Products and Services, Distribution Channels, and the Customer Experience

Question 1

What are the categories of customers?

Answer 1

• personal customers
• sole traders
• partnerships
• limited companies
• clubs, associations and societies
• trustees

Question 2

What is a personal customer?

Answer 2

Personal customers are private individuals who use a bank’s products or services for their own personal use. Accounts can be in their name only, or held jointly with one or more other person(s).

Personal customers include children and teenagers, with a wide range of current and savings accounts, also include ‘high net worth individuals’. There is no precise definition of how rich a person has to be to fit into this category.

Question 3

What is a sole trader?

Answer 3

A sole trader is someone who is self-employed and starts up their own business. Having a separate business account, as opposed to using their personal account, makes it easier for them to manage their business finances and deal with their tax affairs.

Question 4

What is a partnership?

Answer 4

A partnership is where two or more people make a formal arrangement to manage and operate a business and share its profits. There are different types of partnership arrangements. While in some partnerships, all the partners share liabilities and profits equally, in others, partners have limited liability. This means that partners’ personal liability is limited so that, for example, if one partner is sued for malpractice, the assets of other partners are not at risk.

Question 5

What is a Limited Company?

Answer 5

A limited company is a business that has been formed as a company which has its own legal entity, distinct from its owners (shareholders) who have invested in the company.

In a limited company, the liability of its shareholders is limited to the money they originally invested which means that if the company becomes insolvent, the shareholders’ assets remain protected.

A limited company can be set up as either private or public.

Question 6

What is a Private Limited Company?

Answer 6

A private limited company has one or more members, also called shareholders, who invest money in the company by purchasing shares in the company. Many private companies are small businesses in which the members are also directors. A private company must have at least one director.

Question 7

What is a Public Limited Company?

Answer 7

Unlike a private limited company, a public limited company can offer its shares for sale to the general public to raise capital, and may or may not be listed on a stock exchange. These companies are usually fairly large and are strictly regulated, for example, they are required to publish their true financial health. A public limited company is required to have at least two directors.

Question 8

What is a Community Group?

Answer 8

A community group, often referred to as a ‘club’, ‘association’ or ‘society’, and which may be a registered charity, is a group of people who come together because they share a common interest and create a formal structure through which they can pursue their interest. Many banks offer accounts specifically designed for community groups, provided the group is a voluntary, non-profit making organisation and not a private business.

Question 9

What is a Trustee?

Answer 9

A trustee is a person or firm that holds and administers property or assets for the benefit of a third party. A trustee may be appointed for a number of reasons, such as in the case of bankruptcy, for a charity or trust fund, or for certain types of retirement plans and pensions.

Trustees are trusted to make decisions in the beneficiary’s best interests and often have a fiduciary responsibility to the trust beneficiaries.

Most banks offer trust accounts for trustees to help them manage the trust funds. A trustee could be a family member, or a lawyer or accountant who has accepted responsibility for managing the trust account.

The legal status of each of these different types of customer has implications for account opening procedures and the operation of the customer’s account.

Question 10

What is a Vulnerable Customer?

Answer 10

A vulnerable consumer is someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.

The European Commission (2016) states that a vulnerable consumer could be defined as:

A consumer, who:

• is at higher risk of experiencing negative outcomes in the market
• has limited ability to maximise his/her well-being
• has difficulty in obtaining or assimilating information
• is less able to buy, choose or access suitable products or
• is more susceptible to certain marketing practices

Question 11

What are the risk factors in in recognizing consumer vulnerability?

Answer 11

• low literacy, numeracy and financial capability skills
• physical disability
• severe or long-term illness
• mental health problems
• low income and/or debt
• caring responsibilities (including operating a power of attorney)
• being ‘older old’ for example over 80, although this is not absolute (may be associated with cognitive or dexterity impairment, sensory impairments such as hearing or sight, onset of ill-health, not being comfortable with new technology)
• being young (associated with less experience)
• change in circumstances (e.g., job loss, bereavement, divorce)
• non-standard requirements or credit history (e.g., armed forces personnel returning from abroad, ex-offenders, care home leavers, recent immigrants).

Question 12

What are the four different types of of difficulties that a vulnerable customer may be in?

Answer 12

• Temporary: where the issue is not permanent, yet will cause short-term challenges.
• Sporadic: part of a recurring situation, but not permanent.
• Permanent: issue is permanent and will not change
• Compound: customer already in a permanent vulnerable position could find their position further complicated by a short or medium-term issue

Question 13

What is examples of a Trigger?

Answer 13

• payments stopping suddenly
• late or missed payments
• regular unarranged overdrafts and charges
• unusual activity on an account

Question 14

What is Financial Inclusion and Exclusion?

Answer 14

Having access to such products and services is called ‘financial inclusion’; not having access is called ‘financial exclusion’

Question 15

What is Financial Capability?

