a customer-centric approach to regulatory compliance · a customer-centric approach to regulatory...

A Customer-Centric Approach to Regulatory ComplianceTrends and Tips for Success

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The need to avoid financial and reputational damage from the consequences of regulatory noncompliance is causing many banks to change how they operate. According to KPMG’s Evolving Banking Regulation 2013:

Europe“Regulatory reform is perhaps the biggest driver of change.”

Asia“Business models are being impacted by regulation.”

USA“New rules can lead to huge fines.”


Consumer dissatisfaction is also a force for change, as banks take steps to retain and build valuable relationships amidst declining customer loyalty.

E&Y Global Banking Outlook: 2013–14

“…reduced customer loyalty, which challenges retention and cross-selling assumptions.”

“Many existing models depend on cross-selling assumptions. With more customers becoming multi-banked, those models will cease to add up.”

E&Y Global Consumer Banking Survey 2012

“Customers are more likely than ever to switch their main banking relationship.”


Can you satisfy both banking regulators and consumers?


Yes, by focusing on improving customer experience, you satisfy both regulators and consumers.


What regulators say aboutbanks affects consumers:

...raise serious concerns about howbanks treat their customers...

Help the consumer to...

Bank will not impose fees for...

Customers Are Now Banks’Greatest Regulatory Threat

What consumers say aboutbanks affects regulators:

...one of the worst serviceexperiences I could imagine.

You’d think they could at least have...

Another reason to hate this bank.

Feds Will Monitor Banking Customer Experience ...will monitor social media to identify problems

Why customer experience matters, more than ever


...bank fined record £28m for ‘serious failings’

Banks pay for past sins as US, Europelevy record fines

Bad behavior can be expensive

Poor customer experiences can be very costly

Great customer experiences can be very rewarding

Customers who are promoters of their primary bank buy 14% more than detractors

Fully engaged customers represent a 23% premium (share of wallet, profitability,

revenue) over average customers;

Actively disengaged customers represent a 13% discount


“We see leading banks shifting from a narrow, rules-based, technical focus to one that extends to business acumen, improvement of the customer experience and operational understanding.

Without a new approach to compliance and operational risk management, many banks will continue to face high costs and losses in the form of escalating litigation, penalties and staffing needs.”

Managing Compliance and Operational Risk in the New Environment, PwC, Aug. 2013

In fact, customer experience is becoming essential for improving compliance.


Make sure you’re treating customers fairly and consistently within segments

Pick up early warning signals of compliance risk

Comply

CompeteUnderstand customers and anticipate their needs

Engage them in ways that increase loyalty and drive revenue and profit

The more you focus on customer experience, the better you can:


Case in point: Consider the misstep some US banks made in 2011by trying to charge fees for debit card transactions. In her article, “Why Customer Experience Management Is the Antidote to Risk,” Patricia Sahm, of Carlisle & Gallagher Consulting Group, says that if these banks had paid attention to data showing that consumers abhorred such fees, they could have avoided the ensuing damage.

Within days...there were very public and loud outcries from consumers. In the end, many banks retracted the fees, but at a significant reputational loss and regulatory scrutiny, says Sahm, “could have prevented the introduction of risk to the system in the first place.”

n>genuity Journal, summer 2013


Ways to improve customer experience


87

Act as one bank to Jane

See Jane as one customer

Operationalize actions by using decisionengines and intelligent communications thatorchestrate the right actions at the right timethrough Jane’s preferred channels.

At the same time, these technologies capturean audit trail of all interactions with Jane, including operational decisions, inputs and outputs—so you can easily demonstrate regulatory compliance.

Analyze data across accounts and channels to make decisions that reflect the full risk and value of the customer relationship with Jane.

At the same time, analytic models help ensure that you’re treating Jane fairly and consistently in relation to customers with similar risk/reward characteristics.

DEC

IDE

LEARN

One way to simultaneously improve compliance and competitiveness is to put the customer at the center of your operations.

Advanced analytic, decision and communication technologies help you see ONE customer (rather than unrelated accounts) and act as ONE bank (rather than uncoordinated channels and lines of business).


Philippe, an existing bank customer seeking a car loan, might apply in a branch, online from his smartphone or through another channel.

Whichever channel he chooses, Philippe experiences the same consistent originations process. The loan amount, rate and term he qualifies for is determined by the same centrally orchestrated exposure management stategies.

Monique, living in a different region and new to the bank, is also applying for a loan.

Her risk level and characteristics are similar to Philippe’s, so the centralized decision engine follows the same exposure strategy. The automatically captured audit trail means the bank can prove it is treating customers fairly and consistently.

Decision engine centrally manages risk

exposure strategies

It’s also helpful to centralize some analytic decisioning resources, making them available as services to your existing systems.Using the same process across channels for existing and new customers enables you to prove you’re treating all credit candidates equitably.

CUSTOMER-FAC I N G APPLICATIONS


These technologies have also proved very helpful to FICO clients working to improve customer experience:

Mobile self-serve interactionsReduce friction in customer relationships by making fraud checks, collections reminders and other types of interruptive contacts fast, easy, convenient and discrete.

Also help you insure you’re treating all customers properly. For example, you might automatically send loan applicants a text message confirming the amount and key terms. Consumers then confirm they want to go ahead—and every step in the dialog is captured in the audit trail.


These technologies have also proved very helpful to FICO clients working to improve customer experience:

Speech and text analyticsImprove regulatory compliance and reduce conduct risk exposure by analyzing ongoing speech or text interactions with consumers. For example, these analytics can prompt agents who fail to make legally required disclosure statements at the right time in the conversation. They can also immediately alert supervisors to agents using inappropriate language or improperly making promises or threats.

Also be used with predictive analytics to identify the precise conversational patterns of your best agents. The insights help you focus and accelerate training to help all agents emulate the best.


Find out more about improving customer experience by downloading our white paper on the subject.

Insights #75: Satisfying Customers and Regulators: Five Imperatives It covers five imperatives, from the customer’s point of view:

“Treat me fairly”How to avoid becoming the target of complaints and increased regulatory scrutiny by making your operations more customer-centric

“Make this fast, easy and secure”How to increase speed, ease and security in customer transactions across all channels

“Assist me and reward me”How to build customer trust, loyalty and advocacy through a succession of outstanding experiences

“Don’t interrupt me unnecessarily”How to minimize friction by reaching out with relevant communications within customer-preferred channels and times

“Understand me and show it”How to let your customers know you understand them and value their business

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Meet the rising expectationsof regulators and consumersFocusing on customer experience is the best way to do both

Learn more:Check out our website and blogs:

FICO.com Analytics SectionFICO Banking Analytics Blog

FICO Labs Blog

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