Insightive.tv: Can you begin by giving us an overview of the state of digital contracting at Nationwide?
Tony: I suspect, that like lots of firms, it will be dependent on the product. For example, if you are doing a mortgage product switch, that is a fully and completely automated process. The same would be true of personal loans and credit cards — completely online, pre-authenticated with a digital signature. When you get to current accounts, it is entirely possible to go through the process online with a digital signature. But, for example, if you are opening a student current account this is dependent on the availability of your UCAS registration. So, although this process is automated, an individual’s experience may be dictated by where they fall out of that end-to-end journey.
Where we have the least digitisation is in our savings base. The reason being is that we have so many members that still prefer a passbook. They have the choice of a token, card or passbook. But the passbook does require you to have a wet signature, and this is still popular among many of our members.
Insightive.tv: Looking forward, what developments in digitisation are changing in the industry at Nationwide?
Tony: We are definitely seeing a switch. There is a growth in the number of people seeing the value in different kinds of tokenisation. Cards associated with savings rather than the more traditional passbook. The other thing that we are seeing is that, progressively, as people adopt digital applications to manage their finances, they are coming to want to manage these relationships holistically rather than singularly by product. Therefore, we are likely to move towards single convergence of single products, which will then allow us to work against that product set over time. And that will be the only way that real digitisation against the consumer demand will be unlocked. The same will be true of how you allow joint applications, which is very difficult to do in the current market electronically because purchases are tied to IP addresses.
We will launch, in the early part of next year, the first savings product released on our new strategic originations platform. You will be able to open up a savings account, end-to-end, deposit your balance, either from your debit card or elsewhere, and set up your online banking details immediately, without any wet signature being taken. But there will still be members that will prefer a passbook for this same service. So our real driver is, and always will be, is to give choice. But there is no doubt that digital adoption is growing.
Insightive.tv: How have you gone about developing your new digital processes — have you used third parties or developed in-house programs?
Tony: I think we are the only large scale organisation that has entirely replaced its core banking system. We used SAP as our partner to do that. On top of that, what we have done is build our own UI, UX and core interface. I believe strongly that you have to own architectural incident of the interface with the membership. We use partners to develop our technology, but we own the architecture, the design and the intellectual property.
Insightive.tv: Are the drivers for digitisation all about consumer demand, or are there internal drivers as well?
Tony: I think that consumer demand is really at the top of the list. And, in reality, it is the new generation of consumers. If you went back less than four years, when you thought about new business origination — new members, or current members purchasing new products — it would have been about 20% digital and 80% through other channels. At the end of the last year, it had become more than 50% digital. But we have not seen a reduction in volumes through our branch and telephone channels. We have seen our digital channels being additive to our new business flows. Which is why our market share and our market penetration has grown so aggressively and significantly.
When I look at drivers internally, there are a couple of factors. First and foremost it is about customer experience because it forces you to design from the customer in, rather than the organisation out. It forces you to reimagine how the organisation operates, rather than just re- engineering it.
Creating processes that are simpler for customers has the inevitable consequences of driving simpler and easier processes that have low costs and much greater reliance because you have fewer human interventions. Enablement for growth, customer experience, efficiency, improved control and resistance comes together to actually mean that mobile and digitisation is about much more than front office digitisation, and is about end-to-end organisation change. For example, earlier this year, we launched our new banking app. But this is really a singular platform for our member that will go across all channels. Progressively, even if you are engaging in the branch network, you will be purchasing through the same channel, on a mediated basis, that you would go through a non-mediated basis. This retains customer choice, but also creates a simplified process from our end.
Insightive.tv: What do you see as the biggest challenges to digitisation?
Tony: The single biggest challenge is that we have a very human brand. And despite the fact that we have now more than 50% of new purchases coming in digitally — what they are still saying to us, more than anything else, is we want bricks and clicks. We want to be able to engage with you digitally, but we absolutely want to be able to engage with you personally when we wish to do so. The challenge is how you integrate those channels. It is really easy to develop a beautiful and seamless front end, but that cannot be the entirety of the business or the only way customers can interact with the business.