Answer 15

Financial Capability = Having the knowledge, confidence and skills to manage our finances is referred to as ‘financial capability’.

Question 16

What are the services that a Bank provides to it’s customers?

Answer 16

These include products and services that:

• look after our money and help us save for the future (deposit services)
• lend us money to buy ‘major’ things that we don’t have the money for right now (lending services)
• help us pay for things (payment services).

Question 17

What is a Current Account?

Answer 17

A current account helps customers manage their money on a daily basis by receiving payments in to the account and enabling payments out. Some current accounts pay interest on certain balances, and may require a certain amount of money to be paid in each month.

Question 18

What is a Savings & Investment Account?

Answer 18

While customers use a current account to pay for their day-to-day expenses, and perhaps to help manage any short-term shortfall in funds, many customers will want to keep their surplus cash in a savings account.

Question 19

What is the role of a Bank as a Financial Intermediary?

Answer 19

1. The bank will use some of the money we deposit to invest and lend to other people.
2. The more banks lend, the more profits they have the potential to make.
3. The money a bank lends is an asset because this money is a source of income and profits.
4. The money deposited by customers is a liability because the bank is required to give customers their money back, either on demand or on expiry of an agreed period.
5. The business of banking is a balancing act between making a profit from lending and investments, and ensuring the bank has enough cash in reserve to repay those who have deposited their money with them at the agreed time.

Question 20

What is assest-liability?

Answer 20

Knowing the value of the deposits it holds, and how much is due to be repaid and when, helps a bank manage its assets and liabilities to keep our money safe while still making a profit. Asset-liability management is what lies at the core of the business of banking.

Question 21

What is an Islamic Mortgage?

Answer 21

An Islamic mortgage is a mortgage that is compliant with Shariah law. It differs from a traditional mortgage in that it doesn’t involve paying interest. Shariah mortgages are typically referred to as Home Purchase Plans.

There are three types of Home Purchase Plans:

1. Ijara (lease)
2. Musharaka (partnership)
3. Murabaha (profit).

Question 22

What is a Ijara (lease)?

Answer 22

The bank purchases the property the customer wants to buy and leases it to the customer for a fixed term, and at an agreed monthly cost. When the term of the loan ends, the bank transfers full ownership of the property to the customer.

Question 23

What is a Musharaka (partnership)?

Answer 23

This is a co-ownership agreement, where the customer and the bank own a separate share of the property. Each time the customer makes a repayment, which is part capital and part rent, the customer is effectively buying more of the bank’s share. Therefore, the customer’s rent reduces as their share of the property grows. At the end of the agreement, the customer will own the bank’s share of the property.

Question 24

What is a Murabaha (profit)?

Answer 24

The bank buys the property on the customer’s behalf then sells it to the customer for a higher price than it paid for it. The higher price is repaid by the customer in equal instalments over a fixed term.

Question 25

What are three other types of Products and Services a Bank can provide?

Answer 25

• Investments – e.g., stocks and bonds
• Pensions – Long-term investment through individual contribution
• insurance.

Question 25

What are three other types of Products and Services a Bank can provide?

Answer 25

• Investments – e.g., stocks and bonds
• Pensions – Long-term investment through individual contribution
• insurance.

Question 26

What ‘green’ products and services?

Answer 26

Some banks offer products and services, often at preferential rates, to help their customers help the environment. For example:
• green mortgages for customers buying an energy-efficient home
• green personal loans for customers making environment-friendly purchases, such as a low-carbon emission car, or home improvements, e.g., installing solar panels
• helping corporate customers fund low-carbon projects and investments
• the issuing of green bonds.

Question 27

What is a Green Bond?

Answer 27

A green bond is a form of investment, the proceeds of which are used to fund environment-friendly projects, for example, those related to clean water, renewable energy, energy efficiency, river and habitat restoration, acquisition of land, or mitigation of climate change impacts. Although many bond funds invest a portion of their capital to such causes, green bond funds are those that are specifically invested in environmental initiatives.

Question 28

What are different kinds of Payment Services?

Answer 28

• Cash
• Digital currency - A digital currency is a type of money that is available only electronically – it’s not available in physical form
• Online and telephone banking
• Cheques
• Direct Debit
• Standing order
• Debit cards
• Credit cards
• Contactless
• Prepaid cards
• Mobile

Question 29

What is Cheque imaging process?

Answer 29

Typically, with a cheque-imaging clearing system, if a customer pays in a cheque on a weekday before their bank or building society’s advertised cut-off time, the cheque could clear before midnight the following day.

Question 30

What is Multi-Channel Banking?

Answer 30

Multichannel banking means that a bank provides services to its customers through more than one channel. This enables customers to transact their banking business through their channel of choice.

Question 31

What are some different types of channels?

Answer 31

Channels include:

• Branches
• ATMs (automated teller machines)
• Contact centres
• Online banking platforms
• Video banking
• Chatbots (digital assistants)
• Webchat
• SMS (text messaging)
• Mobile apps.

