In banking, it is essential for the bankers and sales representatives that they understand their clients. It is important in consumer banking, while it is essential in corporate and SME banking. The corporate sales people need to provide the right advises, they strive to understand the needs of their clients so they understand what sounds best to their clients.
The banking industry is changing. The customers nowadays, are seeking high-end professional advises more and more, partnerships with the banks and the true mutual understanding. There is a shift from selling the financial products into the advisory, even of it would mean smaller revenue from that particular client in the short run.
The banking relation is not based on providing the financial products, pushing products, which are in marketing campaigns, but rather on understanding the client needs and matching them with products and services of the bank, other financial institutions and non-financial partners. The bank products today are standardized and resemble traditional commodities, created with the goal of matching as many clients as possible. The bank products of tomorrow are flexible enough to meet the individual needs of the clients, especially the clients, which are important to the bank. The product flexibility and its quality is key when banks want to please the specific and individual needs of their customers.
The banking industry is evolving and two types of banking and financial institutions are formed:
- Advisory banks. The banks, which have the direct and trusted relation with their clients. Such banks will be advising their clients with the right financial decisions, finding the best fit for them in sense of the financial products as well as non-financial products. The relationship will go “beyond banking”. They have the complete picture about the client, what they do in their bank as well as in other financial institutions. This kind of banks will be viewed as the preferred partner for their clients.
- Commodity banks. The banks, which concentrate on creating financial products with the best features, the best flexibility, the lowest fees or the right combination of all of the above. Such financial products and services are viewed by their clients as a list of commodities with prices, fees, margins and product portfolio. The same commodities are offered by many banks and once a new bank comes with better conditions on a specific commodity, it will attract a lot of new clients. It is a tough competition banking market, where the client decisions are driven by the pricing and other relevant conditions.
To become an "Advisory bank" means to view the products and services from the client's point of view. If it means that for the customer it is better to go to another bank, the best advice to the client is to offer the other bank’s product. From the short term it means that I could even recommend a product of my competition to my home client. In the long run I keep the customer based on the advisory relationship.
If the current banks are not willing to turn into Advisory banks, other institutions will become their advisers. Then the current banks would turn into a Commodity banks and compete hard on the conditions with several other commodity banks. The commodity banks will not understand their clients, while the Advisory banks will be viewed as the prime banks by the clients. The clients will not be listening to the commodity banks, but to their true advisers - the Advisory banks.
The digital tools that Advisory banks needs are:
Multi-banking – the bankers in the role of advisers need to understand the full financial picture of their clients.
Nano-Segmentation – the way of grouping customers into small segments, in which the customers have similar behavior, needs and preferences as well as most likely similar future behavior.
Digital Financial Adviser – the automatic advising functionality, finding and suggesting the right offers to the right customers at the right time. These are the financial offers as well as non-financial offers which go beyond banking.