Zenmonics View The banking industry is burdened with technology decisions that ultimately end up requiring all resources to maintain brittle point solutions across the enterprise and prevent the bank from focusing on innovation and differentiation. The banks that evolve from this legacy thinking and onto open platforms will survive in the digital age Managing Director - Top 20 Bank Banks need to avoid the trap of solving myopic needs that impede the customer relationship. Digital Transformation is about the enterprise and how complete customer journeys are cultivated across channels. Digital Executive - Top 50 Bank Financial Institutions have had to carry the burden for a while in going through annual initiatives, RFPs, and evaluations of point solution after point solution to solve their enterprise needs; then being left with disparate applications that require the bank to find a way to interface in a cohesive manner; and ultimately maintain the cob web of these legacy applications while attempting to deliver business innovation to retain and grow customers. This leaves bank technology executives with the question of How to execute a better digital strategy that eliminates our point solution technical debt?. For the business executives at the bank, their ask is How can we provide a seamless user experience for both customers and our associates across all digital end points, not just online and mobile?. The financial industry's digital landscape continues to evolve rapidly as the customer experience now expands to accommodate every touch point the financial institution may have with their customers, whether online, through an app, a conversion via the contact center, an in-branch activity or remote social setting. The ability to maintain a continuous, personalized engagement with your customers is critical whether your financial institution is reducing or expanding your branch footprint, advancing your contact center, rolling out automated in-branch kiosks, or opening financial advisory centers. Your customers expect that regardless of their interaction preference, there is a continuous persistence of information that is readily available to both them and your associates to assist them through their journey. Technology must be provided that no longer attempts to solve narrow use cases for one or two channels, placing the burden on the bank. These point solution can become brittle and the bank s burden to maintain separate systems ultimately puts the burden on the customer with the customer having to restart conversations between bank associates, re-enter data between channels, be forced into a single channel for a certain transaction and decipher multiple interfaces for common activities. We hope this study will provide you with insights to mature your digital transformation approach to benefit both your associates and your customers. Riaz Syed CEO and Founder Zenmonics
DELIVERING AN OMNICHANNEL CUSTOMER EXPERIENCE WHY A SINGLE PLATFORM IS THE WAY FORWARD Bob Meara June 8, 2017 This report was commissioned by Zenmonics, at whose request Celent developed this research. The analysis, conclusions, and opinions are Celent's alone, and Zenmonics had no editorial control over the report contents.
CONTENTS Executive Summary... 1 Key Research Questions... 1 Recommendations... 2 Defining Omnichannel... 4 Banking in a Broader Ecosystem... 6 Digital s Ascendency... 6 The Promise of Omnichannel... 9 The Promise for Customers... 11 The Promise for Financial Institutions... 14 State of Omnichannel Banking in North America... 17 Baby Steps: Unified Digital Platforms... 18 The Case for a Single Customer Experience Platform... 21 Nominal Customer Experience Platform Capabilities... 23 Recommendations... 25 Leveraging Celent s Expertise... 26 Support for Financial Institutions... 26 Support for Vendors... 26 Related Celent Research... 27
EXECUTIVE SUMMARY Retail banking, like the broader retail industry, is at an inflection point a reset moment triggered by consumers broad and rapid adoption of smart mobile devices and their propensity to use them for a growing number of tasks. In this environment, consumers (and even your bank associates) make less of a distinction, if any, between channels. Instead, large and growing segments of consumers expect an integrated engagement experience with retailers, one that bridges the digital and physical domains. Delivering on this expectation is the core challenge of omnichannel banking. To say This is easier said than done would be an egregious understatement. Celent advocates the migration toward a single, omnichannel customer experience platform that spans self-service and assisted access points, but recognizes the path forward for many banks will be a long one that includes multiple, incremental initiatives. This report argues for that outcome, outlines a rationale, and shows how many banks are already moving in that direction. KEY RESEARCH QUESTIONS What is the 1 difference between omnichannel delivery and digital transformation? How ready are 2 institutions to 3 deliver omnichannel customer engagement? What are the arguments for a single omnichannel customer experience platform? Omnichannel Delivery Is a Key Component of What It Means to Be a Digital Bank. In Celent s view, omnichannel delivery is a necessary but not sufficient capability for becoming a digital bank. Plenty of banks have invested in analytics and automation, for example, but have leveraged those investments within channel silos. Marketing automation tied to a bank s public domain web site is one example. Conversely, digital is not strictly required for omnichannel delivery, but it is increasingly required to do omnichannel well. The distinction may appear nuanced, but it is important. Digital is fragmenting and diversifying customer experiences as customers engage with more apps, websites, and bots, even using them in physical locations. In order to stay relevant, an institution now needs to go to where its customers are and be available when customers need it. Digital is increasingly involved in doing so. Digital s ascendency is a direct result of changing customer expectations and is important for at least three reasons. 1. The digital environment moves fast. By definition then, so must institutions omnichannel delivery capability. Doing so is virtually impossible for banks that continue to operate multiple, siloed channel technology stacks. 2. Digital is defining customer expectations. A mobile-first approach is necessary, but no longer sufficient. In addition to the user interface layer, business processes and products will need to simplify and automate in order to keep up with changing customer expectations.
