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Silicon Valley millennials are demanding face to face and personalised banking services because they do not trust the internet says David Coombs, head of multi asset investments at Rathbones.

Coombs says he has been told this ‘jaw-dropping’ information by two very different US banks, both of which he has invested in.

Speaking to Global Investment Megatrends about the broader technology and AI trend, Coombs says that simply digitising a business can go very wrong, while many successful strategies often have an analogue component.

He says that First Republic Bank, headquartered in San Francisco with many Silicon Valley clients offers an app to clients but its most important function is to give all the telephone numbers and contact details of the whole team the customer engaged with.

“It might be the wealth manager, the financial planner, the admin person, the person looking at their loan. They have 24/7 contact details of all the people they need to interact with to give them that personal service. So that’s the digital strategy, the customer experience.

“It is really important for millennials, which might seem odd. We might think all they want is whiz-bang stuff, lots of charts and things they can fiddle with and no interaction with human beings.

“Actually, they found that was not the case. Millennials were much more inclined to want personal service and a human being because they don’t trust the internet. They have been weaned on it and there is so much fake stuff. They actually prefer personal service.”

He says the view has then been confirmed by retail bank US BanCorp.

“They said they were investing more in their branches and we ask surely younger people don’t want branches? To which they said: “No actually millennials are going to branches more often older people do.””

He adds: “Millennials don’t believe the guidelines and the terms and conditions they are clicking on. They actually want to ensure they going to get what they paid for, they want to speak to a human being and say: “Can I trust you? If I fall off of the ski lift is my health insurance going to pay out?”

He says such branches are now less places for tellers and more for offering customer assistance almost like car showrooms or ‘customer windows’ into the business.

“So that is a broad-based wealth manager/private bank and a retail and commercial bank both saying millennials want human contact and we are going to build our business around that.”

Digital Nirvana

Coombs suggests that many firms have a digital strategy but don’t properly define it.  

“It’s not just saying let’s have an app. We’re selling apples on the on the high street. Let’s sell apples on the internet. That’s not a digital strategy. A digital strategy for me is where a company embraces technology to improve its profitability and also improves the customer experience.

“If you can use technology to improve your margin, and improve customer driver revenue and margin, that’s Nirvana. You don’t want to be the company that just improves operational efficiency, but loses customers.

“A lot of firms will embrace technology but do it really badly. You have to be more precise and not make bland assessments.”

Good strategy: bad strategy

For examples of bad practice, Coombs highlights supermarket automated tills, suggesting customers should get a 5% discount for doing it themselves.

“I’m getting a worse experience, in my opinion. Because I’m over 50, I don’t want to do it myself. Getting permission to buy some beer, for my age seems completely stupid. So that’s a great example of a digital strategy, a technological strategy that just isn’t working. Some groups are going to bring an app to help you around the store. But it is still you doing it yourself. Shopping with a phone in my hand and a basket? I am still doing all the work!”

He also identifies firms that have understood how digital and AI can work. In the US, he says Rentokil are using AI to bring huge efficiencies to what was a messy and disparate IT system resulting from the expansion strategy of acquiring small businesses in all the major cities.

The increase in efficiency using AI is really important for customers, not least because pests in the US can be life threatening.

“So, the pest controllers can do two more visits in a day. It’s more profitable, more efficient. They can get to more people, more quickly, and if they get emergency calls, a same day visit, not 24 or 48 hours later.”

A strategy to resist Amazon

Coombs says that the Home Depot, which he doesn’t currently own as a stock, is another very good example of a firm that have properly combined digital and the personal.

“In the US, they have employed an app but they’ve realised that the average consumer doesn’t go into their store to browse the screwdriver aisle for half an hour, to see what colours are ‘in’ this year.

“People are in a rush on the way home from work. They have an app that says if you want the left-handed screwdriver with an orange handle, it’s in aisle six, shelf two, bin three and that is customer experience enhanced.”

He adds that they have also put up much more specific signage – not electricals but perhaps plugs and sockets.

That allows the Home Depot to compete with Amazon and mom and pop shops.

They also have a combined strategy on the trade side where along with the digital communications, customers get a trade manager they can ring.

“The trade manager knows exactly where the building site is. They get them their fifteen taps, and they give them three months free credit, which you can’t get from Amazon. They have realised you can’t compete on price with Amazon, you have to bring a premium approach to where the customer sees values but it is also about how you work it with a human being.”

He says it is vitally important to understand this trend and not just to identify the losers.

“The trend is sharper, quicker and the failures are going to be spectacular too, late adopters and those without deep pockets.”

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