Technology and innovation in European banks

European banks are focusing their technology efforts on customers.

Innovations in online and mobile platforms, video banking, social integration and customer relationship management (CRM) are taking precedence to connect with the customers on a virtual level.

Head of electronic channels at the Spanish bank, La Caixa, Benjami Puigdevall Esteve, says innovation is the only key differentiator banks have from their competitors.

The bank, which won global innovator at the Accenture and Efma distribution and marketing innovation in retail financial services awards in Paris this week, has been striving hard to deliver innovative technologies for their customers.

Banks must use technology to form a closer relationship with customers. Innovative technologies, such as La Caixa’s multi-channel private banking solution, The Wall, and online multi-device service, Recibox – which enables customers to manage bills and direct debits – do exactly what they are supposed to.

The everyday bank

But a closer relationship is not enough. Banks must connect with their customers every day according to Piercarlo Gera, global managing director of distribution and marketing services at Accenture.

“The most important banking sectors will polarise between winners and losers,” he says. “And the winners will multiply the number of interactions with customers.”

To be successful in the market, banks must engage every day, and to do this they must also promote and sell non-financial services.

A typical bank has around 40 conversations per year with its customer, and by combining a product push with a customer’s behavior online, banks will have an opportunity to do this in every day.

He calls selling both financial and non-financial services a “platform of services”, using buying a house as an example: Banks must also become real estate agents and give customers possible homes to view, as well as provide mortgages, home insurance, and financing. It’s not just about a closer relationship with the customer, but about becoming more convenient and relevant.

The bank must use its digital and online channels to increase the conversation rate and promote these services at the right time. This “platform of services” should be tailored to the customer by using data. “Like Amazon,” he says. “It’s constantly proposing products which fit the customer’s interest.”

Innovation is key

One clear message from the awards ceremony was technology innovation should be at the top of bank’s agendas.

But innovation needs to come from the top down within a business. “You can’t develop these types of initiatives without top management being fully committed,” says Esteve. “It wouldn’t work.”

La Caixa also encourages both its employees and customers to take part in innovation.

Amazon is constantly proposing products which fit the customer's interest

Piercarlo Gera

“You need to accept ideas from them [employees] and show a commitment to innovation,” he says while warning “you might see proposals you won’t like.”

Their customers submit ideas via a social network which began in July 2012. It now receives 200 ideas per month, which the bank welcomes. Esteve says: “The secret is to really involve your clients in all the phases and make them feel involved. Put them in focus groups, usability tests. Let them be emotionally involved in all the processes.”

Connecting with the customer: AIB, Ireland

Another bank discussing technology ideas with its customers is AIB in Ireland. It understands not all of its customers are digitally savvy and it believes it is important to demonstrate new technologies first hand to its customers.

Its tech-driven branch, The Lab, which launched as a pop-up in a Dublin shopping centre, in June 2013, aims to educate customers in using digital channels.

In Ireland, 84% of the population are online, but only 50% use online banking channels. AIB hopes to bridge this gap by using The Lab – a demo-area where customers can come in and learn about new technologies. Unlike a branch, it doesn’t take manual transactions – only digital.

“We’re taking the virtual to the physical channel,” says Mark Culleton, head of channel adoption at AIB. "It’s a bank’s objective to be a trusted customer service, and we’re using innovation and technology to do this. But it’s what’s behind the lab that is most important.”

AIB partnered with Accenture, Microsoft and Cisco to deliver its technology solutions.

Technologies include a digital avatar that welcomes customers into The Lab; a social media wall that uses gamification methods to encourage customers online with points; a self-service banking zone; a product zone for mobile and online demonstrations on a range of devices; remote advisors who provide face-to-face advice on banking via telepresence and an SME area where businesses can come and learn how to digitise using free of charge meeting rooms and teleconference facilities.

The Lab also has an innovation

zone which is a test-bed for trying out new technological developments, only this week AIB launched a tablet and money manager application that went through the test-bed. The bank invites customers through social media channels and gives them an insight on marrying technology with banking.

“The secret of our success is our customer-centric driven approach,” says Culleton.

Since opening five months ago, AIB has seen a 5% increase in online-banking activations, which it can attribute to The Lab, and it is also one of the top 100 banks for social media.

While there are no plans to roll out other Labs across Ireland, the technology will be adopted in other branches.

Digital first: New mBank, Poland

Another European bank that sees technology as incremental to its business and customer relationships is mBank in Poland.

Bank is a brand launched by the commercial Polish bank BRE Bank 13 years ago. It launched online and has a small portion of physical branches - around 15-20% of the branches banks of a comparable size in Poland tend to have.

