Sandro Tarchini, global industry lead, financial services at Valtech
The banking sector has never faced more disruption than over the last five years. In particular, the pandemic has exponentially accelerated banking’s digital transformation, completely changing the game for today’s banks.
Traditionally, banks would acquire new customers through a broad set of offerings and physical proximity. But proximity has quickly become less important, particularly for simple or recurrent transactions and interactions. Many customers now expect and prefer the convenience of online banking and mobile banking solutions – significantly reducing their reliance on physical contact points and limiting the opportunities banks have to interact with their customers in a physical branch.
This shift has levelled the playing field, opening the door to a wide range of digital-first competitors such as neo banks. As a result, price has become a key competitive driver, with many banks stuck in a never-ending cycle of trying to outcompete each other on interest rates, commissions, or fees.
But this approach overlooks a key part of the picture. The impact of Covid-19, combined with the recent surge of innovative fintech brands, has increased the value of high-quality digital interactions. It has permanently shifted customer expectations when it comes to the banking experience, offering traditional banks and financial institutions a new way to differentiate themselves.
The growing role of CX
According to Insider Intelligence’s Mobile Banking Competitive Edge Study, 89% of consumers said they use mobile banking, rising to 97% of millennials. These users don’t leave their bank for fees. Instead, they’re most likely to leave because of dissatisfaction around mobile banking capabilities (43%), online banking capabilities (35%) and customer service (33%).
In addition, 75% of respondents to the 2022 World Retail Banking Report said they are attracted to new agile competitors as they offer fast, easy-to-use products and experiences that are readily available while remaining low in cost.
With proximity now a much smaller part of the equation, CX is the one true way that banks can differentiate themselves. Customers still want to be understood, respected, appreciated, and valued – they want the emotional connections that were traditionally built through in-person interactions. The key is learning how to achieve this through digital channels.
With the majority of bank customers preferring digital interactions over physical or phone conversations, the delivery of these interactions is the big differentiator. They must be delivered in a way that’s both transactional and emotional, showcasing to customers that their bank genuinely wants to help them achieve their financial goals.
This is what will open the door to consumer confidence and loyalty. Although the journey towards customer-centricity takes time, banks that invest in good CX have higher rates of recommendation, greater wallet share, and are more likely to up-sell or cross-sell products and services to existing customers.
Ultimately, customers have increasingly high expectations and are demanding more from their banking experiences. The onus is therefore on banks to rethink their business models and focus on providing an overwhelmingly easy, convenient, and distinctive CX. The key to success lies in understanding customer needs, and then fulfilling those needs in a way that no other brand can.
Becoming customer-centric
Financial services customers are generally looking for four things: help in maximising the benefits of existing products, relevant product offers at the right time, personal knowledge of things they care about, and customised product features. Therefore, banks strengthen their customer knowledge so they can serve customers holistically.
The starting point is to establish a CX vision. This will help shape business goals and connect them to key experiences that will distinguish the brand and keep customers loyal. For example, this could include defining how certain features will work, identifying the right training for employees, or structuring CX teams in a certain way.
Once the vision has been defined, banks should then set up an analytics framework to measure their progress. Any effective analytics framework will have highly defined KPIs, data sourcing and reporting – along with market analysts who can generate and interpret insights that will enable real-time customer guidance and help banks track their success.
The final pillar is workforce transformation, which should be addressed from an operational and cultural perspective. Operational in terms of defining ways of working, organisational and process improvements, and access to applications for employees to work more effectively. Cultural in terms of identifying skills gaps and building a culture that encourages employees to adopt new technologies and a customer-centric mindset.
This process will help banks identify any gaps, as well as the opportunities to implement consistent, cross-functional omnichannel experiences. And there are plenty of examples of banks that have successfully transformed their CX. For example, Scotiabank rolled out a global AI platform called C.MEE, which analyses data across all customer touchpoints to deliver personalised and relevant banking experiences. Or there’s Capital One, which significantly increased its CX investment after identifying that 47% of its customers are early adopters of technology and 88% regularly use their smartphone for banking interactions. These insights have helped it innovate in CX and become a recognised leader in customer satisfaction.
As we look ahead, the prevalence of digital banking – along with the expectation for more compelling customer experiences – will only increase. CX must therefore become ingrained within banks’ culture and thought of as a product of its own. It is now a greater differentiator than price or products, putting the onus on banks to deliver superior experiences that meet customers’ evolving needs. Their very existence could depend on it.
