How Banks Are Tearing Down and Rebuilding Customer Experience

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Mondaq Business Briefing

September 20, 2018

By Jean-Pascal Nepper

“The customer is always right!”

So goes the motto of good business. For a century or more, entrepreneurs, shopkeepers, and global corporate heads alike have been guided by this principle, but perhaps it needs to be slightly updated.

Because, today, customers are not only right—they’re also telling you how to run your business.

“The customer has spoken!”

Perhaps this one is better suited to our 2018 reality. Look in the finance sector, for example: the Viacom Millennial Disruption Index has found that 60% of millennials think that big banks aren’t designed to service their generation, and 33% believe they won’t ever need a banking institution.

That’s one third of a whole generation who can imagine a world without traditional banks at all! Furthermore, 53% of the 10,000 respondents see no difference between the institution they use and other banks.

The message is that customers are jaded with the current incarnation of the whole banking system. They are open to alternative money institutions; this bank is as good as any other; and their banking experiences are nothing to write home about.

Tech companies can wreck companies

In that context, banks are vulnerable to new types of digital competitors. Even so-called traditionalists (at least a high proportion of them) use banking services via their mobile phones, an interface exploited very adroitly by many new, digital companies. The momentum for brand-new banking seems to be strong: one might even ask whether banks will survive as the primary type of money-holding institution at all. Perhaps open banking providers or tech giants will take the stage.

Indeed, the likes of Google, Facebook, and Amazon have certain advantages: they benefit from strong brands, stable infrastructures, and huge user bases. They are able to utilize the existing banking infrastructure and already have expertise in developing new customer-friendly services and products. Furthermore, 73% of generation Y would be more excited about a new offering in financial services from Google, Amazon, Apple, PayPal, or Square than from their own nationwide bank.[1]

One advantage that digital companies have over banks is, in many cases at least, a head start in terms of tech integration: there is a shift currently observable from siloed systems, where every need has a corresponding technology or software, towards an integrated system where there are no standalone needs and everything is interconnected.

While around a quarter (27%) of banks still see fintech as a threat, 0% of banks can prevent third-party players from getting customer data, which is rapidly becoming the most prized asset in the financial sector. Banks must therefore choose how to approach this shift in technological power and how to deal with newcomers whose operations run on powerful, interconnected IT systems that they’ve built from the ground up. No matter what, APIs are going to be opened up, and this could be the excuse—the opportunity—for banks to pursue a new, digital ecosystem: not just revamped processes, but an all-encompassing transformation involving a total rethink of business model and revenue sources.

Fintechs and other disruptive companies are also known for speed. If banks quicken their IT workings, they will stand a competitive chance by dramatically cutting costs as well as the time-to-market of their products.

No matter what’s happening backstage, customers will only care about one thing: their journey and experience of the product or service. In a banking context, this means redefining people’s relationship with money.

Five hot CX items for banks

Research by the Economist Intelligence Unit has revealed the top five areas consumers identified as leading to a positive experience:

  • Fast response to enquiries or complaints.
  • Simple purchasing process.
  • Ability to track orders in real time.
  • Clarity and simplicity of product information across channels.
  • Ability to interact with the company over multiple channels.

All the above come down to one attribute: agility. In the context of banking, agility means that the bank is flexible on a deep level—and thus able secure enduring nimbleness.

How can these items be benchmarked? Customer experience may be harder to quantify than other, more numerical fields—but it is possible, for example using a metric of growth combined with stickiness. By growth I mean how well a bank can attract new customers and more business from existing customers; by high stickiness I mean low customer attrition.

Ultimately, customers will take fast, easy, and accurate technology for granted. Over and above that, they want to be treated well and to perceive that someone is listening to them if they complain, seek assistance, or respond to new offers.

The social way

Historically, banks have considered “interaction” to be an onsite meeting between client and financial advisor during daytime working hours, but that model is unfit for today’s customers who want 24/7 digital access. Retaining customers seems to be related to agility, but also to the bank’s ability to interact with customers across different channels.

The commerce industry, for example, has already matured in digital platforms, whereas banks are only starting now to gain momentum. Earlier digital efforts by banks tended to focus simply on marketing through the new medium, but as technology matures—along with the regulations and security surrounding it—more fundamental changes have become possible.

Ian Pollari, Global Fintech Co-leader and Head of Banking for KPMG Australia, comments that “changing customer behavior is another significant factor. Customers spend the majority of their time on digital (e.g. social, messaging) platforms. Hence, financial institutions must position themselves where their customers are, and create a corresponding digital platform strategy relevant for their market position, customer service proposition and strategic objectives.”

Nowadays most banks are striving to become social businesses, to understand that customer word-of-mouth is worth more than paid ads and marketing collateral. Of the 50 largest banks in the world, over 90% use Facebook and 88% Twitter. However, there are two ways for banks to use social networks: they can repeat old branding patterns, or they can adapt to the local norms of these new social communities.

An easy way of adhering to the latter is to answer user questions online, a practice called social customer care. Even if you can’t go into detail on a public platform, at least directing the use to another channel shows engagement and that you’re part of that online community.

Striking the right balance

Without a doubt, customer experience is today’s battlefield. Eighty-eight percent of CEOs are concerned about the loyalty of their customers (KPMG Global CEO Survey 2016), so it’s no wonder customer experience is poised to overtake price and product as the number one brand differentiator.

What’s more, over the next five years, almost 89% of CEOs expect to be competing on the basis of customer experience, yet only 7% currently deliver it effectively, according to Forrester. And KPMG’s U.S. CEO Outlook 2017 found that only 56% of CEOs say they can confidently articulate how they can create value for their customers.

We understand the challenge: companies need to respond to customer needs while, at the same time, better understanding the value those customers bring to the enterprise.

[1] Read more customer experience insights in the Khube Mag special CX edition. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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