofthe cost of manning each separately. Also, since itensures that the request is met immediately,there
s a lower risk of losing the customer. A medium to cross sell and right sell Though self-service channels provide ampleopportunity to cross and right sell, they lack thepersonal touch of a branch. A manager at a branchhas the ability to assess a customer
srequirement, anticipate future needs as well asgauge the customer
s willingness to listen. All thisis possible only in a face to face interaction. Videobanking enables the service representative to doall of the above over various self-servicechannels, an option till date closed for banks. Help target new customers, new generations The video banking channel caters to therequirements of Generation Y. A survey conductedshows that while this generation likes to receiveadvice, it would rather get it by way of video conference (40 percent of Gen Y respondentswere interested in receiving advice by way of avideo conference). This generation constitutes thefuture customer base for banks and hence, theirrequirements cannot be ignored. Video bankingcould also be an effective medium to attract andretain new customers. Say, for example, thatsomeone who is not a customer wishes towithdraw cash from a bank
s ATM. While doing so,a new deposit product catches his attention. Ifthere is a video banking option, the prospect canspeak to a bank representative, obtain all thenecessary details and even initiate the originationprocess right away! Competitive advantage through differentiatedservice offering The banking industry is highly competitive anddifferentiation holds the key to survival. Videobanking could provide such differentiation byextending personalized service to existingcustomers and increasing customer satisfaction.Also, this can be used as an effective tool to caterto the needs of high net worth and overseasclients. Inclusion tool This solution can help banks reach theunbanked/under-banked communities in far flungregions. This model is being used successfully byNew England Credit Union in Australia. Setting upa full-fledged branch in a far flung region may notbe a viable option for a bank. Instead, a branchwith skeletal staff and video banking capabilityproviding access to experts situated elsewherewould be an ideal solution. Bridging the communication barrier This channel could be utilized as a tool to bridgethe language barrier. For example, a bank inChina could centralize its English-speaking tellersand extend their linguistic skills to all branchesthrough video banking. This could help theEnglish-speaking expatriate customers of thebank access their accounts with minimumdifficulty from any branch. A training/communication tool Video can be used to conduct internal training orcommunication sessions for employees, therebysaving their cost of travel. 
 
Self-service
or
Fully Assisted
 –
 
A
 
Middle
Path
Holds the
Answer 

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