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New challenger online banks have had few reputational issues. Mostly not associated with the 2008 financial crash, they have benefited from enlightened regulation and a modern approach towards mobile, digital banking.
Their customer proposition depends on a data driven approach designed for millennial, early adopting professionals with shrinking loyalties. They are rich in apps, biometrics, facial and voice recognition. Their popularity is underlined by BACS which reports consistent growth in the number of consumers ‘switching’ their accounts.
They also have no branches and little opportunity for human contact. In the case of Tesco, they want customers to open an account with no human intervention while Tesco’s shop front synergies are limited to up selling via leaflets at the till. AI has replaced the predictive functions of the traditional bank manager in a world where customer contact too often depends on an algorithm that often reports back to the algorithm that sent it.
What they all have is data, and that’s what was stolen from Tesco Bank, in what the FCA says calls an unprecedented attack of its kind.
The problem with data driven relationships is that they lack empathy just when it is needed most. They lack the ‘pull’ of human interaction. They have usurped the customer relationship and still has far to go before adding to it.
This poses a problem. While customers, commentators and the regulator will assume the Bank will take immediate steps to mend its tech, of greater interest, and far easier to evaluate, will be how it interacts to deepen relations with its customers.
Tesco Bank CEO Benny Higgins has put a brave face on the news, doing the rounds of TV studios, offering apologies and reassurance. Faced with a growing backlash however, a CEO under pressure needs real time analysis to help rebuild internal motivation as much as his customer relations. To do so, he should depend on the data on which his customer proposition depends, to decide on how best to proceed.
The challenge he faces is not limited to reputational risk arising from the hack. Customer engagement has not been a priority for digital organisations whose transformation has depended on replacing human contact with technology. The role of data as a ‘pull’ factor, particularly in customer engagement, where insight is information advantage, is dangerously underestimated, and especially so in times of crisis.
Instead, digital organisations in all sectors need to ask themselves where their customer insight is being fed back into. Across the business? To intelligent people who know how to intervene in the data set, to collate, extrapolate and share it?
While bank customers depend on tech to meet their human needs, they still want to know that there are humans employed and systems that manage cyber risk and cyber risk strategy. Regulators in the UK and across the EU treat this as a hot topic and one would expect Tesco Bank to be asked to explain their cyber risk management strategy and action plan.
Perhaps Mr Higgins should ask his customer facing teams what they are doing to engage his customers? How are they engaging, with whom is data being shared? In the knowledge economy, management must know what to do. A crisis is no time for guesswork. Time is limited when fast customer response insight needs to flow across silos.
He should also focus on his associates. How can a CEO reach out to customers if staff, particularly the customer-facing ones, are facing the other way? The interrelationship between contented customers and engaged employees is a virtuous circle. When the two coincide, the circle is complete. Employees are just as likely to jump ship as customers if they feel excluded, or disengaged, and Mr Higgins will not be able to rebuild his customers' trust without them.
More generally, are the top leadership teams at board level comprised sufficiently well to drive the CEO’s focus? Despite a reducing customer interaction, the board must have leaders that can empathise and understand the customer and their likely future habits to champion further innovations delivered in digital channels that meet best in class security standards that satisfy the reasonable expectations of customers and the regulatory authorities. If the top table leadership team is lacking, so will be the response and reputation risk incidents such as what happened to Tesco Bank will continue to occur, further eroding public trust in financial services.
As I write, of the Bank’s seven million customers, only 20,000 appear have been affected. Collateral damage is harder to measure. Talk Talk’s share price has yet to recover from its hack in 2015 and Tesco Bank’s tech savvy customers are unlikely to remain loyal to a tech driven financial firm that lets them down.
In a world where disloyalty is replacing apathy, data driven financial services works both ways. The more providers know about the customer, the more innovative they can be. The more they engage their customers, the likelier they are to keep them.