BOSTON: Banks around the world are having to restructure their operations in order to provide customers with the service they expect across both physical and digital channels, a new report suggests.

Boston Consulting Group first observed the need for what it termed “bionic transformation” two years ago, since when the imperative has intensified.

In Accelerating Bionic Transformation, the management consulting firm, noted a widening gap between top banks and the rest of the sector, in terms of net operating profit and net profit per customer.

But much of that is down to traditional cost-saving moves of cutting staff and branch numbers which cannot sustain future growth – that will depend on addressing the “service expectation gap” between what customers want and what they currently receive.

The study observed a shift away from traditional banking, as 43% of survey respondents said they preferred digital-only experiences; the same percentage wanted a mix of physical and digital – “a hybrid banking experience in which digital tools and capabilities combine with human input and advice at the moments that matter”.

To enable that kind of experience, banks must go bionic, said BCG, a process that consists of three interrelated elements.

First is combining digital and personal interactions to create a more responsive and cost-effective distribution model, including the creation of multiple branch formats based on expected changes in customer behavior, product mix and profitability.

At the same time, CRM systems, next-best-action tools, and other digital enablers can improve the quality and quantity of customer interactions. BCG’s research indicated that “banks that move to this type of bionic network can see revenue gains of 5% to 15% … and increases in customer satisfaction of 10% to 15%.”

Second is a value proposition that combines human judgment with data power. “More effective value-based pricing practices could allow banks to add as much as 15% in revenue over six to 12 months, while improving customer impact,” the study said.

Third is the adoption of a customer journey mindset with end-to-end processes that are supported with robotics and machine learning to reduce process intensity and improve customer satisfaction.

“Retail banks that digitalize their most important customer journeys can see a 5% to 20% boost in revenue from improved service, increased relationship manager (RM) capacity, and enhanced data-enabled offerings,” BCG reported.

Data sourced from BCG; additional content by WARC staff