Question 32

What is channel hopping?

Answer 32

Although having a choice of channels to suit customer preferences is a good thing, the downside is that this ‘channel hopping’ can cause problems for both the customer and the bank if some channels are operating in isolation, and if what happens during one interaction is not captured elsewhere.

Question 33

What is Omnichannel Banking?

Answer 33

With omnichannel banking, the change that happens on one channel is reproduced on all channels used by the customer which makes issue resolving much easier for the customer. The customer’s information is stored centrally and handled from one place, enabling banks to deliver a more personalised service. Processes are automated and people resources are used more efficiently.

Therefore, omnichannel banking is much more than just providing multiple ways for customers to transact. It is about a seamless and consistent interaction between customers and their financial institutions across multiple channels. While multichannel is focused on transactions, omnichannel focuses on interactions.

Question 34

What is Onmichannel Banking about?

Answer 34

• paying attention to customers and their banking experience, as well as processing their transactions
• not just doing what customers expect in terms of processing transactions accurately, but anticipating what they want and when, meeting their needs, and exceeding their expectations to provide an outstanding banking experience
• getting to the core of the nature of customers’ engagement with their banks instead of just focusing on transactions
• collecting and analysing a range of data about customers that provide insight to their needs, wants and preferences so that banks can provide personalised services with more targeted marketing offers.

Question 35

What are the benefits of Onmichannel Banking?

Answer 35

• Customers use different channels to make transactions without having to enter their credentials each time. The systems synchronise information between channels, and ensure an integrated and linear operational process.
• Customers decide what channels they prefer to use for each banking operation, for example, send money, apply for loans, and save. This way, they get more flexibility and mobility, and the bank is regarded as more user-friendly and innovative. All services can be accessed through different devices, enquiries can be solved through apps and machines, and these aspects transform the customer’s journey into a seamless and satisfactory banking experience.
• All services are personalised according to customers’ profiles and transaction history, making communication more effective for the customer and more profitable for the bank.
• Banks accumulate a large amount of data about their customers and their actions. The next step is to interpret and process smart data to create successful products and offerings for them.

Question 36

What is Optichannel Banking?

Answer 36

While omnichannel banking enables customers to interact seamlessly with their bank in various ways, optichannel banking is about channel optimisation and personalised communication with customers.

Optichannel banking determines the optimal number of channels for customer communication for particular customer requests. It does not mean more channels. It means the most straightforward customer journey and adequate channel navigation. The other thing is personalisation. Personalisation as we know it could involve considering a customer’s behaviour and account history, and sending a personalised message, usually by email, at a certain time of month, or when there is a marketing campaign.

Optichannel banking therefore takes banking to the next level, using AI, machine learning and big data to offer customised products for each customer. Banks can learn more about their customers’ preferences and can provide targeted, relevant and specific communication — sending the right messages, at the right time, on the right channels.

Question 37

What is the Customer Experience?

Answer 37

The customer (or banking) experience can be described as how a customer perceives, and feels about, all their interactions (called ‘touchpoints’) with a bank, or other provider of banking services, along the entire customer journey — from when the customer first becomes aware of and learns about a certain provider, to opening an account or using a service, to when they stop banking with that provider and close their account(s) (see image below).

A customer’s experience can be affected by a number of factors, for example, how they are treated, the appropriateness of advertising, the quality and functionality of products and services, and ease of use and access to these products and services.

Question 38

What are customers looking for?

Answer 38

• ensures my transactions are safe and secure
• allows me to do things anywhere, anytime through digital channels
• provides a smooth, easy customer experience
• provides personalised service that suits my needs
• provides self-service machines to shop for products and services and receive target-market recommendations without human interaction
• is trustworthy
• provides opportunity for personal, human interaction through branch, telephone, and/or live chat
• helps me gain and keep control over my finances
• innovates with new, up-to-date technologies/apps
• rewards me for my business.

Question 39

What are some ideas of improving customer experience innovations?

Answer 39

Using chatbots to connect with customers, making it easy for them to search transactions, transfer and deposit funds, and get advice on financial products. Some chatbots are integrated with a bank’s financial literacy library so that resources can quickly be provided to customers. With the ability to understand voice and text commands, connecting with a chatbot for some customers is like having their own virtual personal banker in their pocket.

Some banks have apps that help customers set goals, save money and track their progress towards their goals. The app can also make suggestions about how to save money and compares prices on things like utilities and groceries which means that customers can get personalised financial advice regardless of where they are.

Question 40

How can Banks enhance Customer Experience?

Answer 40

• Collecting customer experience data in real time across all channels and touchpoints
• Analysing the feedback and taking action to improve customer satisfaction and loyalty
• Monitoring end to end customer journeys
• Track and address individual customer feedback with closed loop functionality