Can Digital Government learn from Digital Banking?

 

 

Typically, objectives of Digital Government are broader than those of Digital Banking - ie in contrast of increased revenue and competitive advantage pursued by Financial Services, government projects often aim to improve socio-economic environment. But, there are similarities and it is not uncommon that Digital Government programs refer to operational efficiencies and other benefits that digitization has brought to the private sector. Considering that Financial Services is one of early adopters of e-business, what can we learn from:

a) customer uptake of their online services, and

b) impact of e-services on operations.

 

One-size-fits-all vs community-centric approach

According to ABS (Australian Bureau of Statistics) data [1] an uptake of online banking in about 72% (proportion of people who access services online). An uptake of online government services is lower (at this stage) - about 58%.Depending on which consultant you speak with, there are many recommendations on how to increase the use of e-services (eg better connectivity, better security, marketing). Let's see what Financial Services are up to.

Analysis of business customers shows that even though they have access to the same online banking options, their expectations and use vary. Whilst most businesses would use basic services (such as e-payments and access to account information), their preferences diverge for other categories of services. For example, this research [2] broadly segments businesses into tech-savy (36%), 'traditionalists' (28%) with moderate use of e-services and businesses with diverse needs (36%) that might be more effectively served in branches.

Further analysis of customer experience [3] suggests that different countries (depending on their socio-economic environment) have different customer profiles (defined by prevalent attitudes, including their willingness to use self-service). Both Australia and the UK appear to show a similar pattern for a relatively big proportion of 'self-sufficients' with moderate use of self-service. Canada and US seem to fall in a somewhat different group with a higher level of comfort with online options. Singapore and South Korea (that, by the way, get comparatively high rankings for e-government) have a relatively big proportion of 'new world adopters'.

 

Why is it relevant

It is not uncommon that Digital Government strategies are peppered with references to 'best-practices' and 'case-studies' that showcase high e-service uptakes levels and savings. These experiences may or may not be transferable and can lead to impractical or ineffective recommendations.Whilst there are common global trends in digitization of services, Digital Strategies that are tailored to specific socio-economic circumstances, cultural preferences and priorities of local communities should have good chances to optimise the uptake of relevant e-services and improve ROI (return on investment) of e-government projects.

The evolution of Digital Banking also shows that whilst technical capabilities of websites are important, success in meeting customer needs depends (at this stage) on optimization of service delivery across all three key channels - online/ mobile, call centres and physical offices. In particular, with respect to knowledge-intensive services (eg those that require judgement, advice, assessment, problem resolution) customers prefer human-to-human contact.

 

Service is a service is a service (?)

How have digital services affected operations? The latest update from the European Central Bank [4] shows that from 2009 to 2013

a) Financial Services branch network has been reduced by about 15%

b) workforce has declined by about 7%

These changes cannot be directly attributed to advances in digital banking, though - in part, they are due to such factors as the financial crisis and industry consolidation. In the absence of conclusive data, we can look at some general trends.

Many banks cite successful deployments of digital solutions that lead to branch closures - eg Royal Bank of Scotland [5] reported 200% growth in online/ mobile banking and 30% drop in branch transactions since 2010. A study of community banks and credit unions in North America [6] suggests a decline of 28% in the volume of teller transactions (from 2007 to 2013).

Whilst inefficient branches are being closed down, banks are also experimenting with new Digital Branch models. These range from small spaces equipped with video-tellers and self-service kiosks to handle transactional services to large flagship offices that aim to win new customers (and communities) over, showcase (or pilot) innovations and provide tailored services [7].

Why is it relevant

It is not uncommon that Digital Government Strategies set targets for the number of services that should be digitized. Moreover, modelling of financial benefits of digitization often makes a link between the number of services to be moved to the online channel and reduction of customer service staff.

The evolution of Digital Banking (so far) highlights that from the perspective of a longer-term optimization of service delivery two strategies become important:

1) cross-channel delivery that maps different types of services, analyses customer preferences and defines best channels (or a combination of channels) to achieve a balance between costs-to-serve, service quality and customer satisfaction; and

2) workforce management - re-training, up skilling, greater staff flexibility.

 

Few Digital Government Strategies deal with the above (at this stage). Some of the metrics that can provide an initial insight into channel performance are number of hybrid customers (those who use both online and off-line channels), channel abandonment rates, use of assisted support options, staff utilization. To wrap up: analysis of cross-industry lessons could provide a useful avenue for both uncovering weaknesses in strategies and, at the same time, discovering inspiration.

 

Sources:

[1] ABS, Household Use of Information Technology, Australia, 2012-13

[2] Ernst & Young, Global Commercial Banking Survey, 2014

[3] Ernst & Young, Global Consumer Banking Survey, 2014

[4] ECB press release about branch network -> https://www.ecb.europa.eu/press/pr/date/2014/html/pr140711.en.html

[5] Royal Bank of Scotland -> http://www.rbs.com/news/2015/january/rbs-and-natwest-improve-digital-banking-for-personal-customers.html

[6] 2013 FMSI Teller Line Study

[7] Rightsizing branch network:

Interactive digital branch Mbank - winner of Finovate Europe 2015 http://thefinancialbrand.com/50198/mbank-digital-banking-branch/

JPMorgan Chase -> https://www.chase.com/news/111614-branch-of-the-future

Bank of America -> http://www.charlotteobserver.com/news/business/banking/article9270371.html

TSB bank -> http://www.computerweekly.com/news/2240241392/TSB-bank-is-investing-in-bank-branches-not-closing-them

CheBanca! -> http://thefinanser.co.uk/fsclub/2015/05/why-would-a-digital-bank-have-branches-chebanca-case-study.html

 

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