3. Digital goes beyond the traditional consumer-facing applications and now transcends the enterprise, meaning a digitally integrated branch, contact center, kiosks, and mobile workforce to streamline and automate processes to alleviate putting the burden on the customer. These implications of digital s ascendency must influence how banks architect for omnichannel delivery. Omnichannel Delivery Remains Aspirational at Most Institutions. Celent surveyed North American financial institutions in December 2016 to understand the state and likely evolution of retail channel delivery systems. 1 Given the complexities of omnichannel delivery and the state of legacy systems in most institutions, it is no surprise that few, if any, claim to have arrived. But, the situation is worse only a small minority of institutions has even begun executing an omnichannel strategy! Less than one in ten institutions are close to omnichannel delivery. The majority have not yet even begun executing on a plan to get there. Since omnichannel is a journey, not a once-and-done initiative, it is useful to examine how institutions intend to get to omnichannel in the near-term (or more realistically, get closer to omnichannel). A minority of banks are taking steps. Celent s December 2016 survey found the two initiatives either in place or deemed most likely by the most institutions are: Migrate to a single digital technology stack (26% in place, 22% highly likely), and Implement an omnichannel customer acquisition / onboarding system (2% in place, 30% highly likely) Understandably, more institutions seem resigned to keep at least some legacy channel systems in place for the short term. The idea of a unified channel platform for the enterprise may be conceptually elegant, but just 10% of surveyed banks view that outcome as highly likely in the next three years. How then to get to omnichannel? The Case for Omnichannel Customer Experience Platforms Above all, institutions should begin with the end in mind, while prioritizing initiatives based on short-term business objectives. Omnichannel customer experience platforms (CXPs) offer an excellent way to do this. Creating an omnichannel customer experience from the patchwork of legacy systems that define most banks technology infrastructure is no easy task. Legacy technology can be an inhibitor for omnichannel delivery as well as the larger challenge of digital transformation (DX), because it restricts functionality as well as speed and is often overly complex and costly. As these massive and complex undertakings are approached, institutions are left with two basic paths rip and replace or renovate progressively. Celent sees progressive renovation as the obvious path of choice for most institutions built on an omnichannel CXP. Above all, institutions should begin with the end in mind, while prioritizing initiatives based on short-term business objectives. Omnichannel CXPs (defined later in the report) offer an excellent way to do this. RECOMMENDATIONS Omnichannel delivery is not an easy proposition to provide. Implementing point solutions along the journey can be costly and delay much-needed improvements in capability, work process, and cost reduction. On top of that, the vendor marketplace is a noisy one, with all manner of approaches confidently advocated. Worse still, precious few institutions 1 A complete analysis of survey results is contained in the Celent report, A Survey of Retail Banking Channel Systems in North America: Omnichannel Emerges, February 2017 Chapter: Executive Summary 2
can offer case studies of substantive omnichannel delivery because so few have made it there. In consideration of these constraints, Celent offers the following recommendations: Begin with the end in mind. Celent s research suggests that too many institutions are solving for proximate pain points without careful consideration for the impact of these decisions in the longer term. Synchronize with digital transformation efforts. Omnichannel and digital are two sides of the same coin. Treat them accordingly. No channel initiative should be funded or implemented apart from a larger omnichannel context, and no omnichannel initiative should be apart from the larger digital context. Take swift action and aim for quick wins. If your institution does not have a codified omnichannel strategy, get on with it! Bite off small projects that have comparably broad support to demonstrate immediate value and silence the curmudgeons in your organization. This report begins with a much-needed definition of omnichannel, including differentiating omnichannel delivery from the larger ambition of digital transformation (DX). It then looks at why omnichannel delivery is such a big deal, explaining the promise for both consumers and financial institutions when omnichannel is done well. The industry s fledgling capability is covered next, drawing on a December 2016 survey of North American financial institutions. The report then makes a case for the use of an omnichannel CXP as the preferred mechanism to transform legacy technical architectures into the nimble platforms banks urgently need, without massive rip and replace and the high cost and lengthy projects that approach requires. Chapter: Executive Summary 3
DEFINING OMNICHANNEL Two terms have pervaded the financial services lexicon in recent years: digital and omnichannel. Both terms are ill-defined, leaving ample room for confusion. At Celent, we view omnichannel delivery as a key element of the digital transformation (DX) all financial institutions will be forced to address if they are not doing so already. Are digital and omnichannel synonymous? Not exactly. In Celent s view, omnichannel delivery is a necessary but not sufficient capability for becoming a digital bank. Plenty of banks have invested in analytics and automation, for example, but have leveraged those investments within channel silos. Marketing automation tied to a bank s public domain website is one example. Conversely, digital is not strictly required for omnichannel delivery, but it is increasingly required to do omnichannel well. The distinction may appear nuanced, but it is important. Celent views digital in banking as much more than perfecting one s digital presence. We believe that digital requires substantive structural change in the financial institution across multiple elements: culture, organization, IT, products, and governance. It also requires change in how work gets done, through the systematic use of automation and analytics in front, middle, and back office work. Celent s framework for digital in banking is depicted in Figure 1. A full discussion of the framework is found in the Celent report, Defining a Digital Financial Institution: What Digital Means in Banking, December 2014. Figure 1: Celent s Framework for Digital/Omnichannel Source: Celent While arguably simplistic, the essence of omnichannel retail delivery is firmly tied to the customer experience highlighted in Figure 1, Delivering a customized but consistent FI brand experience to customers across all channels and points of interaction. This is important because although banks may currently think and organize around channels, customers do not. They reasonably expect the brand experience to be consistent no matter how they interact with their bank or credit union. Doing so involves at least three things illustrated in Figure 2 on the next page: Chapter: Defining Omnichannel 4
