Digital Multi-Channel Strategies Are Failing To Deliver Results

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In the early 1960s, John Diebold, a pioneer in automating processes for financial institutions, wrote that "the 'cashless society' is no longer an option but a necessity."

Lately, there has been a renewed interest in this vision of a cashless society especially as consumers and businesses equip themselves with the various mobile devices now available for digitally accessing, managing and moving money.

While not everyone thinks a cashless society is a good thing, (usually for ideological reasons) most commentators are singing the praises of mobile and its potential especially its industry evangelists.  There is no doubt that some portion of the song they are singing is true.  The statistics show that consumers are growing increasingly comfortable with using their smartphones and tablets for everything from banking to making online purchases via apps from their favorite retailers. 

However, when these evangelists, especially those who happen to be selling products and services for the mobile space, describe a future when the only way you’ll pay your bills and buy your latte is with a blink of the eye, it reminds me of John Diebold and others who predicted the advent of a cashless society more than fifty years ago.  The vision is still not a reality in totality and likely never will be.  The same goes for a future where branches, stores and even our personal computers disappear in favor of things we can hang off (or embed in) our bodies.

The fact is that while mobile banking adoption has exceeded 30 percent, more than half of bank and credit union customers with Internet access still (and also) bank online.  In addition, more than a third of consumers start some banking activity on their personal computers then finish it later on a tablet or a smartphone.  Mobile devices may be changing the landscape relative to how consumers bank and make purchases, but they will not completely replace older forms of these same activities.  Consumers adopt new methods and keep old habits.  It is why cash still abounds in the face of several innovations that were to be its demise.

With the exception of retailers, financial institutions may be more acutely aware of this basic reality about consumer behavior than any other group.   To date, many FIs have reacted tactically to this diversification of digital channel choices by their customers.  They scrambled to offer online banking in the late 1990s and early 2000s.  Many still use remnants of those solutions today for their online banking solutions.  Then with the introduction of the iPhone in 2007, they quickly moved to plug that hole, creating a new mobile banking channel within their IT infrastructure.  Along came the tablet, and some  added even another silo for that device.  And the beat goes on with the consumer adopting the new and keeping the old; insisting on having all popular options available.

Thus it is astounding that you still hear pundits and suppliers espouse a multi-channel digital strategy for banks and credit unions using logic that seems to ignore the reality of the customers’ expectations and the FIs IT landscape.  The reasons are various and flawed.  For example, some say multi-channel (or point) solutions offer a better user experience because they are created for a specific device type.   Untrue.  Technology exists and is available that can present a consistent, rich user experience to any device type.  Others insist that the key to growing the relationship with the customer is by delivering contextual, personalized offerings onto the device.  While this is true, it completely ignores the fact that most FIs cannot do this because the data required is isolated in online, mobile  and backend systems across the organization that lack the ability to share information in real time. 

Today, the organization that is not considering an omnichannel (or cross-channel depending on how the term is used) strategy is condemning itself to death by a thousand cuts.  The costs for the online, mobile, tablet and apps deployed for digital customers can be oppressive.  A banker recently told me “due to the cost of my digital channels, it is cheaper for me to service a customer from a branch”. 

I thought he was exaggerating until he showed me that the cost for each digital customer was $3 to $4 per month when he adds up the what he pays for  his online and mobile solutions plus the apps he has deployed.  And for all that money, what he gets is a variety of user experiences that result in unhappy customers. He also has no way to monitor the data and usage across these disparate systems in a way that is meaningful to his customers. 

In short, his digital channels are a mess.  They limit innovation and lower his chances of retaining the customers he has.  Meanwhile, the cost associated with each grows annually. My banker friend did not intentionally put himself and his institution in this position.  The solutions available to him limited the nature of his response. He is not alone. 

Those who do undertake the omnichannel path will not only lower that cost and complexity but free large amounts of data about their customers that offers a path to personalizing services and product offerings in a way that can drive revenue growth.  In addition, those who deploy an omnichannel strategy and abandon the tactical multi-channel option are most likely to be among the banks and credit unions left standing as consolidation continues to take its toll on underperformers.