Innovating Customer Service: Retail Banking’s New Frontier

How does a retail bank innovate? Traditional innovation literature would suggest that organizations innovate by getting new and/or improved products to market. However, in a service, the product is the process. Thus, innovation in banking lies more in process and organizational changes than in new product development in a traditional sense. This paper reviews a multi-year research effort on innovation and efficiency in retail banking, and discusses both the means by which innovation occurs along with the factors that make one institution better than another in innovation. Implications of these results to the study of the broader service sector will be drawn as well.

Innovation in banking is not that easy. The industry has to contend with a tangle of regulations acting as “speed bumps” that can slow down product and marketing innovation.  Before introducing new products and sometimes even new marketing programs, banks have to consider such factors as privacy laws, debt security guidelines, and fair lending practices.

The other problems that banks face when they are innovating are:

Internal structural problems: The product companies have a R&D of there own, this is not so in case of Banking, so who will innovate.

Two other forces — risk aversion and inertia — can tamp down the urge to innovate. Banks must be exceptionally careful not to over-complicate their offerings, because product confusion can undermine the confidence the consumer must have in the bank to trust it with their money.

So what are ways to innovate in  case of banking esp Retail Banking,

Well, when we are going to put in Banking take care of two things:

• Put the customers First: Whatever product you are selling make sure that it satisfies the customers needs. A transport swipe card in America, will not work much, because people prefer to go by there own vehicles, where as in Hong Kong, where public transport is given much preference, people will  accept it with both hands. How can this be done. Well here are a few ways:
  1. Internal structural changes; Break down the wall between sales and customer services.
  2. Clearer organizational processes can help make it possible for innovations to develop on a regular schedule.
  3. Drawing clearer distinctions between those parts of the offering in which line managers are allowed to experiment and those areas they must not touch can also contribute to higher quality innovation. Such controlled, modular architecture can make it easier for experimentation to occur in lower risk areas while keeping core offerings stable.
  4. Banks should look for new insights from the existing customer data. An example of this would be, credit cards marketed to NASCAR fans — featuring a picture of their favorite driver — it has been seen that such cards have performed better than other cards, although the card itself has the same benefits as plainer versions.

• Keep it Simple: The next thing that needs to be done is to keep the things simple.Do not over complicate the matters or in other words services. “Keep-it-Simple” offerings are likely to be the industry’s big winners, just “very simple products that meet their fundamental needs.”

So in the end it could be said that those banks which will innovate and innovate with ease will the ones, who will get the maximum out of this saturated market.