But that does not mean that technology does not play a role throughout. I see an industry in which, for the first time in 30 years, technology is re-enabling person to person relationships. We will be able to have a conversation, face to face, through technology.
Insightive.tv: How much of a priority is digitising the contracting process within your larger agenda?
Tony: It would be in the top three. And I don’t order these one-two-three. But identification and verification are a huge deal for institutions because we have all build authentications that are different by each channel. The second is the UI/UX and straight through experience. And the third would be contracting. These three, when brought together, create the magic of the offer.
Insightive.tv: Do you face any compliance issues around that process?
Tony: The reality is that there are compliance risks related to our entire industry. And in many ways the compliance can be reduced because I can prove a digital footprint, I can prove identification and hold digital records in a way that cannot be done with face to face communication where people’s interpretations can be different.
Technology has the means of improving identity verification in ways that we cannot even yet imagine. I broadly could, today, know that if you are on our mobile app, on your device, know that that device is yours because we would broadly know if the actions seem normalised based on a GPSR signal. I know whether or not the IP address is the same as that registered at the outset. It actually becomes the singularly most secure token available. In many ways, we are going back to the sophistication of note production — with watermarks, silver lines, ink quality assessments — now in a digital format. As this technology matures, digital contracting will become exceedingly easier. We have products that you can now purchase with two clicks because I know that you are who you say you are through your device, and I know that the behaviour that you are exhibiting is what I should expect and that I should, therefore, get out of the way and let you get on with it.
The thing that is clear is that we are still emerging into an economy where knowing how long you need to hold that data for is unclear. You have competing requirements. You have the GDPR saying that we should not hold personal data over certain periods of time, and we will have other regulatory standards that say that we should hold it in perpetuity. There could perhaps be greater consistency in regulatory standards.
Insightive.tv: Do you have any further thought about the GDPR specifically?
Tony: On a basic level it is just common sense regulations. We should not hold on to data we no longer need. We have a responsibility to store data safely and understand and mitigate the growing risk of cybercrime. I can’t disagree with any of it. But I do think that all regulation needs to be consistent and that regulators across Europe, the UK, and across the sector should continue to collaborate to arrive at the right outcome.
Insightive.tv: Do you think that digitisation creates new levels of risk for the industry?
Tony: I think that it creates different risks. But these can be dealt with. The other thing it does is it creates a huge opportunity because all of a sudden your distribution is no longer defined by geography. We are now capable of personalising services in a way that has been difficult to do since the days of dealing with a bank manager in a branch — where the personalisation genuinely was person to person. Now the personalisation is about data, as well as digitalisation and mobile adoption. I am personally optimistic about the change that will come. But no change comes without risk, it’s just a new set of risks to manage.
Fundamental to all of this is the emergent technology around robotics and auto advice. What we are starting to see is the simplification in advice giving processes so that you can now extend your reach in a very different way. But it’s not any one of these things that are changing the organisation. It is the collective of these things that are complete transformative to the experience, to the cost space, to the reach, to the brand, and to the overall member proposition as a consequence.
It is the best time in the world to have an understanding of technology. There is not a better time in the world to have technology as your core credentials as an individual, or a company because technology is what will change the world. Getting with the program, and understanding that, not forcing change, but leading change is the thing that will allow businesses to be distinctive and different.
Tony Prestedge has been Executive Director of Nationwide since 2007. We spoke with Tony to get an understanding of how digital innovation and digital contracting is transforming the way Nationwide interacts with its customers.
Nationwide is the largest building society in the world. Founded in 1846, it has grown through mergers and acquisitions to now be a top three provider of savings and mortgages in the UK. It services over 7% of the UK current account market and is consistently highly ranked among financial service providers regarding customer satisfaction.
THE DIGITAL FUTURE OF CUSTOMER CONTRACTING series