SEPA: How to Stand Out in a Standardised Marketplace?
The consumer spoke, and banking regulation answered with the single euro payments area (SEPA). As such it can be argued that SEPA is driven by consumer demand. Therefore, the ultimate goal of SEPA, its whole raison d’etre, is to enhance customer experience and stop banks competing on product and price.
When SEPA is fully in force, and banks have to be able to offer standard cross-border payment products to customers by January 2008, banks will need to think carefully about how they can offer value-added service. In addition, today’s consumer is more powerful than ever before, especially as the increasingly savvy consumer is no longer willing to stay with the same bank year after year. Instead, they are keen to shop around for the best deal and are looking for the highest level of service and the best value on the market. Banks should take SEPA as a warning and listen to the consumer a little more.
The SEPA environment is the equivalent to a town market where everyone is selling the same thing. In this situation, which market stall would the consumer choose? They will respond best to the one that offers the most effective service and best fits their need. The same rules will apply to the new SEPA banking environment.
It is going to be a huge cultural shift for banks and they are already struggling to keep up with the aggressive timeframes. It was recently announced by Gerard Hartsink, chairman of the European Payments Council (EPC), that banks are unlikely to meet the 2008 deadline for SEPA direct debits. This comes as no real surprise as there has been continued debate on banks’ ability to meet the 2008 deadline. However, SEPA is still going to happen and if there is a delay then banks should take advantage of this extra time to tighten up their strategies.
Banks may consider the following three actions in terms of how they approach SEPA. Firstly, some may choose to leave the market of cross-border payments and outsource these in an attempt to limit their costs. Secondly, some banks may decide to specialise in cross-border payments. But thirdly, and most significantly, many banks may examine and overhaul their processes to ensure they can deliver the best possible customer service within this standardised marketplace – in short, they are trying to make their market stall the one with just the right products and the most helpful and attentive staff.
SEPA will undoubtedly utterly destroy a bank’s ability to compete on cross-border products by price or product type. So for those that do continue to offer cross-border payment products, competition has to be around more subtle areas, such as customer service and efficiency. Similar analogies can be made in the telecoms arena, where multiple companies are often essentially offering a very similar service. The way the company can excel is through how effectively they can sell to and service the customer.
Without doubt, successful customer relationship management is the key to succeeding in the increasingly competitive banking arena. This is the area where banks can truly set themselves apart from their competitors. It is possible for banks and financial institutions to seamlessly tie cross-border payments into the full customer banking experience with fast, effective and efficient processing of customer requests.
Banks should actually embrace the opportunity SEPA provides, which lets them stand out in the area of customer service. By acting fast and examining existing customer service policies and technologies, banks can potentially benefit from SEPA while others struggle to keep on top of the legislation.
The key to improved customer service is the ability to treat each customer as an individual. It is incredibly frustrating to be mis-sold something or to have to repeat details to a bank time and again. The other key to improved customer service is speed. In the case of processing payments, the phrase ‘time is money’ could never be more accurate in terms of charges and interest incurred if there are delays. Banks and financial institutions must ensure they can process customer requests swiftly and efficiently, this involves enabling the front office systems to exploit critical data maintained in back office systems.
Cross-border transactions are an example of a customer approaching a bank proactively. In this case, the customer is initiating the conversation and it is an opportunity for the bank to open the conversation to a wider selection of services that may be of interest to the customer. But this can only be done effectively, and be of real benefit for both parties, if the bank truly understands the customer.
By eliminating silos and providing predictions, not assumptions, through multiple business dimensions, it is possible to deliver a ‘customer segment of one’. This means that a unique recommendation can be generated at the touch of a button. This will enable the bank to better understand the customer’s needs, their past behaviour and what type communication they will respond well to. It is about setting the guidelines for a productive conversation. A customer should not feel as though they are being ‘sold’ to, rather that the bank understands their needs and responds to them in the appropriate way.
Ultimately the bank’s customer service model should ensure that all communication between the company and customer is appropriate and the best fit for both parties. One way of doing this is to follow a ‘next best action’ approach, which (as it implies) prompts the bank to offer the most appropriate action for the consumer. This approach enables companies to deal with their customers in a dynamic, real-time and guided way.
Revolutionising customer interaction, management and insight is the solution to delivering the customer service that will excel in the SEPA environment. By embracing this methodology, a bank can succeed in the increasingly competitive banking arena. In such an aggressive market where it is so easy to change bank, it is the only way banks will differentiate their service and reduce their customer churn.
Regardless of whether SEPA happens in 2008 or 2009, one element a bank can be certain of is that by enhancing the existing customer experience model they will be well prepared for, and may even welcome, the legislation.