1. Optimizing each channel individually. 2. Delivering on the omnichannel customer promise. 3. Recognizing that customers increasingly engage with banking services in a broader ecosystem. Figure 2: Three Imperatives for Omnichannel Customer Experience Source: Celent Optimizing Each Channel Individually This need does not disappear with aspirations for omnichannel delivery. Each channel still must be optimized. Examples abound: optimum branch channel composition and density, ATM density and capability, digital channel capabilities, social media integration, and more. None of this is new. However, what is new is the proliferation of access points and the imperative to accommodate how customers prefer to interact with the bank in an increasingly digital world. The complicating factor is also that the transformation of individual channels needs to happen in the context of all channels, so that they collectively deliver on the omnichannel promise our second channel management imperative. An important component of this is optimizing the mix of channels collectively, at the same time as optimizing them individually. This process may involve conflicts that will need to be resolved iteratively. And, like other aspects of omnichannel delivery, individual channel optimization will be a moving target. Delivering on the Omnichannel Promise Delivering a customized but consistent FI brand experience to customers across all channels and points of interaction is not a once-and-done proposition, but something that will continually evolve with consumers changing preferences and expectations. Keeping up involves rigorous ongoing effort, as banks customer journey mapping initiatives have revealed. However, Celent sees three transcendent requirements: Zero drop rate channel integration. The customer should be able to move seamlessly between different channels, such as picking up a previously saved application process or having an agent conversation in session without having to reauthenticate or re-enter and repeat data. Customers expect that any transaction they perform is known to the FI. Optimizing a cross-channel experience by building on individual channel strengths. We recognize that each channel is different. The way the customer engages with, say, mobile is different from interactions at the branch or call center. As a result, we don t think that all channels must offer the same functionality or even access the same information in all cases. Instead, we believe customer experience via an individual channel should be tailored to its strengths. For example, an investor may want a timely alert and ability to act on that information (e.g., sell/buy shares) on his mobile but is more likely to prefer online and physical channels for in-depth research. Chapter: Defining Omnichannel 5
Mutually reinforcing channels (for example, a live video chat from within a mobile banking app or an automated kiosk inside a branch). Creative use of digital technologies in physical channels is an essential component of omnichannel delivery. This too will be a moving target. Examples include video teller access within a branch, enabling new account funding or bill pay from a kiosk, and cardless cash access at the ATM. These three transcendent requirements highlight the importance of real time information and consistency of data across channels, delivering a single version of truth across all customer touchpoints both externally to the customer and internally to front line staff. Not only must messaging, branding, and processes be consistent across channels, but so must the data. This is particularly difficult when nearly every channel runs on its own technology stack. BANKING IN A BROADER ECOSYSTEM The third omnichannel imperative is the need to recognize and accommodate customers increasing engagement with banking services in a broader ecosystem. This requires enabling access to banking products and services via third party channels and applications, typically through API integration. Examples include: Access to payment credentials or lending from within a merchant s app. Linking to a bank s mortgage application within a real estate app, or a car loan application within a car buying app. USAA s car buying service offered within its mobile app. Payment integration within the Uber app. Card-linked merchant offers delivered through bank s digital channels. Digital is fragmenting and diversifying customer experiences as customers engage with more apps and websites and even use them in physical locations. In order to stay relevant, an institution now needs to go to where its customers are and be available when customers need it. Digital is increasingly involved in doing so. Key Research Question 1 What is the difference between omnichannel delivery and digital transformation? Omnichannel delivery is a key component of what it means to be a digital bank. DIGITAL S ASCENDENCY Digital s ascendency further blurs the boundary between omnichannel delivery and the broader ambition of becoming a digital bank. Delivering a customized but consistent experience across all channels and points of interaction, especially in real time, would be impossible without analytics and automation two capabilities that represent the next layer of Celent s Digital Framework in Figure 1. We leave the bulk of that discussion to the previous report, but wish to emphasize digital s changing role and ascending prominence because they are relevant to the changing nature of omnichannel delivery. Chapter: Defining Omnichannel 6
