This post is part of Gallup's ongoing series on the shifting landscape for financial institutions. It provides insights into channel optimization, emerging customer behaviors and preferences, product penetration and relationship growth, engaging the most critical affluent and business customers, and reshaping banks' overall value proposition.
The banking industry looks much different now than it did just five years ago. The consumer's experience and technology are more of a focus now than ever, but many banks still struggle with their most basic operations, leaving these organizations with a long -- and sometimes competing -- list of priorities.
As the new year gets underway, I asked Gallup's banking experts to share what they see as the greatest challenges facing the industry in 2015, as well as their advice for helping leaders and managers meet these challenges. Here's what they said:
Omni-Channel Remains an Issue
Balance continues to be a key challenge for banks. They need to efficiently serve customers, while still engaging them, and without prioritizing one over the other. Banks can find a happy medium between what is best for their customers and what is best for their bottom line -- but getting there won't be easy.
"While the banking industry has continued to raise their game when it comes to the customer experience, those that are able to truly embrace a cross-channel approach will separate themselves from the pack. This is no easy task, as it requires breaking down data, product and channel silos, reconfiguring how information and performance is tracked and analyzed, and properly assigning responsibility and accountability for critical aspects of the customer experience. To truly deliver on a cross-channel approach, banks must avoid a piecemeal approach. It will take a holistic, organization-wide commitment to changing how they view the customer experience and how they manage their business. As a result, I do not expect to see successful cross-channel approaches by most banks in the industry, which means those that manage to pull off the transformation will reap disproportionate rewards." -- Bill Petti, Senior Practice Consultant
"Banks must evolve to thinking about winning customers through the lens of customer experience versus customer service. Given the number of touch points in banking, the challenge is in breaking silos and creating a sense of seamlessness through the integration of the digital, physical and human interactions." -- Anson Vuong, Senior Consultant
Consumer and Product Segments Heat Up
Competition among banks will be fierce this year, particularly in lucrative segments like loan and high-net-worth customers. To capture a bigger share of the market, banks will need to create specific strategies for more profitable segments to improve their bottom line.
"In 2015, banks will continue to see their profits generated from a relatively small percentage of high-value accounts. The fight for share of wallet and loyalty among these clients will become increasingly competitive, with each bank vying to offer the most differentiated, high-touch and customized experience. Capturing a holistic view of any one of these clients' portfolios with a bank -- and their potential value that lies outside of the bank -- stands as the first step for many banks in delivering this experience, and will be a priority over the coming year." -- Courtney Behringer, Advanced Consultant
"The cost to serve to the mass market and the limited number of the affluent brings the squeeze toward winning the mass affluent and emerging affluent. The trick to winning those populations is treating them less like mass market and more like an 'affluent,' but inside a reasonable cost-to-serve model." -- Anson Vuong, Senior Consultant
"In 2015, there is going to be a big focus on capitalizing on the current rate environment and maximizing new loan originations and refinancing. Since most banks will be chasing segments, those that can make the origination process easier and more engaging will build expanded relationships with new and existing customers." -- Patrick Whiston, Managing Consultant
Channel Preferences Continue to Shift
Customers no longer make the weekly trip to their bank to deposit their payroll check and get cash for the weekend. Online and mobile banking are increasingly common and banks will have to continue to work to understand the new, tech-savvy customer and their ideal experience.
"For many years, traditional retail banks relied upon branch ubiquity in a bricks-and-mortar world to drive their success. They collected deposits and sold products from the comfort of traditional branches, the places customers went to do most of their banking. Shifts in customer preferences and technology have lessened the importance of branch networks, and in some cases rendered those networks inefficient with sunk costs that may take years to transform or unwind. The newer players, operating almost exclusively in the digital-mobile space, are certainly unencumbered by legacy networks and systems, but face their own challenges delivering rich customer experiences beyond the routine, day-to-day transactions. My sense is that we will witness a race to a 'sweet spot' somewhere in the middle, with the winners being able to provide meaningful, impactful and often personal channels for certain situations and customers, alongside a seamless, frictionless, integrated digital offering to handle most of the customer's daily needs. Who will get there first? Probably those institutions that can adroitly blend a keen understanding of their customers' needs with a healthy and honest appraisal of their company's strengths and weaknesses, along with a risk appetite to test and learn (and sometimes fail)." -- Jon Hughes, Senior Consultant
"Community and regional banks will prioritize their investments in improving the user experience and functionality of technology, such as mobile apps, that quickly went from a luxury to necessity. Without these investments, banks will find it harder to achieve traditional goals such as branch migration or growing share of wallet." -- Chris Magnani, Consultant
Employees Must Rise to the Challenge
As consumer preferences and expectations shift, banks will need to rethink their strategies for helping employees connect with customers. Coaching and education will be crucial to their success.
"The topic that we are most closely focused on this year is coaching. Individualized coaching -- focusing on what associates naturally do well -- and the culture that supports it are the closest things we have found to a silver bullet in terms of linking high levels of performance with high levels of employee engagement. We will be extremely focused on driving thoughtful coaching of associates in 2015." -- Lee Clayton, Senior Consultant
"In 2015, we can expect banks to increasingly invest in digital and self-service offerings, with increasingly complex transaction types becoming enabled on mobile, tablet and online platforms. Banks will be investing not only in the development of the platforms themselves, but in educating their customers about their availability, benefits and functionality. The need for this education, along with the corresponding increasing complexity and decreasing frequency of in-person transactions, will force many banks to re-examine their employee and talent pool to see how well it meets the needs of this new environment." -- Courtney Behringer, Advanced Consultant
Banking Basics Still Need to Be Conquered
Whether the goal is increasing customer engagement, selling more products and services, or figuring out what to do with all that data, banks have more work to do in regard to their business operations.
"For years we've seen customer engagement improve throughout the industry. This trend will continue in 2015, as more banks realize the importance of their customer experience to their bottom line." -- Sean Williams, Principal Researcher
"In a world of limited lines of long-term differentiation for banks, it becomes about how you sell versus what you sell." -- Anson Vuong, Senior Consultant
"For years we've seen customer engagement improve throughout the industry. In 2015, banks will need to figure out how to best use big data to address their business challenges in a timely and cost effective manner." -- John Fleming, Chief Scientist
That's what our Gallup experts see as the major obstacles for the banking industry in 2015. What do you see for the coming year?