Customer experience (CX) has always been a priority, but in the wake of COVID-19 it has become a survival imperative. The upending of “business-as-usual” has left financial institutions grappling with the dual challenge of preserving the financial health of their clients and preserving their own during what will surely be a prolonged period of economic uncertainty.
Financial institutions are readying for the year ahead and most realize that investing in customer retention is a smart bet. Research shows that building a customer-focused, digital-first financial institution is a must as customer-centric banks outperform their more traditional peers. But what other trends should they be paying close attention to that will help them stand out and keep their customers happy?
Customers Demand Better Digital Experiences
Consumers largely hold their primary banking account with a traditional institution. However a growing number of individuals are opening secondary accounts with fintechs or other nontraditional players due to the ease of use and other customer experience offerings these emerging players have become synonymous with. Incumbent institutions must take note. There is an opportunity to consolidate existing customers’ banking business by offering the right mix of digital capabilities, personalization, benefits, and incentives.
Investments in data innovation can help streamline this shift to online experiences and also yield substantial returns. One study showed that banks and credit unions that digitize processes can achieve a 20% increase in revenues and a 30% decline in expenses. Sadly, most financial services organizations struggle to properly capitalize on the customer journey due to silos across channels, in bridges from acquisition to application to onboarding to self-service, in backend technology, and across lines of business.
Legacy players must overcome these gaps to focus on connecting the dots between their existing products, services, and education to blend them into one connected engagement.
This pivot from a transactional relationship will create one of real trust and value. This could look like moving from offering mortgages to helping customers make a home, from selling health insurance to helping people get and stay fit, from offering a new business loan to mentoring successful young entrepreneurs, or from managing a portfolio to creating investment experts.
Investment in Agility and Speed Lowers Total Cost of Ownership (TCO)
The pace of change in the digital world is mind-blowing. Rolling out new digital initiatives is now measured in days and weeks, not months. The very definition of what is ‘fast’ has changed. Legacy technology has been designed for annual releases, for ‘relaunch projects’ – for the way of working of yesterday.
Traditional financial institutions are bogged down by legacy tech that is clunky and does not integrate easily or move swiftly. This puts them at a disadvantage against modern solutions that pave the way for business and IT teams to collaborate together. This harmony creates an upward spiral of acceleration and optimization that propels the brand forward to the best digital experience.
Under the hood, that requires technology to be composable: easily integrated and complementary. This is no easy feat, and a lot to take on for already-stretched teams struggling to scale. The recently-formed MACH Alliance helps organizations adopt a technology ecosystem that is microservices based, API-first, cloud-native SaaS, and headless. This approach enables FSIs to experiment with the latest tools, avoid worrying about upgrade cycles or managing infrastructure.
Increased Security Measures are Key for Customer Trust
Financial service providers guard their customers’ future. Security, stability and governance are mission critical. One wrong turn and customer trust – and retention – is gone. Some customers have remained hesitant to fully adopt digital banking, even in the wake of the global pandemic and nationwide lockdown efforts.
According to EY’s customer research, only 60% of consumers are comfortable sharing personal information with their primary financial service provider without any assurance regarding data protection and security. This is understandable, as newspapers have highlighted the increase in cyber fraud, often targeting users that make digital payments.
Vendor risk management remains a key concern for financial institutions in the U.S. Partnerships create potential problems and compliance risks associated with vendors remain a big concern. Regulators have made it abundantly clear that they will view any compliance risk in a vendor’s policies and procedures as risk of the financial institution.
Vendors must be held to the highest enterprise software standards and should also be SOC3 certified. Look for how these software or service providers approach penetration testing or development operations to ensure they are approaching their own product development securely.
Autonomous Finance is the Future
Financial services customers are no different than those interacting with retail brands or the travel industry. They expect content to be carefully curated and helpful. They expect their financial institution to help them leverage the available products and services to the fullest – autonomously and automated.
A true digital financial services experience offers a full suite of services and includes personal finance, automated savings/wealth management, and interactive insurance advisors, all paired with a breadth of service and advice. Fintech and Insurtech startups are paving the way and are quickly raising customer expectations.
Excelling at this level of automation and personalization requires a new approach to content technology. Content has to be accessed programmatically to support these modern use cases. Simply publishing content no longer cuts it. For example, millions of people are failing to achieve full financial well-being and may welcome advice on making responsible financial decisions. In 2019, for example, 35% of US online adults said they felt anxious about their financial situation, and 32% said they live from paycheck to paycheck.
Algorithm-based services reduce the cognitive load on the individual user and aim to improve financial outcomes. Forrester forecasts this space evolving: “Autonomous finance will evolve through four levels of maturity. Current offerings mostly come from fintech and insurtech startups and vary in two key ways: level of autonomy and breadth of service or advice.”
Fintech startups are already using automation to reinvent credit cards, checking accounts, insurance, investing, mortgages, and savings. Incumbents are dabbling with autonomous finance, too. For example, banks such as Bank of America, BBVA, and Westpac have rolled out virtual assistants to help customers manage their money and have seen steady growth in customer adoption.
Legacy financial institutions looking to engender brand loyalty and customer trust should consider this approach, and look to add an element of proactiveness to their customer engagements. Perhaps they could reach out and offer to automate a customer’s savings based on his or her previous activities or offer a personal finance app that will help a customer with multiple withdrawal fees better budget their monthly expenses. This level of personalization not only brings value to the customer, but also offers a cohesive experience across all interactions within the organization.