Digital used to simply be two self-service channels; online and mobile. But what was once rather clear has become blurry. In a growing number of banks, online and mobile banking channels run on a common platform and are managed by a single team. They already have become a single digital channel designed to be device agnostic. More profoundly, what was initially conceived to be a customer self-service channel is becoming a primary interaction mechanism (including sales) for both consumers and bankers. Digital is influencing and becoming central to all other channels. Consider these examples of digitals influence in other channels: Branch-based universal bankers are being equipped with tablets as a primary access point for customer information, sales, and service interactions. Loan applications which may have been started in a digital, self-service manner can be finished in the branch or call center without duplicate effort. Customers can pre-stage ATM transactions and authenticate using their mobile banking app and receive an e-receipt of the transaction. Customers can book a branch appointment digitally, receive SMS reminders, check in at the branch using their mobile device, and be serviced by a banker alerted to their arrival in the branch using geolocation. A customer may initiate a transaction at a branch lobby ATM using his mobile device, receive assistance via real-time video from a remotely located teller, and be subsequently greeted in-person by a tablet-wielding universal banker. All of these examples illustrate how digital is becoming integral to both the customer and banker s experience (Figure 3). Figure 3: Digital Is Becoming Integral to Nearly Every Customer Interaction Source: Celent Digital s ascendency is a direct result of changing customer expectations and is important for at least three reasons: 1. The digital environment moves fast. By definition then, so must institutions omnichannel delivery capability. Doing so is virtually impossible for banks that continue to operate multiple, siloed channel technology stacks. 2. Digital is defining customer expectations. A mobile-first approach is necessary, but no longer sufficient. In addition to the user interface layer, business processes and products will need to simplify and automate in order to satisfy customer expectations. Chapter: Defining Omnichannel 7
3. Digital transcends the enterprise. A digitally integrated branch, kiosks, contact center, and mobile workforce are needed to alleviate putting the burden on the customer. These implications of digital s ascendency must influence how banks architect for omnichannel delivery. We ll return to this topic after a look at omnichannel s importance. Chapter: Defining Omnichannel 8
THE PROMISE OF OMNICHANNEL In today s retail banking climate, the customer is king. While some institutions have long since reflected a single-minded devotion to customer/member satisfaction, recent Celent research indicates an industrywide shift in priorities toward improving customer relationships. It is precisely this devotion to customer relationships that is driving banks pursuit of omnichannel retail delivery. Ask a bank or credit union what their most pressing retail banking priority is, and you likely would have heard a common theme with striking consistency. Particularly since the financial crisis, it has been all about growing topline sales results in an environment where doing so profitably has been difficult. That was the consistent refrain in each of three previous biannual surveys conducted between 2010 and 2014. However, in Celent s most recent survey conducted in December 2016, improving customer relationships has overtaken sales results as banks top strategic priority. Fraud/risk management has grown in importance since 2012 as well, but the change is not as pronounced. Figure 4 offers a historic view of top retail banking priorities graphed as a percentage rating #1 or #2 in priority. Figure 4: Improving Customer Relationships Is Now Job #1 among Surveyed Institutions Top Retail Banking Priorities Improving sales results 41% 75% 75% Improving customer relationships 58% 59% 70% Cost reduction Regulatory compliance 20% 34% 29% 32% 34% 27% 2016 2014 2012 Fraud/risk management 9% 23% 18% 0% 20% 40% 60% 80% % rating #1 or #2 priority Source: Celent survey of North American financial institutions, December 2016, n=112 Q: What are your institution's top retail banking priorities? Please indicate up to five in order of priority. The significant elevation in priority given to improving customer relationships is more than lip service. In post-survey interviews, nearly all institutions mentioned having an explicit focus on customer relationships, with several banks citing changes in key performance indicators supporting the move. This reflects a seismic paradigm shift, from inside-out to outside-in. It is also a pragmatic response to the reality that it costs far more to win new customers than to keep the ones you have. Improved customer relationships correlate to improved loyalty and retention. Omnichannel delivery obviously supports this ambition. The ability for an associate to know in real-time, what the customer performed in any channel, will strengthen the relationship. Chapter: The Promise of Omnichannel 9
The survey question was a forced ranking, meant to expose differences among similarly valued priorities. The extent to which customer relationships dominate current priorities is particularly stark when #1 priority and #2 priority choices are compared graphically (Figure 5). Also noteworthy is the comparatively low priority of cost reduction. While on almost every institution s priority list, it was cited as a top priority by just 10%. Figure 5: Nearly Half of Institutions Say Customer Relationships Is Their Top Priority Top Retail Banking Strategic Priorities Customer relationships 48% 21% Sales results 22% 19% Regulatory compliance 13% 18% #1 Priority #2 Priority Operating cost reduction 10% 23% Fraud/risk management 4% 19% 0% 20% 40% 60% 80% Resp (%) Source: Celent survey of North American financial institutions, December 2016, n=112 Q: What are your institution's top retail banking priorities? Please indicate up to five in order of priority. Channel priorities are also changing. Not long ago, financial institutions were racing to make mobile banking apps available to customers even as many struggled to justify a business case for doing so. Early in the decade, large banks enjoyed early-mover advantage, with many smaller institutions waiting on their vendors. By 2014, few questioned the imperative of having a competitive mobile banking platform. By 2016, mobile banking rose to the number one delivery channel priority among surveyed North American financial institutions. Its ascendency was swift and undeniable (Figure 6). Figure 6: Branch and ATM Channel Importance Has Eroded in Favor of Mobile Branch network Internet banking channel Mobile/tablet banking channel Call center ATM network Historic Delivery Channel Funding Priority 2.1 2.0 2.2 2.4 2.4 Source: Celent survey of North American financial institutions, 2010, 2012, 2014 and 2016 Q: Given limited resources, indicate the relative priority among your delivery channels based on what gets funded in your organization. 2.3 2.5 2.5 2.5 3.1 3.0 3.4 3.5 3.5 3.5 3.9 4.0 3.8 3.9 1 2 3 4 5 Ranking Avg. (5=highest priority) 4.4 2016 2014 2012 2010 Chapter: The Promise of Omnichannel 10
