Bjorn Cumps, PhD
Post-Doctoral Research Associate at the Vlerick Business School in Belgium
Centre for Financial Services
Trust is a delicate flower. One that needs warmth and nurturing but got trampled instead in the financial crisis. Customers have massively turned their backs on the financial services industry as they feel deceived and misled. Regaining customer trust is the number one challenge financial service organisations will face the years to come. And technology, if used correctly, might well be their best chance of achieving this.
Let’s face the facts. Today, the financial sector is at the bottom of the reputational food chain. A culture of profiteering, maximising risks and bonuses, minimising responsibility and looking down on customers has alienated financial service organisations from their customers. The gap between financial service organisations and the customer has never been wider. And that is where new technologies take the stage. More than ever, customers are digitising their lives. From purchasing to socialising, from selling to criticising, they leave their digital trails behind. Both their business and private lives increasingly unfold themselves online. And their beloved devices (smartphones, tablets and computers) are the gateways to this digital life.
Financial service organisations want to regain customer trust by getting to know them better and by being close to them. They call it customer centricity: putting the customer central in their business models. And how better to do this than by leveraging new technologies and taking part in their digitised lives. One of the ways to do this is by combining Big Data with personalisation. Many banks have started to enrich their existing CRM-systems with unstructured data from social media mining to be able to target customers with personalised offerings. If you “liked” your friends Facebook post on ice-skating and tweeted about wanting to go to Disney-On-Ice, it might well be that your next present as a Premium client are tickets to an ice-skating show. It is clear that financial services companies are looking to leverage large amounts of customer data across multiple service delivery channels (branch, web, mobile) to support new predictive analysis models in discovering consumer behavior patterns. Big Data analysis will become a main source of getting to know the customer. But not only Big Data technology is being used for personalisation. The financial industry is discovering social media, not solely as a source of data, or as a marketing tool, but as tool to create a community, an ecosystem around its products. For example, a Belgian bank has created a social media savings account where the customer can save for a specific goal (a new bike, U2 tickets or a new piano), add the amount needed, a description and picture of the goal, post this on Facebook with a %-indicator, and allow Facebook friends to directly contribute and save along with him. Our research indicates that technological innovation focused on creating ecosystems/a community around financial products are the fastest growing category of innovation in financial services (based on a screening of 150 projects).
Customers have become mobile thanks to their devices and they expect the same mobility and flexibility from their financial institution. Multi-channel will become the norm. But true multi-channel goes beyond having different channels (branch, web, mobile) available. It means financial institutions need to shift from silo-channels to true process integrated channels that complement each-other. The customer will chose which channel he uses for which product. Offering the right product-channel mix will become key for differentiated offering. Furthermore, successful financial service organisations will offer one uniform process that works across all channels. If a customer wants to start his loan application on his smartphone, continue it on his computer and finish it in the branch this should be one fluid process without having to re-enter information. Financial service organisations who can deliver the best customer experience will be able to differentiate himself from the competition. But differentiation in the front requires excellence and integration in the back.
Customer centricity is also key for many financial service organisations. But you need a streamlined back-end to do this in an affordable and profitable way. That is why technology also has a major impact on the back-end. Process mining software and enterprise architecture tools are increasingly being used to create a structured and streamlined set of customer-facing business processes. Big data is also crucial in identifying, monitoring and minimising/avoiding business risks. Regulation (Basel III, Solvency II …) are data- and simulation driven and require strong information management capabilities. And knowing your customer is not only necessary in the front to offer customised service, but also in the back to detect fraud and securing your systems. Of course, big data is only … big data. What will separate the winners from the losers is how financial service organisations transform their huge amounts of unstructured data into true, actionable business intelligence. Data reduction, transformation and analysis skills & technology will be at the core of the future financial service organisation. To better know your customer. To regain that trust. To get that flower blooming again.