Why Customer Experience in Financial Services is the New Differentiator

By Sandro Tarchini, Global Industry Leader, Financial Services at Valtech

Over the past few years, the banking industry has faced severe disruptions that have dramatically accelerated digital transformation across the entire banking industry. Catalyzed by the Covid-19 pandemic, the transformation has irreversibly changed banking as we know it.

Previously, banks attracted new customers through their various offers and services and people physically went to their local bank branch. However, when it comes to customer expectations, in-person interactions have fallen to the bottom of the list, especially for one-time or recurring transactions and interactions. Most customers now expect and prefer the convenience of being able to perform these types of transactions using online and mobile banking solutions.

The rise in demand for digital banking services has leveled the playing field for financial service providers. With the strong rise of digital banks and traditional banks transforming their products and services, customers are now spoiled for choice when it comes to how and with whom they choose to do business with them. Therefore, identifying the differentiators between banks and fintechs is becoming increasingly difficult in an already saturated industry. Additionally, economic uncertainty is expected to limit the attractive interest rates set by lenders, so there is little financial service providers can do to stay competitive. As a result, more emphasis has been placed on customer experience (CX), as vendors try to strike a balance between attracting new customers and ensuring that existing customers stay with them.

The impact of the pandemic, alongside the recent explosion of fintech brands, has brought the value of high-quality digital interactions to the forefront. So how can banks make customer experience their greatest asset?

The Growing Importance of CX

According to Insider Intelligence Mobile Banking Competitive Advantage Study, 89% of consumers said they use mobile banking, compared to 97% of millennials. These users do not leave their bank for the fees. Instead, they are most likely to leave due to dissatisfaction with mobile banking capabilities (43%), online banking capabilities (35%) and customer service (33%).

In addition, 75% of respondents to the 2022 Global Retail Banking Report said they are attracted to new, nimble competitors because they offer fast, easy-to-use products and experiences that are readily available while remaining low-cost.

With in-person interactions playing a much smaller role in banking, CX is one of the primary ways banks can ensure they stand out from the crowd. Customers still want to be understood, respected, appreciated and valued – they want to maintain the human connection that was traditionally established through in-person interactions. The key is to learn how to deliver this through digital channels.

Most customers prefer digital interactions over physical or telephone conversations, the delivery of these interactions is the main differentiator. They should be delivered in a manner that is both transactional and emotional, demonstrating to customers that their bank genuinely wants to help them achieve their financial goals.

This will build consumer trust and loyalty. Although the journey to customer centricity does not happen overnight, banks that invest in good CX have higher referral rates, higher share of wallet, and are more likely to sell products and services. incentives or crossovers to existing customers.

Ultimately, customers have increasingly high expectations and demand more from their banking experiences. It is therefore incumbent on banks to rethink their business models and focus on providing extremely simple, convenient and distinctive CX. The key to success lies in understanding customer needs and then meeting those needs like no other brand can.

Build a customer-centric experience

Financial services customers are typically looking for four things: help in maximizing the benefits of existing products, relevant product offerings at the right time, personal knowledge of the things they care about, and personalized product features. Consequently, banks are strengthening their customer knowledge in order to be able to serve customers in a comprehensive way.

The starting point is to establish a CX vision. This will help shape business goals and connect them to key experiences that will set the brand apart and drive customer loyalty. For example, this could include defining how certain features work, identifying the right training for employees, or structuring CX teams in a certain way.

Once the CX vision is defined, banks must then put in place an analytical framework to measure their progress. Any effective analytics framework will have highly defined KPIs, data source and reporting, and market analysts who can generate and interpret insights that will provide real-time customer guidance and help banks to track their success.

The final step is workforce transformation, which must be approached from an operational and cultural perspective. Operational in terms of defining working methods, improving organization and processes, and providing access to applications so that employees work more efficiently. Cultural in terms of identifying skill gaps and creating a culture that encourages employees to embrace new technologies and adopt a customer-centric mindset.

These steps will help banks identify gaps, as well as opportunities to introduce cohesive and cross-functional omnichannel experiences. They can also look to banks that have successfully transformed their CX for inspiration. For example, Scotiabank has deployed a global AI platform called C.MEE, which analyzes data from all customer touchpoints to deliver personalized and relevant banking experiences. Additionally, Capital One significantly increased its CX investment after identifying that 47% of its customers are early adopters of the technology and 88% regularly use their smartphone for banking interactions.

Digital banking is prevalent in today’s society and will continue to shape the industry for years to come. CX is now a clearer differentiator than price or products, so there is more pressure on banks to deliver on that front. As consumers face more choices than ever before, banks need to lay the groundwork to deliver unbeatable customer experiences. Failure to do so could harm their ability to retain existing customers and attract new ones. Banks must therefore prioritize CX and ensure that they meet customer expectations.

Stephen V. Lee