This is reflected in surveyed technology priorities, where mobile banking channel development ranked number one in a list of 10 competing technology priorities in the December survey (Figure 7). The comparatively high importance placed on the mobile channel is easily justified: growing customer utilization, changing customer expectations, and highly visible feedback on Google Play and App Store when banks fall behind. Figure 7: For Most Banks, Digital Channel Development Is Their Number One Technology Priority Retail Banking Technology Importance Mobile banking channel development 4.6 Omnichannel delivery Measure and optimize the customer journey Personalization Branch channel transformation Predictive analytics 4.1 3.8 3.7 3.7 3.5 Open APIs Middle-office enhancements 2.9 3.1 Core system replacement Artificial intelligence-based initiatives 2.2 2.1 0 1 2 3 4 5 Avg. rating (5= most important) Source: Celent survey of North American financial institutions, December 2016, n=112. Q: How important are each of the following technologies in delivering your top priorities in the previous question? But, closely following mobile channel development is omnichannel delivery. Is the rational for omnichannel similarly manifest? It depends. We look separately at the customer and bank perspective to answer this question. THE PROMISE FOR CUSTOMERS Said simply, consumers tend to want financial services on demand and on their terms. What this means precisely is a moving target, with changing preferences and variation among consumer segments. Moreover, customer engagement preferences vary depending on what needs to be accomplished during any given interaction. Research from Harris Poll, Pew Research Center and others demonstrates that many consumers use channels fluidly, with engagement preferences closely tied to specific use-cases. What they use depends on their needs at a particular moment. Particularly relevant research on this topic is discussed in a recent Oliver Wyman report, Consumer Banking in Canada: Omnichannel Strategy, April 2017. Delivering a customized yet consistent brand experience as they do so is one primary objective of omnichannel delivery. One way to view this is to examine customer experience along the shop-buy-use continuum. Different elements impact the customer experience in each stage. Improving the customer experience invites changing strategic focus along the way also (Figure 8). In this context, omnichannel s goal is to make it easier for customers to shop, buy, and use financial services on their own terms. This means that omnichannel delivery transcends the spectrum of self-service, assisted selfservice, and full-service engagement. Chapter: The Promise of Omnichannel 11
Figure 8: Omnichannel Affects Interactions Across the Shop-Buy-Use Continuum Source: Oliver Wyman and Celent A sampling of use cases across the shop-buy-use continuum may help illustrate how banks are improving the customer experience through omnichannel service delivery. Shop Consumers are increasingly shopping for goods and services digitally, whether they buy them online or in a store. For example, in a 2014 Oliver Wyman Path to Purchase Checking Study, visiting a bank s website was the most frequently cited (67% of consumers) influencer in choosing a banking relationship. Compared to the branch channel (34%), the digital channels have been more important to consumers shopping for some time. Historic multichannel constructs focused on making information available to prospects across various channels. Omnichannel approaches tend to focus on engagement during the shop phase. Table 1 compares typical multichannel buying experiences offered by many institutions to an omnichannel end-state. Table 1: Omnichannel Advantages During the Shop Phase Customer Use Case Multichannel CX Omnichannel CX Browsing online Web presence designed for desktop. Poor rendering on mobile device. Mobile-aware content renders well on all devices. Researching online Source: Celent Call to action requires customer to leave the current experience. Directed to FAQ to get questions answered. Any personal engagement loses context of where customer has been. Context-aware content. Ability to provide context-aware needs assessments in real time to guide the customer or associate to personalized, recommended products for the customer Context-aware information served instead of generic FAQ. Chat and/or click-to-call options for in-person assistance as well as digital appointment booking. Able to originate digitally, if desired. Chapter: The Promise of Omnichannel 12
Buy Historically, the branch has been the dominant delivery channel for buying financial services, even if few purchase decisions are made within those four walls. This is changing rapidly. Most banks are quick to attribute transaction volume to the digital channels, but less likely attribute sales revenue accordingly. Attribution accuracy is not the only problem. Until recently, few North American financial institutions had effective digital customer acquisition capability, particularly for a mobile use case. Fewer still offer a credible omnichannel experience. Those that do enjoy considerable short-term competitive advantage. Table 2 compares typical multichannel shopping experiences offered by many institutions to an omnichannel end-state. Table 2: Omnichannel Advantages During the Buy Phase CUSTOMER USE-CASE MULTICHANNEL CX OMNICHANNEL CX Product application Questions during an application Source: Celent If offered, digital application is a dumb form or has points of friction. Most/all required information must be manually entered. Authentication relies on KBA. Experience is different in each channel. Siloed channel systems have no record of previous activity. Starting an application digitally and subsequently visiting a branch would require a do-over. Typically involves leaving the environment. Staff typically has no context or access to information already entered. If already a customer, reauthentication is typically required. Engagement mechanisms are limited. Mobile-first device-agnostic capability. Ability to share product information between customer and the FI (like an Amazon Cart). Save-and-resume support across all points of engagement. Image analytics speeds pre-fill of information and ID validation. Fewer questions, faster process. Bank follow-up on all abandoned digital applications. Multiple engagement options are available in-session, without need for reauthentication (call, chat, video, etc.). Staff has visibility to in-process application and can finish on customer s behalf. If desired, appointment can be booked for follow-up conversation. Two previous Celent reports discuss omnichannel customer acquisition in considerable detail (See Omnichannel Customer Acquisition 2.0: What It Is and How to Get There, July, 2016, and Omnichannel Customer Acquisition 2.0: Vendor Spectrum (Part 2), September 2016. Use Historically, virtually all retailers have invested in digital channel development to support consumers across the shop-buy-use continuum. In contrast, financial institutions have been focused on services delivery the use part. Current efforts at many institutions are now more balanced. Beyond offering competitive transactional capabilities, more banks have invested in improving customer engagement through seamless access to staff using chat, video, click-to-call and digital appointment booking. Table 3 compares typical multichannel experiences offered by many institutions to an omnichannel end state. Chapter: The Promise of Omnichannel 13
