Retail banking customers are changing the way they use and obtain banking services. Mounting evidence has reinforced a need to think carefully about redesigning delivery systems to make the continuing shift seamless. It is startling to realize that more customers now prefer to handle routine transactions online than in a branch. The vast majority of bank customers look up their balances online, with some studies reporting the figure to be 85%. Most also prefer online funds transfer over a branch visit. Further, in working with current clients, we are finding a dramatic reduction in branch teller transactions year over year—on the order of 20% from 2010 to 2011, in some cases.

This shift in customer preferences is underway, and our delivery channels need to be redesigned to accommodate the current and imminent wishes of customers at each touch point. How do banks make this transition when, too often, decision making on design does not involve customers’ quantified preferences in the equation? It is time for banks to also rethink their redesign methodology.

In the early 1980s, under the banner of Quality Improvement, the customer became a central focus for improvement initiatives, with surveys, studies, and testing introduced into change processes. Over time, those labor-intensive techniques were replaced because of a need for “speed to decision.” Well-meaning management teams returned to their previous approach of thinking that they know what customers want and designing to the standards and beliefs of the line or IT management.

It is time to return to involving customers in the redesign process by studying their preferences and incorporating them into design. In our discussions with bank CEOs, the overwhelming strategic objective for 2011 is to reduce operating expenses through realized operating efficiencies. The new fee income realities brought about by regulation changes have mandated a closer look at operating expenses, creating an ideal opportunity to re-engage customers in the process.

The most recent J.D. Power study, which surveyed more than 48,000 retail bank customers across the United States, indicates a struggle to satisfy customers’ needs. This represents a four-year downward trend, and it must be observed that traditional methods, such as greeting in the branch and cleaning up the branch experience, will not suffice for a customer base that is trending to online service. Here’s a great opportunity to win customers back and lower operating expenses at the same time. It is time to go back to those quality principles that got so much attention in the early 1980s by designing according to customers' needs.