“The digital transformation that we are living through is akin to the industrial revolution of a bygone era. The next wave of advances in Internet of Things (IoT), machine learning, smart robots, quantum computing, and autonomous vehicles will continue to profoundly change societal constructs and bring a completely new set of customer expectations and interactions with businesses – whether they’re prepared for it or not.”
After decades of unrivalled dominance by the ‘big four’, the challengers are in the midst of a renaissance. As the industry licks its wounds from a bruising judicial inquiry, Australia’s burgeoning challenger banking institutions have stepped in to offer a consumer-friendly (and scandal-free) alternative to the beleaguered incumbents.
RACQ Bank has established itself as one of the most unique innovators in the challenger banking space, and Muhammad Majid, General Manager Strategy and Transformation at RACQ, its keenest steward.
We spoke with Majid to trace RACQ’s rebirth from roadside assistance company and insurer to one of Queensland’s leading challenger banking institutions, and the success behind the company’s complete in-branch and digital revitalisation program.
FST Media: Uniquely, RACQ began life as a motoring and insurance company (still a core part of its business today). What inspired RACQ’s foray into the banking space? As a ‘challenger’ bank, how can RACQ ‘out-innovate’ the big four to deliver unique customer experiences?
Majid: RACQ has a rich history spanning more than 100 years. Today, it has in excess of 1.7 million members and serves 60 per cent of Queensland households through its roadside assistance, insurance, and now banking offerings.
As a mutual [banking institution], RACQ is always actively looking for new ways in which we can bring highly relevant services to our members. One of the key drivers for considering banking was the desire for a more regular and deeper interaction with our members compared to what is possible through insurance and assistance.
Considering the trust deficit developing in the sector, with customers looking for alternatives that are unquestionably working in their benefit, RACQ feels that it can make a tangible difference for its members in this space. Our differentiator remains that we’re easy to use and simple, offering quality banking products that are matched with longstanding relationships of service and trust that our members enjoy.
FST Media: Last year, RACQ merged with another Queensland-based mutual, QT Mutual Bank (QTMB). How will this merger deliver innovation in end-user platforms and improve internal processes? What tangible benefits will it bring to your customers?
Majid: QTMB was a fellow Queensland mutual focusing on the education sector. The merger provided RACQ with the resources to enter into banking with established expertise, systems, and a distribution network. RACQ Bank was launched after an 11-month transformation program, with a new internet banking facility, a new mobile banking app, improved fulfilment and service processes, and a new digital sales channel (including Apple Pay and Samsung Pay), as well as being a participant in the NPP scheme. By combining the foundations of QTMB with RACQ’s trusted brand, a member base of more than 1.7 million Queenslanders, delivery capability and capital, the RACQ brand is able to offer all members access to high-quality offerings across insurance, assistance, banking travel, and lifestyle services.
FST Media: RACQ recently underwent a major customer-inspired transformation program, overhauling many of its brick-and-mortar branches. Walk us through the origins of and mechanics behind the program. A year in, has the program borne fruit for RACQ?
Majid: The transformation program undertaken prior to relaunch as ‘RACQ Bank’ involved a complete digital overhaul, end-to-end process transformation, staff systems integration, consolidation of data warehouses, staff integration, and a refurbishment of all branches, just to name a few key projects.
Included within the physical rebrand was a bold new ‘branch of the future’ experiment, which brought together all business lines of RACQ in one location. This was designed from the ground-up and customer tested at various steps along the way. The result was a visually unique, architecturally designed space which feels typically ‘Queensland’ – warm and homely, complete with a gabled roof, a boardwalk, and a breakfast bar.
Our customers have regularly commented on the in-branch experience, and staff also report high engagement with customers. Six months in, this remains one of our highest performing branches.
FST Media: What’s the next big customer service innovation for RACQ? What role will digital play in RACQ’s customer experience (CX) initiatives?
Majid: The digital transformation that we are living through is akin to the industrial revolution of a bygone era. The next wave of advances in Internet of Things (IoT), machine learning, smart robots, quantum computing, and autonomous vehicles will continue to profoundly change societal constructs and bring a completely new set of customer expectations and interactions with businesses – whether they’re prepared for it or not.
Having said that, we should keep in mind that digital is only one aspect of the customer experience. The delivered CX of any organisation is the sum of the ‘value’ created along the value chain. In this context, the true differentiation for RACQ is delivering trust, expertise, empathy, ease and genuine care to our members. Rather than thinking of these attributes as ‘innovations’, they are fundamental to who we are.
One single CX innovation cannot deliver on this goal, but we continue to strive every day across the various layers of our organisation. Some examples include better customer personalisation using data, customisation of pricing and feature selection, better status tracking and expansion of communication channels, process optimisation in both banking and insurance, as well as a range of digital apps and payment technologies making our member’s lives easier.
FST Media: What has been the most impactful technological or structural innovation adopted by RACQ over the last year? How has it shaped better banking practices?