Table 3: Omnichannel Advantages During the Use Phase CUSTOMER USE-CASE MULTICHANNEL CX OMNICHANNEL CX Transaction Transaction have mixed processes by channel Transactions have a common process across channels Self-service Query Siloed data that requires reentry of information when changing channels Assistance is available in session. Staff has context prior to engaging customer through real-time persistence of data across channels. In-branch query Staff may have no access to contact or transaction history to inform query. May have to access more than one system to assist. May require manual re-entry of service request data from Selfservice to back-office Staff may see an appointment scheduled by customer. Staff has view of interaction history across channels. Automated case creation in the back-office once the customer submits a service request Source: Celent All this is good for customers. But what specific promise does omnichannel delivery hold for financial institutions? THE PROMISE FOR FINANCIAL INSTITUTIONS Part of the difficulty in understanding omnichannel s value to the bank is that most banks have had no historic view into their customer s interaction patterns. While many institutions may have a precise understanding of each channel s metrics, they lack a cross-channel view of customer s actual interaction journey. Without that understanding, it is nearly impossible to quantify all of the missed opportunities. As the saying goes, You don t know what you don t know. Yet, the benefits of omnichannel delivery are becoming manifest, particularly among institutions further along the journey. In this section, we look briefly at five benefit areas and illustrate the impact omnichannel delivery has had among early-mover institutions. Specifically: Improved customer experience (CX). Improved customer acquisition and retention. Reduced revenue leakage. Improved employee productivity. Improved marketing ROI. Improved Customer Experience Much has been published on the wisdom of providing a compelling customer experience. Proponents for investments in CX often don t require a convincing business case for investment because the benefits of improved CX are intuitively obvious. Others claim CX investments offer only a soft ROI. Celent observes that there is an abundance of credible research across multiple industries that demonstrate loyalty and revenue gains closely correlated with modest improvements in CX. One particularly compelling set of insights is available from the Temkin Group in its ROI of Customer Experience, 2016. We do not attempt to settle the debate here. Chapter: The Promise of Omnichannel 14
Beyond the promise of an ROI in generic improvements in CX, surgical improvements in CX during critical points in the customer journey can in themselves produce an attractive payout. Examples: A Turkish bank offered mobile banking customers cardless cash access at its ATMs using ibeacon. Those customers can withdraw cash in one fourth the time it used to take using a debit card. A US bank upgraded its digital assets to a single platform coincident with new capabilities. The effort correlates with measurable improvements in customer utilization, satisfaction, and loyalty. A Portuguese bank launched its Customer Branch Experience 2.0 initiative to deliver a single-minded objective: delight customers with an exceptional branch experience. Doing so resulted in an increase in sales, better customer retention, accelerated customer utilization of digital platforms, and increased brand association as a bank known for innovation. The bank observes improvements both in customer acquisition and in attrition attributed to the initiative. Improved Customer Acquisition and Retention Improved customer acquisition has at least two components: 1) low-friction experiences in the digital channels, and 2) seamless assistance when needed. Examples: An Australian bank grew its new account acquisition mix from 100% in-branch to 42% digital in its first year on an omnichannel customer onboarding platform. Digitized banking operations at a Korean bank s new branch formats vastly improved sales capability. Within just two months of launching, the new branch formats collectively sold four times more than existing traditional branches. A US bank launched online account opening, and since the 2016 launch, 65% of the applications are coming through mobile devices (previously 0%). Reduced Revenue Leakage The high rate of digital shopping cart abandonment is well-known. While improving the omnichannel CX of customer acquisition will not eliminate revenue leakage, it has been shown to have a dramatic impact in bringing about its reduction. Two examples illustrate the value of an omnichannel platform that can handle data in real-time across consumer and enterprise roles, allowing these analytics to become actionable. An Australian bank reduced abandonment rates for account opening applications among one customer segment to 30%, far lower than the industry average of 70%. A Canadian bank captured contact information from prospects that abandoned its digital shopping cart and treated them as qualified sales leads for outbound telephone follow-up. This effort yielded a 27% close rate for new credit cards (versus a historical 4% to 6%). Improved Employee Productivity Omnichannel delivery directly impacts employee productivity in a variety of ways. Some are a function of the requisite automation of work processes needed to engage customers digitally. They become omnichannel benefits when those same capabilities are leveraged across all customer touchpoints. Benefit examples from early-adopters of omnichannel CXPs include: Instant case creation for servicing requests across channels to reduce manual entry of data, batch file processing, and more. Paperless processing with electronic delivery and acknowledgement. Reduce branch costs through kiosks, tablets, shared devices. Chapter: The Promise of Omnichannel 15
