Banking on your customers’ experience?

Alpa Somaiya|13 June 2019
Banking on your customers’ experience?

The banking customer is the ultimate prize in the battle that’s been raging between legacy financial institutions, and fintech and big tech. The weapons of choice are data, technology and targeted marketing. The fight is an interesting one with regulatory forces encouraging innovation and new digital technologies providing the opportunities to improve customer experiences.

As we’ve written before, banking is an industry that has changed from interacting with customers face-to-face to interacting with them digitally. Now, how, and even when and where, you present your offerings is just as, if not more, important than what you can offer. The terms “customer experience” and “the age of the consumer” have been around for years, but never has improving your customers’ experience been so critical to success. According to McKinsey, improving customer experience increases a customer’s likelihood of renewing or buying new products by between 30% and 50%. And that’s just one statistic from the hundreds of customer experience surveys out there.

The digital disruption

The continuous fast-paced evolution of tech, from smartphones to wearables, has placed serious pressure on the financial services industry. The transformation and proliferation of transacting methods has increased the potential and complexity of creating a positive customer experience. This increase in complexity is perhaps reflected by the results in the 2017 Retail Banking Trends and Predictions Report, commissioned by The Financial Brand, which found that many of the financial industry’s customer experience initiatives were unsupported, misdirected, underfunded and poorly measured. Not a great situation to be in when you’re fighting to stay alive.

In this digital age, customer experience is now synonymous with digital transformation. Some banks are still reluctant to engage in digital transformation because of the risk of failure and expense. But, even though the complexity and sheer scale may seem daunting, there is, according to the late Steve Jobs, an obvious place to start. According to him, the way you deal with improving the customer’s digital experience is that “you’ve got to start with the client experience and work backwards to the technology.” Just ask US Bank’s Ankit Bhatt, who was voted Digital Banker of the Year by American Banker. Bhatt’s solution to improving customer experience? Ask the customers. Observe customers. He makes the customers default designers and developers, “co-creating” apps and capabilities with customers.

Currently, only a handful of banks are “doing digital” properly because “having a mobile app doesn’t mean you’ve gone digital,” according to Chris Skinner. These days, a bank needs to offer robust digital systems that go beyond merely facilitating transactions. At a minimum, a banks’ digital platforms have to make cash management seamless and efficient and ensure that it truly integrates with other product offerings. According to Mr Skinner, going digital is about “a reimagining of finance using technology. In fact, digital requires a complete rethinking of the business model … because the banking model is built for physical distribution, whereas now we are moving to digital distribution.” It’s about “back-office products” versus “real-time availability.”

The basics need to be in place to ensure customers can reach you and interact. It’s the digital experience and innovation that will determine whether your customers will stay or go.

It seems that financial institutions are starting to take note. According to the 2019 Digital Banking Report from The Financial Brand, for the first time ever, the use of data, AI and advanced analytics was ranked first, replacing the customer experience as the number one trend. Open banking, APIs and innovation also ranked highly on the list. Interestingly, these innovations are all necessary to keep up with customer demand, allowing the delivery of relevant, innovative products and services faster, more easily, and with a personal touch.

The fintech advantage

Financial institutions are becoming more comfortable pairing with fintech firms, allowing them to innovate at a faster pace. There are many more players on the field now, and to succeed, traditional financial institutions will have to bring their A game.

The synergy of strengths is the ultimate goal in any partnership with a fintech; the combined entity being stronger than any individual unit. So, who’s bringing what to the party? Fintechs bring an innovation mindset, agility, a consumer-centric perspective and an infrastructure built for digital. They lack, however, brand recognition and consumer trust, capital, expertise negotiating the ever-changing regulatory landscape, and established distribution networks. These are what a bank will bring to the mix, the magic ingredients to scale up.

Pairing with fintechs also allows the full potential of open banking to be realized. As more third-party services rely more heavily on open banking APIs, customers will naturally migrate to the banks that have the fastest and most featureful services. It all comes down to where you want to be on the playing field.

About the author

Alpa Somaiya

Alpa Somaiya

Senior copywriter/Editor

From science to health research to fintech, Alpa is a self-confessed jack-of-a-few trades. When not despairing about the use of the Oxford comma, she enthusiastically collates, translates and disseminates information for your reading pleasure, and with the hope that we all learn a little something along the way.

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