The Weekly Extract: June 1, 2020

  • Alex Jimenez
  • June 01, 2020

The Weekly Extract from Extractable is a condensed roundup of digital experience news for financial services institutions, and our take from San Francisco.

This week we go back to the guessing game on the permanent changes to banking models after the pandemic. We examine the need to consider Employee Experience in the pursuit for better Customer Experiences. Finally, we look at high yield savings accounts in Canada and a new fintech that promises the same in the US.


Post-COVID Banking Models Remain Uncertain

Speculation continues about the resurgence of digital banking at the expense of the bank branch. Ellen Sheng in a CNBC article makes the case for increased mobile usage sticking post COVID-19. She quotes a study by FIS that saw a jump in mobile banking registrations by 200%, and mobile banking use by 85%. She also notes a survey by Novantas where only 40% of respondents said they expect to return to branches post-Covid.

While our numbers also show that there is a remarkable increase in usage of digital, we are also skeptical of opinion surveys. We often see opinion surveys stating that well over 20% of bank customers are unsatisfied with their banks in a given year, yet attrition rates at most FIs remain in the single digits.

LendAcademy also considered the impact of the pandemic on banking models this week in an examination of the future of fintech. They see the closing of branches and growth of digital transactions, advice, and money management  furthered by the application of AI. The winners aren’t fintech firms, but the legacy financial service companies that adopt new technologies and leverage fintech firms.

Across the pond, the speculation is more dramatic. Business Insider quotes a report by Kearney that says that the pandemic could “fuel 1 in 4 European bank branches to close in next three years.” The existing trend in Europe saw 35% of bank branches close over the last 10 years.

Business Insiders ads, “And in some regions, digital banking is used by a majority of consumers: 70% of banking customers in the UK, Norway, and Sweden already use remote channels like online banking, mobile apps, and call centers to research and purchase products.”

Digital banking adoption in the UK has been more remarkable than in the US. According to an article in Finextra a “recent study estimates that within five years 44% of Brits will have a digital-only bank.” A review of account opening experiences including legacy banks and challenger banks notes that “it took just two working days to have an active account at Monzo and Starling,” two of the leading UK fintech banks. In the meantime legacy “Barclays matched the upstarts but most traditional lenders took far longer, with laggard HSBC requiring a huge 36 days.”

Anecdotally, we can confirm that the experiences we have had in the US aren’t that much different. Recently, we opened a Chime account in less than a day, which was matched by Marcus, Bank of America, and Chase. An account with a top 20 Credit Union took nearly five weeks.

Back in the US, Ondot, a California-based digital card services platform for credit and debit issuers, described the impact of the pandemic as a “decade of change in just a few months.”

Prasanna Narayan, Ondot’s vice president for product management, is quoted in an article in CU Times:

“COVID-19 has increased demand for digital payment solutions among consumers who see changing the way they spend money as a potential health issue. This added pressure is forcing financial institutions to review their digital banking roadmaps in order to meet the changing needs of consumers.”

The bottom line remains that whether the pandemic have accelerated adoption of digital by a small or large margin, the inevitable result is a major change in banking models in the US and Europe. As noted by Ondot, FIs  “need to reassess their digital priorities” to meet consumers’ readjusted needs.  The Ondot white paper spotlights “self-service needs, modernizing their card experiences, and being prepared to capture increased account opening as the economy recovers.”


Employee Experience Key to Better CX

When clients engage us to help them with their digital transformation, we put them through a crash-course in design thinking. We believe that the only way to transform a business is to change the mindset from product and channel focus to customer focus. It isn’t enough to say you care about the customer. Organizations have to do the work of deeply understanding their customer’s needs to build empathy.

Organizations that adopt this way of thinking are better prepared for a continually changing world because they are constantly in tune with customers and can see what is ahead. It becomes second nature to launch new products, services, and experiences when empathy becomes a core tenet. Many customer-focused organizations, however, were shaken by the pandemic when they had to work remotely. They had never applied design thinking internally, and hadn’t considered the employee experience. Here is a learning that must come out of the current crisis.

In an article in CMS Wire, Anamika Lasser writes: “It is relatively simple to launch a new front-end digital experience such as a webpage, mobile app or product improvement. The challenge is anticipating how that initiative will impact every facet of your organization.”

She notes how Employee Experience (EX), is often overlooked as a key component of the customer experience. Organizations fail to realize that the design of experiences that don’t consider the downstream impact to internal teams will not yield the desired results in the long term. In digital banking, we often see well-designed experiences that are poorly understood by support teams like the call center or the branch. When a customer seeks support, teams aren’t ready to help; impacting the overall customer experience.

