Actionable Insights From APT's Retail Practice

The Channel Migration Challenge

April 20th, 2017 | Posted by APT in Financial Services

When asked about future strategies, APT research shows that financial services institutions (FSIs) consistently report a focus on enhancing omnichannel offerings to meet the needs of a rapidly evolving customer base. Specifically, 60 percent of banks surveyed highlighted channel migration as a strategic priority, and 100 percent of those respondents said they are focused on improving digital onboarding processes to accelerate this channel migration.

Based on those findings, it is clear that banks aspire to create a seamless experience across channels and reduce reliance on the branch for transactions. This is a win-win shift for FSIs and customers alike. For banks, there are significant cost savings, and customers gain a more convenient and seamless banking experience. Further, research from Bain indicates that omnichannel customers are more loyal to their primary bank than those that only bank in one channel.

While FSIs clearly understand the benefits of channel migration, most are still refining their channel migration strategies. It can be difficult to understand how to most effectively migrate customers to online and mobile channels, especially given the risks to both the bottom line and brand reputation involved with attempting to shift customer behavior. In an increasingly omnichannel environment, it will be critical for banks to determine the right channel mix for each customer to drive satisfaction and maximize profitability.

Banks first should understand the customer journey for each type of transaction, and how it varies by customer segment. For example:

  • Are tech-savvy millennials still more likely to take out a loan if they can speak to a branch manager in person?
  • Will more tenured customers stay with the bank even when digital kiosks replace many teller transactions?
  • How will shifting product offers to online banking portals and mobile apps impact cross-sell?

Banks will need to answer these questions and more to optimize their channel migration strategies for maximum impact.

While some FSIs try to drive traffic to online and mobile platforms through customer incentives, they need to ensure they understand the true impact of these promotions on key metrics like balances, cross-sell, and retention. For example, HSBC will compensate customers a year after they open an Advance or Premier account if they register for mobile or online banking within 60 days of opening the account. But does this type of promotion drive lasting value by enticing customers to actively use omnichannel platforms, or are they merely redeeming the reward without shifting their long-term banking behavior?

Online and mobile incentives may be effective with some customers, but attempting to shift the behavior of customers that value in-person interaction could lead to lost business. This is a critical consideration, especially as banks refine their network strategy and select branches for closure. Customers that are less inclined to shift to mobile channels if their branch is closed have a higher likelihood of attrition. Banks need to quickly identify these customers and understand which outreach strategies are most effective in maximizing retention.

The seemingly infinite combinations of product offerings, channels, and frequencies necessitate robust experimentation. By testing different outreach variations, FSIs can hone in on the optimal communication strategy for each customer.

To learn more about how banks can ensure they are targeting the right customers with channel migration communications and incentives, watch this video.

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