While mBank has more advantages than a traditional branch, because it is accessible 24/7, Michał Panowicz, senior director New mBank says that mBank had been suffering because sales and advice from traditional branches was difficult to move into the online space. “We tried to build the service so it does offer a viable substitute to branches,” he says.

The New mBank, which launched in April 2013, was awarded for being the most disruptive bank in terms of innovation and technology, as well as an award for digital and mobile excellence.

mBank wanted to overhaul the technologies which delivered online banking to its customers. It realised online banking hasn’t changed since all the big banks jumped online during the internet revolution in the 90s.

“The experience and interaction model by banking industry at large is delivering the same in 2013 as 1995,” Panowicz says. “It’s the same mold – it’s about data, text, links. But at the same time, the digital life of our customers is completely different and changed incomparably.”

mBank decided to draw on modern digital life and research how customers see the online world today. It was inspired by what digital life looks like, and using styles and ideas from social media and websites such as Spotify and Pinterest it deeply changed its existing interface.

“We had a clean sheet of paper, there was no legacy that we were tied to.”

If we don't deliver, somebody else will

Michał Panowicz

The New mBank offers 500 different technology products including a virtual banking platform, with video banking, Google-like quick search, mobile banking, location based services, social integration peer-to-peer payments and personalized advertising.

“If we don’t deliver, somebody else will. It’s not OK to pretend to give customer model which is dated as retailers cater to consumers,” he says. “We need to be up to date.”

The change in the user interface was so drastic, that mBank decided to go for a soft transition. “It was a non linear change,” says Panowicz. “And customers are conditioned to the online banking standard.”

It used gamification to help with the deep changes. The notion of challenges and rewards to guide people through the service, by offering badges for completing different actions such as watching a tutorial or transferring money.

In seven months since the around half of its customers have transferred to the new platform, and the bank sees around 30% of transactions per day occur on the new platform. Additionally mBank has seen more customers interested in new products, while sales increase by 29%, due to the easy check out service.

Video Banking: Nykredit, Denmark

While some banks focus on multichannel experiences, telepresence and video banking has also been a popular way to connect with customer. Nykredit won the multichannel and customer experience management award for its Direct Banking platform, which enables remote personal advisors via telepresence.

Nykredit implemted the remote personal advisors in June 2012 to meet the needs of its Nordic banking customers who are traditionally more addicted to digital channels but still need 1:1 advise.

During a reorganisation of the bank in 2011-2012, Nykredit realised it had a number of existing technologies that it could use in a more coherent fashion to propose better value for its customers. This resulted in the creation of remote personal advisors via telepresence.

The implementation of out-of-hours video banking meant that peak moments of contact with the customer changed. Where the evening sales rate was traditionally low, it now sees a peak, so much so the bank is considering opening slightly earlier at the weekends for the same reason.

Karsten Knudsen, group managing director at Nykredit says customer satisfaction has increased by 7.5% over the past year, while employee satisfaction has also increased by 8.5%. ROI has also seen an improvement at an increase of 5% due to Direct Banking.

But where was the UK?

The UK has similar issues as other geograophies and there is a lot of innovation in the UK market

Piercarlo Gera

While innovation from banks across Europe was bursting from the seams at the Parisian awards ceremony, there was a significant lack of UK banks on the nomination list.

“The UK has similar issues as other geographies and there is a lot of innovation in the UK market” says Gera, noting Barclays as having a clear strategy with mobile, using its PingIt platform as an example of innovation. Barclays was the only UK bank to be nominated for the responsible business award for its Business Connector which connects small businesses and suppliers through an online community.

But Gera believes the UK is lagging behind when it comes to offering a platform of both financial and non-financial services.

“Major banks are working on a digital agenda,” he says “But with mobility, they are not yet working on an ecosystem strategy [selling other services with partners] which may be an angle for consideration for the UK.”

But the UK may just be lost in a crowded sector which is clearly innovating at a rapid rate. To keep up with competitors banks need to not only ensure that innovation is on the top of their agendas, but to also ensure technologies are simple for customer to adopt. And at that point banks can start to become “every day banks” by offering non-financial products and services through these new channels.

Winners of the Accenture and Efma the distribution and marketing innovation in retail financial services awards

• Digital and Mobile Excellence Award: mBank (Poland)
• Physical Distribution Award: AIB (Ireland) and Aktif (Turkey)
• Multichannel Customer-Experience Management Award: Nykredit (Denmark) 
• Customer Analytics and Big Data Award: Intesa Sanpaolo (Italy)
• Sales Effectiveness: Hana Bank (Korea)
• Responsible Business Award: BNP Paribas Personal Finance – Cetelem (France) and Maybank (Malaysia)
• Most Disruptive Innovation Award: mBank (Poland)
• Global Innovator of the Year Award: La Caixa (Spain)