Anamika suggests that “companies need to reframe the discussion and emphasize human experiences, not just customer experiences. This will encourage those charged with CX innovation to consider the employee impact, too, so they can roll out sustainable change.”

She further asks organizations to consider connecting the dots between CX and EX by asking these questions:

  • How will this affect each and every department, from sales to service, to billing and accounting, to in-store workers?
  • Does every member of our workforce understand what and why we are changing, and what it means for their role?

Stephen Powers, VP Group Director at Forrester also highlights EX as a focus coming out of the pandemic in an article in Forrester’s Insights. Stephen’s article examines the categories of technology that organizations failed to have ready including EX solutions. He recommends organizations look at EX solutions to enable collaboration and learning throughout the enterprise.

It isn’t enough to just implement more technology, however. The need to look at EX has raised to the surface. ServiceNow’s global director of HR transformation, Tracey Fritcher, notes in a separate article in CMSWire, “I’ve talked to people leaders across industries and around the world, and we all see that work and how we think about the employee experience has changed. The rise of remote work as a result of the crisis has increased the complexity of a return to the office, as well as the need to create a safe and productive employee experience that protects the psychological and physical safety of employees.”

Dr. Reetu Sandhu, manager of the Limeade Institute, says “the pandemic has shown us that we need to rethink how we view work, and our approach to the entire employee experience. Going back to ‘normal’ and returning to pre-pandemic operations is no longer possible. We must look ahead and adapt to the changing landscape while implementing what we’ve learned along the way.”

Clearly one of the lessons from the pandemic is that it isn’t enough to accelerate organaziations towards customer-centricity. Companies should be human-centered, combining CX with EX, to have empathy as a core value. Managers often speak of understanding processes across the enterprise. The human element has been lacking in that understanding. When we add design thinking to the mix, and consider the interactions between processes and humans, whether they are employees, vendors, suppliers, or customers, we can learn to improve overall.


New Players Enter High-Yield Savings Rate Game

This week N26, the Berlin-based challenger bank, released a survey results regarding the US and European markets. The survey found that “Americans are saving an average of almost $220 a month compared to €177 ($192) in Europe due to the introduction of social distancing and isolation measures.”

The study notes that “Americans’ leading reason for saving money long term is for retirement (49%).”

What vehicle are they putting their money into given the current state of Wall Street and the paltry earnings from a simple savings account?

An article in Forbes highlights a new fintech that thinks have an answer, Save Advisers. As described by Donna Fuscaldo, Save Advisers is “gearing up to launch a FDIC-insured savings platform this summer it says is a low-risk way to earn a higher yield. Taking a page from robo advisors, customers open a savings account with a minimum of $1,000 and instead of getting a fixed rate of interest, Save invests the customer’s interest in a portfolio of ETFs that cover stocks, bonds, real estate, and commodities.”

Donna ads “the returns vary based on the market but is averaging around 3.2%. That compares to a high yield savings account which gets you an average return of around 1.6%. If Save doesn’t deliver a return, the initial investment remains intact.”

A quick glance at Bankrate shows that 1.6% isn’t an average. It is the highest rate you can find from a direct-bank. Most of our savings accounts are paying south of 1%, makinf 3.2% very attractive.  How can banks and credit unions compete with such yields?

EQ bank in Toronto is also playing the high savings rate game. They are paying 2% which is about 40% higher than what you can find from Canada’s big five.

In an article in The Financial Post, Mahima Poddar, EQ Bank’s senior vice-president of Digital Banking and Strategy, notes that the high savings rate strategy “involves making a sacrifice now in order to attract new clients.” She believes they’ll stay with EQ in the long-term and that’ll give the bank an opportunity to make its investment back.

The strategy seems to be working. The article notes that “EQ has been signing up new clients at more than double its regular pace. This new wave of clients is the second-largest EQ has seen since opening in 2016.”

Apparently, they aren’t the only ones. Other small banks throughout Canada are also offering higher rates now to take this opportunity to gain customers from the five banks that dominate the market. “There are at least 12 other financial institutions in Canada offering interest rates at or above two per cent for savings accounts, with the highest being LBC Digital’s 2.25 per cent.”

We wonder if we will see this trend move south to the US. With rates around 0.8% in some of our savings accounts, perhaps customers would be happy to move for a rate like  EQ’s or Save Adviser’s.

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