Doubling Down on Digital Differentiation

By Tim Hamilton, CEO & founder of Praxent

The financial services landscape grows increasingly crowded as fintechs, neobanks and even major tech companies and retailers vie for relevance and market share. To keep up, banks and credit unions must evolve; the longtime approach of relying on a branch-centric strategy simply won’t cut it for the next generation of account holders. It’s time to focus on digital differentiation and customization, delivering the transformational products, services and experiences that draw customers in and perpetuate loyalty.

Heeding design best practices

Today, institutions are continuing to make errors when it comes to front end design and development. While there are many scenarios in which off the shelf technology makes sense, such as for internal, back-end processes, the customer-facing experience should be customized based on the institution’s core competencies. When an institution leverages off the shelf technology that closely resembles the same experience offered by the bank down the street, they’re emulating a brand of sameness, which fails to spark loyalty and evangelism.

There are several best practices to follow when designing a digital experience to accentuate differentiators and stand out. The first is to break the cycle of leading with system-centric, rather than human-centric, design. Over the past several decades, the banking industry has centered its designs around systems heavily based on paper, like records. The result is a clunky, slow and often confusing experience for users. There is an exciting trend of banks breaking away from this approach, instead leading with experiences designed with humans in mind. Banks should keep an ear out for the phrase ‘we’ve always done it this way’ – this can be a lightening rod moment to embrace innovation and reimagine the experience.

The next best practice is to embrace user research, instead of simply making decisions based on intuition. Effective designs consider how users will interact with the system, as well as which features and functions will be used most frequently. However, leaning into user research requires a philosophical shift. Many are apprehensive of interviewing customers and initiating a discussion because they are afraid that it will bring frustrations to the forefront and the user will abandon. However, we’ve actually found that engaging in user-centric research actually does the opposite and actually creates loyalty instead.

Finally, keep in mind that design problems aren’t limited to new products. As a business grows, it’s common for information architecture, or how new content and features are introduced and managed, to fall by the wayside. When new features are added hastily, the result is clumsy navigation with too many tabs and extensive menus. Rather than cramming all user pathways into a single navigation menu, think about how time-saving features or important information may be displayed in the context of use, at the point of need, and without taking the user’s attention away from the work at hand. If done right it, this can significantly increase digital engagement and uncover opportunities for new product and service innovations.

Identifying and solving unmet needs

Perhaps the most important consideration is what need the product or service is solving for. If the purpose behind the design isn’t clear and relevant, the best UX in the world won’t make a difference. Banks and credit unions must focus on meeting the unmet needs of niche groups across their customer base.

As a first step, institutions must fully grasp who their customers are and where the gaps lie. This doesn’t mean categorizing customers based on generic characteristics such as Millennials, urban dwellers and mass affluent. Instead, this means creating niche groups based on unmet needs.

That’s easier said than done. How can these unmet needs be identified? A combination of mining many existing data sources (such as delivery channels, payment and core systems) and identifying previously untapped data sources as well, such as payroll, assets or even health insurance. Fintechs can often be a strong partner to help with data collection, organization and analysis.

Once the data has been examined, niche groups can be formed depending on where traditional financial services fall short and what unique needs are left unfulfilled. Perhaps this looks like customers that value sustainability as a core principle or young adults that have fallen into a habit of leveraging BNPL. Such narrow segmentation and a deep understanding on unique needs empowers institutions to deliver greater value to those customers, presenting meaningful, relevant, empathetic products or services to support these customers’ lifestyles and beliefs.

By prioritizing the identification of niche groups based on unmet needs and then leveraging strong design practices to create transformation products and services, banks and credit unions will be able to increase digital adoption and engagement, fostering lasting loyalty. In an environment fraught with disruptors and rising customer expectations, it’s one of the best practices to retain relevance and market share.