Reduce training and attrition (call center) with a common application platform (versus multiple systems). Greater adherence to compliance policies through pre-filled, automated and validation processes. An APAC bank realized a 70% reduction in loan application processing time through the digitization of its workflow and omnichannel customer engagement through the application and underwriting process. Several banks implementing omnichannel customer acquisition approaches reduced new account application time in the branch by between 60% and 80% not including applications completed in self-service channels. A US credit union employing transaction data analytics across multiple channels designed to provide better insight in how members interacted with the credit union achieved a 50% reduction in member inquiry response time related to ATM inquiries. Improved Marketing ROI Marketing has changed dramatically in the past few years. In particular, digital and analytics have given rise to a bevy of marketing automation solutions designed specifically to improve marketing s ROI. Here, we simply look at the specific impact omnichannel engagement can have on marketing ROI. An India based institution enabled omnichannel loan origination and servicing. The initiative produced specific marketing related improvements including: nearly 2,000 new loan applications in the first two months resulting in US$7 million in loan value, accompanied by a 15% reduction in loan sourcing costs through reduced sales involvement in the process, An Argentina-based bank moved from generic marketing to real-time relevant and personalized offers using AI. Offers are extended through its public domain website, online banking, and contact center channels, with other customer touchpoints to follow. In the first quarter post launch: personalized offers led to 28% of loan sales, a 17 percent conversion rate on IVR offers, 12,000 new subscribers to the bank s loyalty program, and $60,000 in annual savings through increased e-statement adoption. A US bank recently launched a direct bank brand and new website, integrated to their omnichannel account origination and has led to 20% of site visitors opening funded accounts A glaring absence in the list of omnichannel benefits for financial institutions is cost reduction. In Celent s view, cost reduction is not necessarily an outcome of omnichannel retail delivery, but can result when omnichannel delivery is wisely architected. We will return to the topic of cost reduction, but the next section presents the fledgling state of omnichannel banking.. Chapter: The Promise of Omnichannel 16
STATE OF OMNICHANNEL BANKING IN NORTH AMERICA Celent surveyed North American financial institutions in December 2016 to understand the state and likely evolution of retail channel delivery systems. 2 Given the complexities of omnichannel delivery and the state of legacy systems in most institutions, it is no surprise that few, if any, claim to have arrived. But, the situation is worse only a small minority of institutions have even begun executing on an omnichannel strategy. Key Research Question 2 How ready are institutions to deliver omnichannel customer engagement? 50% of large banks are developing or refining omnichannel strategies while smaller bank segments lag behind. Theoretically, omnichannel readiness may be simpler and easier for smaller organizations running relatively modern legacy systems. While this describes many community banks and credit unions, many of those same institutions are also heavily reliant on their core banking system vendors who do not yet offer a turnkey path to omnichannel delivery for their clients, to Celent s knowledge. Large organizations have a more difficult path ahead given the complexity of their systems, processes, and organizations, but have begun working on the objective well ahead of smaller institutions. Based on their own self-assessment, large banks have a commanding lead in omnichannel readiness (Figure 9). Figure 9: Large Banks Lead the Industry in Omnichannel Readiness Resp (%) 70% 60% 50% 40% 30% 20% 10% 0% 59% 50% 25% Researching (no agreed-to path forward yet) Progress Towards Omnichannel Delivery by Asset Tier 27% 32% Source: Celent survey of North American financial institutions, October 2016, n=112. Q: Which option best describes where your institution is in its journey towards omnichannel delivery? 33% Developing (formal priority, individual(s) responsible, strategy emerging) 2 A complete analysis of survey results is contained in the Celent report, A Survey of Retail Banking Channel Systems in North America: Omnichannel Emerges, February 2017. 5% < $1 B $1-50 B > $50 B 12% 17% Refining (Strategy is set. Evaluating business case, vendor selection, etc.) 9% 6% 25% Executing (strategy and design are in-place) Chapter: State of Omnichannel Banking in North America 17
Beyond overall readiness, the survey asked institutions to assess their readiness separately in each of six areas: strategy, organization, culture, technology, funding, and metrics/governance. Since developing a strategy for omnichannel delivery is a logical starting point, it was judged further along in most institutions compared to the other elements. As in overall maturity (Figure 9), large banks self-assessment suggests they are well ahead of the industry in readiness across each component (Figure 10). The relative order, however, is consistent across the asset tiers. Metrics and governance need the most work. Figure 10: Large Banks Lead in Readiness Across the Board Omnichannel Delivery Readiness by Asset Tier Strategy 54% 52% 73% Technology 49% 51% 67% Funding 48% 51% 67% > $50 B Culture Organization 52% 46% 50% 48% 62% 62% $1-50 B < $1 B Metrics / governance 38% 45% 58% 0% 20% 40% 60% 80% Average readiness (% ready) Source: Celent survey of North American financial institutions, October 2016, n=112. Q: Indicate your assessment of your institution's readiness in each of the aspects of omnichannel delivery below. Omnichannel delivery clearly remains aspirational at most institutions. Since omnichannel is a journey, not a once-and-done initiative, it is useful to examine how institutions intend to get to omnichannel in the near term (or more realistically, get closer to omnichannel). BABY STEPS: UNIFIED DIGITAL PLATFORMS Over the past several decades, as banks offered customers additional ways to interact, individual channels grew independently and often resulted in separately installed and managed technology stacks. An ambition for omnichannel delivery does not, however, necessarily require a rip and replace of these legacy systems at least in the short term. Banks have already begun to consolidate digital channels into a single platform inappropriately positioned as omnichannel by some vendors. With tablets making their way into branches, applications moving to the cloud, and user interfaces becoming responsive and device agnostic, how long can separate channel platforms be defended (Figure 11)? Chapter: State of Omnichannel Banking in North America 18
