Digitizing the banking distribution network consists of implementing the processes and systems that enable the customer to be a player in the banking relationship via digital devices during prospecting, acquisition (new relationship), development (multi-equipment, consumption of products and services owned) and building loyalty.
The terminals used in the digitization process are those of the bank and its customers.
The bank makes the prospect/customer the player in the relationship, either remotely or in proximity, using the channel of their choice (Internet, mobile application, telephone). It presents its products and services in this way so that the customer can purchase and use them autonomously. However the bank still offers the opportunity to call on its consulting expertise over the telephone or during an appointment if the customer so wishes; the bank also remains free to contact the customer on its own initiative to discuss the opportunities available to access new services.
In 2014, the digitization of the banking distribution network became the principal lever of recognition amongst banks, a commercial asset and a powerful criterion.
The advertising slogans of banks compete with each other to regain the trust of customers by exposing them directly to services and deals.
- BforBank “I am my own banker”
- Boursorama “The bank in tune with the times”
- Monabanq “People before the agent”
- Fortuneo “I love my bank, I’ve been a customer for 10 years”
- BNP Paribas “The bank for a changing world”
- Société générale “The leading bank for online customer relationships”
- Caisse d’épargne “100% human 100% online”
This new communication attempts to resolve the distance paradox caused by digitization (I am my own banker) by humanising this link (I love my bank). The major risk which banks need to resolve is that of the increasing volatility of customers, caused by the autonomy granted. The bank builds this new digital link by giving it a determining value to promote customer retention and development.
Digitization of prospecting
Banks invest in new digital territories to attract potential customers. On the Internet, serious games are multiplying for marketing purposes. Banks use their products and services in games to create value for the brand, establish the bank firmly in its time, and prove its creativity and proximity. The game enables traffic to be generated, attracts future customers, teaches customers how to buy banking services and promotes actions being taken and the purchase of a banking service, all the benefits of which it provides having been understood. Increasing numbers of banks are using social networks to remain connected with potential customers and existing customers at a place where these latter communicate between each other. Exposure on social networks is a double-edged sword for banks: positive virality which is potentially effective but which carries the risk of addressing a bad reputation.
Phygital (digitization of branches, union of physical and digital) is another prospecting approach aimed at working on the brand’s territory and attracting future customers in the very place where the bank is located: interactive walls, window screens facing outwards, in-branch machines to discover the advantages of the bank, to begin a new customer relationship, to make an appointment, to use the banking facilities freely.
The digital conquest
For a bank, the symbol of the conquest is the entering into a relationship with the opening of a first current account. Direct banks were the first to digitize new customer relationships for obvious reasons related to their organisation lacking in a physical network. For retail banks, digitization of new account applications has become a tool to win new business for new customers who are more comfortable using the Internet than making appointments to see an adviser in a bank branch.
Winning a new customer is an important step in initiating a sustainable and profitable relationship. The bank must know the potential customer (KYC requirement: know your customer) and assess the risk represented by them (solvency, fraud). The digital conquest approach means that there is no longer any physical support given to the relationship (appointments, paper documents). The interaction takes place over the Internet and the necessary documents are sent digitally.
The electronic signature is collected via a trusted third party who archives the contract with a probative value. The documentary evidence to be provided generally involves two forms of ID, proof of address, a handwritten specimen signature and proof of income. If an account is opened remotely, proof of another bank account is a prerequisite.
The applicant must provide proof that he or she already has a bank account in another institution (cheque or transfer from an account for which they are the named account holder), which excludes young potential customers from opening their first bank account.
The documentary conformity checks are carried out by an automatic image reading software package and, in the event of problems, by bank officials, connected to the flow of new applications via the Internet:
- Document verifications: document identification, concentration of pixels and template matching
- Conformity checks: verifications on external repositories, verifications of MRZ verification codes (Machine Readable Zone – zone containing the document’s data codification) for ID cards, passports and residence permits
- Completeness and accuracy checks: comparison between the declarative information collected at the beginning of the application process and the information that appears on the documentary evidence
Then come the checks carried out by the Banque de France, the central bank of France (banking suspension, cases of loan repayments to private individuals), performed automatically according to the search keys verified during the documentary check (name and date of birth as appears on the ID card). The account is opened as soon as the first transfer is received and collected by the bank.
Business development boosted by digital technology
As soon as a new relationship has been established with a customer, the bank devotes itself to developing its net banking income by cross-selling and up-selling, and by encouraging the purchase of products and services which generate banking commission.