Majid: Too often digital initiatives serve as the paper over the cracks in underlying processes and service capabilities. By combining a digital transformation with an end-to-end process review covering the breadth of credit approval processes, staffing levels in processing teams, integration with call centres, customer identification processes etcetera, we were able to truly consider how we could improve the offering from the perspective of the customer. That’s not to say that we’ve completed the journey we started, but when we discuss the relative impact, the consideration of digital in concert with the entire value chain stands out to me as the most important point of difference adopted by the RACQ Bank launch program.
FST Media: How important is mobile in defining RACQ’s digital innovation program?
Majid: Like many peers, RACQ’s online customer interactions have gradually migrated onto mobile as the primary interaction channel, with the majority of our online sessions originating via mobile. I have mentioned previously the role of digital as the industrial revolution of our era. Mobile, wearables, and other forms of it will remain our primary interface into this digital world and, as such, remains a critical part of our strategy. Over the last few years, RACQ has invested heavily in the mobile channel – with it being the first auto club to launch a ‘track your vehicle’ type roadside assistance app, a geolocation-based discounts service enabling our customers to access relevant discounts, a learner driver’s app, and now, with banking, we are continuing to invest in RACQ Bank’s mobile app, with Apple Pay and Samsung Pay enabled.
FST Media: What are some of the key technology constraints facing challenger banks in the current Australian market? Without the financial (and technological) resources of the incumbents, what can challenger banks do to differentiate themselves from the big four?
Majid: Building scale remains a clear source of competitive advantage across the industry, particularly when you consider the efficiency advantages available to the larger institutions. Smaller players remain constrained, either in their ability to find the capital or their ability to remain profitable while making significant technology investments.
Often, the capital requirements come from the need for underlying technology platforms. This is changing with the recent developments in cloud and SaaS, as platforms are increasingly becoming available as variable cost options.
More importantly, perhaps, smaller players also enjoy significant advantages when it comes to agility, their ability to make decisions and to move decisively. For mutuals, the ability to make long-term decisions, and the freedom to act truly for the benefit of their customers without the pressure of the next quarterly update to the market, can be truly advantageous. Partnering – either through mergers such as RACQ and QTMB, or by pooling resources and effort – with start-ups remains an effective strategy in this highly competitive environment.
FST Media: How is RACQ responding to major technological innovations in financial services, including blockchain, analytics and artificial intelligence (AI)/machine learning (ML)?
Majid: Blockchain has obvious potential applications in contract exchange, trading, ledgers and funds transfers, but at the same time difficulties with the processing speed and power requirements for transactions at scale remain engineering challenges that need to be cracked before widespread adoption will be possible.
In terms of the major tech innovations, RACQ has built up an impressive big data and analytics capability over the last few years, and this allows us to understand our customers and their needs across the breadth of their relationship with us. Building on top of this understanding, we are currently experimenting with robotic process automation and ‘chatbots’, as well as continuing to invest heavily in core capabilities, such as CRM and product manufacturing and pricing capabilities. Just as important as what we are doing in-house, we also continue to invest in and nurture several fintech start-ups with the potential of mainstream adoption.
FST Media: What are the most pressing cybersecurity concerns facing challenger banks? How do these security challenges differ from the big four?
Majid: The general increase in frequency and sophistication of denial of service attacks remains a concern. Phishing attacks and identity fraud are also at the top of the list – particularly for an organisation going through a brand change, which might give other parties an opportunity to confuse the customers in parallel with the change process.
For a challenger bank, the disproportionate impact of losses on the bottom line from a relatively small number of events can be quite high. In some environments, this can lead to a loss aversion, where the digital processes are effectively crippled to eliminate the risk of losses. The challenge remains for both risk functions and digital/CX teams within challenger banks to devise mechanisms which mitigate the risk but result in a better customer experience.
FST Media: What technology will be the definitive ‘game changer’ for FSI?
Majid: Personally, I am quite excited by the development of conversational UIs (user interfaces), which are fairly basic at this stage, but given the convergence of a number of technologies such as big data, analytics, AI and robotic process automation, these technologies have the potential to take over existing touch-based user interfaces which dominate the industry.
When you consider how big data capabilities allow AI systems to be more context-aware, and how process automation is allowing more processes to be automated and connected, there is real potential for conversational UIs to become much smarter and more capable, with instructions moving from more transactional (e.g. “check my balance”) to task and delegation (“apply for a credit card with RACQ Bank”). This is perhaps a few years away, but all the ingredients are already starting to fall into place.
FST Media: And finally, as a featured keynote speaker at FST’s Melbourne Banking conference, what are you hoping to achieve from your presentation?
Majid: The launch of RACQ Bank was a large and unique initiative across the industry, which utilised a number of interesting methodologies to achieve significant results over a short time frame. Just like we have benefitted from the experience of many others before us, I am hoping that by our learnings from the RACQ Bank experience, others in the industry might find some useful approaches that they can apply.