Figure 11: Is a Unified Omnichannel Platform an Obvious End Game? Source: Celent Celent s December 2016 survey sought to understand likely technology direction in the near term; that is, over the next three years, to understand what projects are being undertaken to get institutions closer to omnichannel delivery. Figure 12 lists specific actions in order of their likelihood ( in place or highly likely responses) for the overall survey panel. The two initiatives either in place or deemed most likely by the most institutions are: Migrate to a single digital technology stack (26% in place, 22% highly likely). Implement an omnichannel customer acquisition / onboarding system (2% in place, 30% highly likely). Figure 12: A Single Digital Technology Stack Is a Popular Stop Along the Path to Omnichannel Migrate to a single DIGITAL channel technology stack Implement an omnichannel customer acquisition system Replace branch teller or platform sales systems Implement an omnichannel system of engagement, keeping legacy systems Migrate to a single omnichannel technology stack - replacing legacy channel platforms Omnichannel Delivery Plans for next 3 years Replace ATM software Expose open APIs 2% 10% Source: Celent survey of North American financial institutions, October 2016, n=112. Q: How likely is your institution to take the following actions in pursuit of omnichannel delivery over the next three years? 2% 4% 3% 0% 7% 19% 26% 17% 30% 21% 25% 28% 22% 22% 52% 39% 52% 35% 16% 0% 20% 40% 60% 80% In place Highly Likely Somewhat likely Resp (%) Chapter: State of Omnichannel Banking in North America 19
One-fourth of the survey sample already has migrated to a single digital technology stack, the most broadly implemented initiative of all those listed. Omnichannel customer acquisition systems were viewed as highly likely by 30% of the panel the highest of the available options. Understandably, more institutions seem resigned to keep legacy channel systems in place for the short term, at least some of them. As with channelspecific initiatives, large banks appear to have an appetite for a wider variety of near-term action in pursuit of omnichannel delivery (Figure 13). Figure 13: Large Banks Appear to Have Much Larger Omnichannel Appetites Omnichannel Delivery Plans for Next 3 Years by Asset Tier Migrate to a single DIGITAL channel technology stack Expose open APIs Implement an omnichannel customer acquisition system Replace ATM software Replace branch teller or platform sales systems Implement an omnichannel system of engagement while keeping legacy systems Migrate to a single omnichannel technology stack 37% 26% 22% 31% 26% 27% 24% 18% 11% 30% 16% 25% 9% 13% 11% 45% 55% 50% 50% 50% 56% > $50 B $1-50 B < $1 B 0% 20% 40% 60% In-place or highly likely (%) Source: Celent survey of North American financial institutions, October 2016, n=112. Q: How likely is your institution to take the following actions in pursuit of omnichannel delivery over the next three years? Since so few institutions intend rip and replace legacy channel platforms with a single omnichannel technology stack, they will need an alternative. In Celent s view, an omnichannel CXP is that alternative. Chapter: State of Omnichannel Banking in North America 20
THE CASE FOR A SINGLE CUSTOMER EXPERIENCE PLATFORM Creating an omnichannel customer experience from the patchwork of legacy channel and core back office systems that define most banks technology infrastructure is no easy task. Legacy technology can be an inhibitor for omnichannel delivery as well as the larger challenge of digital transformation (DX), because it restricts functionality as well as speed and among larger institutions, and is often overly complex and costly. As these massive and complex undertakings are approached, institutions are left with two basic paths rip and replace or progressive renovation (Figure 14). Each approach has its benefits () and drawbacks (). Institution size, of course, is a factor. Rip and replace is both comparatively complex and unlikely for large banks. But, given the up-front cost and risk associated with large-scale channel platform modernization, Celent sees progressive renovation as the obvious path of choice for midsize and large institutions. Figure 14: Two Paths to Architecture Modernization Source: Oliver Wyman One way to facilitate omnichannel delivery using a progressive renovation approach is through the use of an omnichannel customer experience platform. In Celent s view, most institutions will end up using this approach even a number of smaller institutions. To make the case, let s first clarify what we mean by progressive renovation of an institutions channel stack, then look at how this can occur using an omnichannel customer experience platform (CXP). Progressive Renovation The essence of the progressive renovation approach is to selectively invest in key capabilities over time in a way that achieves quick wins while minimizing any throw-away expense for the longer term. There are many examples of this approach (geography, line of business, etc.). The approach relevant to omnichannel involves decoupling channel and core back office systems through the use of a common digital API, so the channel system modernization can move forward effectively regardless of how and when the back office systems may change. Progressive renovation of channel systems allows institutions to: Chapter: The Case for a Single Customer Experience Platform 21
Operate a high-speed, customer-centric front end alongside the transaction-centric legacy back end. Front end systems, although numerous in many institutions, are fundamentally less complex and difficult to replace than core back end systems. Design the front end to be modular to allow rapid release cycles to keep up with today s increasing pace of change. Bridge the front end to legacy environments using a digital API that allows all channel applications to reuse a common set of services and open access to APIs and data to partners. Banks are rapidly gaining an appreciation for the use of APIs both internally and externally, particularly large banks (Figure 13). Progressive renovation defines an approach to digital transformation, not necessarily the outcome. But, the approach does require at least for a period of time something to manage rapid change in front end systems (along with their optional consolidation) with the constraints of legacy back end systems and the inevitability that essential data is likely to reside in multiple places throughout the enterprise for the foreseeable future. Customer Experience Platform One architecture approach to accomplish this needed management of the front end to back end to external system integration utilizes what is commonly referred to as a system(s) of enablement. More than an SOA layer, it combines easily managed business rules, essential data, common capabilities, and an API-driven integration layer that coexists persistently alongside systems of interaction (branch, digital, contact center, ATM platforms, etc.) and systems of record (DDA, LMS, CRM, etc.). Figure 15 contrasts legacy architecture with this type of a digital architecture. Figure 15: Legacy Architectures Are Wholly Unsuited for Omnichannel Delivery Source: Oliver Wyman This architecture approach is a great fit for many banks in Celent s opinion, for at least three reasons: 1. Streamlines various system connection points. Rather than maintaining a many-to-many front end / back end set of connection points, all systems of interaction and systems of record are connected to the system of enablement using a single set of APIs. Chapter: The Case for a Single Customer Experience Platform 22