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FAQ: Omnichannel in Banking

Learn more about Omnichannel in banking in our frequently asked questions.

Definition

What does omnichannel mean in the context of banking?

Omnichannel has become a real buzzword. Usually, it is taken to mean the linking and orchestrating of different interaction channels in a way that, from the customer’s perspective, is as seamless as possible, in order to provide a good customer experience. In the context of a bank, that means that customers can choose the channel that suits their needs, change it when they need to, and use it without interruption to take advantage of their banking services.

Relevance

Why is this topic relevant for banks?

As a result of the growth of booking portals for travel and e-commerce over the last 20 years, customers of all ages and across all segments have long become accustomed to taking control of their own affairs. Banks continue to place great value on personal contact and remain dependent, for a number of their processes, on physical touchpoints, such as the delivery of documents by post. This is reminiscent of where large department stores were around ten years ago. They were overtaken by resourceful online retailers in a short space of time and are now fighting for survival.

The majority of customers have now moved on considerably from where they were just a few years ago. When they order a product or service, they want to configure it themselves and start using it straight away. They want to be able to see status of their order instead of being kept in the dark for several days, waiting on a letter from the bank.

Like the retailers mentioned earlier, traditional banks are being challenged by pure play providers, which, at least in relation to digital channels, are continually setting new standards.

Challenges

What are the most common omnichannel-related stumbling blocks for banks?

Often, banks are too well-meaning and want too much at once, as they assume they have to merge all possible interactions across all channels and for all customers in a very short space of time. This type of ambition is not compatible with the banks’ established structures and system landscapes, and is an example of an attempt to implement too much.

In addition, there is the structural challenge of what is known as the ‘omnichannel trap’: the attempt to further develop traditional channels (branches, agencies, call centres) and online channels (portals, e-banking, mobile banking) and integrate them to a viable extent, which places an enormous financial strain on the bank. An omnichannel bank must invest in all three areas, while a neobank purely focuses on the online channels and gathers relevant expertise.

We are currently seeing many banks that, out of necessity, pursued supposed ‘silver bullets’ in the form of omnichannel standard solutions and then realised during the implementation process that the solution was not suitable for them, was difficult to adjust or left significant gaps.

Finally, there is a considerable cultural challenge. The transformation will not be successful if digital channels and their integration continue to be viewed as hygiene factors and enablers of traditional business. Employees need to recognise and understand the advantages, and they need to adapt. This process takes time, as we know only too well from other sectors.

Are there alternative approaches to omnichannel?

Even for conservative banks, closing themselves off from the digital world is no longer an option. In light of the complexity and the omnichannel trap outlined above, small and medium-sized banks, in particular, have to ask themselves which role they would like to play. If they would like to play a leading digital role, then a ‘digital-first’ strategy would likely be a simpler choice. By that, we mean a conscious shift away from trying to tailor existing bank infrastructure to multiple channels by spending a lot of money.

Instead, a flexible banking system is cultivated, in a similar way to a neobank. This primarily works in the digital space and may only appeal to a section of the bank’s customer base. Gradually, this is then supplemented by meaningful multichannel functionality, such as face-to-face consultation solutions and other business areas, including financing and provision.

We also believe that a bank that uses this strategy will be able to free itself from monolithic applications and inflexible processes, therefore securing itself a place in tomorrow’s world.

Armando Paz Zühlke
Contact person for Switzerland

Armando Paz

Senior Business Development Manager

Armando Paz is Senior Business Development Manager and since September 2020 at Zühlke. Armando has been working in the IT environment for over 15 years with a strong background in financial services. His employers have included companies such as Union-Investment, Bloomberg, Fitch Solutions, State Street and start-up Fintech Tagmydeals. Armando holds a B.A. Hons in Business and Management and a Master of Accounting and Finance. His focus is on sales of software solutions and consultants to banks and insurance companies.

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