The digitization of the banking relationship is based on the self-care set out in the customer-specific area on the Internet and on the mobile application rolled out across the various platforms on the market. For everyday banking, the tools available to the customer aim to remove any obstacles to the action: with 24/7 availability, the tools are simplified and use a language suited to the customer’s concerns.
The implementation of a personal financial management (PFM) tool marks the digital focus of the relationship.
The tool presents the accounts, balances and banking transactions in plain language understood by consumers: categories of expenditure and revenue, assets, budget, remittance… and gives graphical representations that make it possible to quickly understand the financial position and to make decisions: distribution of overall wealth, proportion of expenditure per category, curve of the change in the daily balance, bar chart of monthly budgets, budget consumption indicator, balance to be spent.
Front office API; the heart of digitization architecture
The overall architecture of customer-oriented services uses an omni-channel element that is generally represented by the front office API, which is responsible for all exchanges between the channels and the bank’s information system. The uniqueness of this element introduces the omni-channel notion into the digitization vocabulary.
As possible remote customer relationship channels have gradually appeared (telephone, Internet, mobile), banks have developed devices on each exchange system by applying a “multi-channel” deployment software. In principle, the banks agreed that it was important that the various channels communicate with each other, particularly in the case of processes that are not executed in real-time. “Cross-channel” or “mix-channel” projects then launched, which involved establishing break points in the processes, and sharing information about the processes performed on one channel to be able to possibly continue them on another channel. The new approaches to urbanising information systems propose the adoption of development principles which aim to pool the distribution applications for all customer/adviser channels. These new applications are called “omni-channel” applications.
Digitization requires efforts to simplify and ensure the security of services
For digitization to be successful, it is essential to facilitate access and use of services. Offering functionalities in a mobile application is necessarily accompanied by a simplification effort in order to be compatible with the specific use of the smartphone or tablet.
Digital banks are also constantly concerned with identification and authentication of remote users.
The control systems are implemented gradually according to the sensitivity of the action:
- low level: connection via an identifier and a secret code
- medium level: entry of an OTP code received by SMS
- high level: enrolment of the mobile as a personal physical terminal and transmission of notifications by push mobile.
The bank’s Risk manager produces the security matrix of functionalities in order to apply the appropriate control system according to the risk level.
Digital banks breed innovative projects
The digitization project is itself innovative by its speed of execution and cooperative mode adopted. A model for setting up a digital bank is planned over a 1-year period, including a 3-month test phase reserved for bank employees committed to testing the digital bank before it is made available to the public. The digital project is broken down into various streams that are handled simultaneously, which requires considerable coordination and strong leadership.
The bank’s statement of requirements describes the processes to be implemented to involve the customer as a player in the process. During the detailed specifications stage, certain rules are established, or even sacrificed in the interests of simplification. The detailed specifications phase of the digitization project is complicated by comparing the distribution processes envisaged, the future user’s experience and the technical capacity of the core banking service and front office API to take care of the expected functioning. The design teams must be constantly in contact with the business units (product marketing, process, operations) and with the architects of the computing solution to correctly specify the target system.
The digital project mode, over a deliberately short period, brings together all of the stakeholders on the same platform: business units (product marketing, communication, sales, legal, risk, operations), client, ISD, partners, project management. This proximity facilitates the collective mobilisation of the project and constant sharing of subjects to enable decisions to be made quickly. Visual management on the walls of the project platform makes it possible to showcase the teams, the progress of the work, the points under investigation and the schedules, which is likely to speed up the involvement of players in the project. “Stand up” meetings that take place in front of panels are quicker than using meeting rooms with media projected on a screen. Every effort is made to make swift progress and remove obstacles without delay.
Digitization is revolutionising the organisation and processes
The adviser personifies the front office of the bank. He or she welcomes prospective customers and advises customers, completes applications and performs certain actions on their behalf. By exposing the customer directly to application forms and operations, digitization relieves the adviser of some of his work. Digitization also changes the bank’s scheme of delegation as it opens up rights of actions to the customers themselves.
The adviser provides support, manages difficult situations, provides advice for complex projects and new means of customer knowledge. Providing advice requires customer knowledge that is all the more rich since the relationship is close: analysis of the customer’s activity in relation to their accounts and outside the bank, increasing the number of contacts, observing the behaviour of the customer’s peers. The adviser generally becomes more relationship-focussed than banking-focussed, even though they have to maintain a good level of expertise to find solutions. The need for accessibility is also changing. The frequency of interactions is declining as customers are acting for themselves.
But the need for contact can take place outside normal working hours: lunchtime, evenings and weekends. It is the responsibility of the banking network to organise itself to ensure relational permanence in synchronous mode during working hours (telephone calls, appointments) and in asynchronous mode the rest of the time (e-mail).