Three ways banks can adapt for success in 2023

By Andrew Stevens, Principal of Banking and Financial Services at Quadient

Andrew Stevens

Over the past few months, ‘recession’ has been the word on everyone’s lips. With economic turbulence looming, many consumers are worried about their finances in a way that the industry hasn’t seen for decades. Over the next year, banks and financial services organisations will need to adapt their strategies to ensure that they are evolving with the times and meeting customer needs. This means helping customers face economic hardships by becoming more proactive in their support, improving customer communication, and proving the value of their service – rather than making customers feel like ‘just another revenue source’.

Moving from reactive to proactive

As it stands, most high street banks offer support to customers who tell them they are financially struggling. This is a good first step, but it won’t be enough to help customers navigate economic storms in the coming year. Not all customers will feel comfortable coming forwards, and some might not even realise they need help until it’s too late. To help customers navigate their finances in 2023, banks need to take a more proactive approach.

This means proactively seeking out customers who might be likely to encounter financial hardship, and offering valuable support and advice. This could involve banks looking at customers’ monthly outgoings and notifying them if there are any upcoming changes to support or interest rates that might create problems down the line. For example, many customers might struggle to pay their bills when the Government adjusts its support package from March 2023 onwards. By proactively informing customers of this planned change, banks can give customers time to prepare their finances.

It’s also crucial that advice is relevant. On an individual level, this means ensuring any information is personalised to the customer, and takes into account their individual financial situation, as well as the ways they prefer to be contacted. If a customer has specified that they prefer to receive emails, advice sent through letters – however helpful – is likely to be left unopened or ignored.

Advice also needs to be relevant to the needs of today’s consumer. Banks need to keep in mind that the recession playbook has changed since the last big non-bank caused crisis in the 1990s, and today’s consumers demand a higher standard of living. While satellite TV packages might have been considered a luxury in the 1990s, streaming services are now expected for the large majority today. Banks that advise customers to cut back on these outgoings are likely to risk losing customers’ trust and engagement. To gain and maintain a loyal customer base in 2023, banks should focus on offering realistic advice about opportunities to save money.

Segmenting customer bases to meet the duty of care

The last six months have seen a steep climb in mortgage rates, and many homeowners are struggling to make payments. The news of rates rising further is likely to cause a great deal of stress for customers, so banks should consider how they can deliver this news in the most sensitive way. This means ensuring these updates are personalised and considered, with the potential impact of the news in mind.

With pressure to personalise offerings for customers’ needs, banks’ ability to segment their customer base – dividing customers into different groups based on the data banks have about them – is going to become much more important in 2023. Until now, many banks have only segmented customers for their own internal use, but now they should start thinking about how segments can help improve customer care.

Each customer base will have different concerns and will require varying levels of advice and support. For instance, customers with a student account might be worried about their finances as they leave education and look for employment – or customers who are renting might be stressed about rising rental costs. To provide the best customer care, banks need to understand customers’ concerns and helping them to understand what’s happening to their finances and why.

Regulation will clamp down on those not helping customers

Recent years have seen rising expectations from consumers – and this won’t change anytime soon. In fact, the pressure on businesses to put the customer first is now coming from all angles, with the Government putting in place regulations like Consumer Duty, which ensures that organisations are providing customers with the best possible outcomes. This means banks will need to offer better options for customers who are struggling – such as offering products with the best interest rates, or offering more flexible overdrafts. Banks will need to urgently transform in the coming year: they have until July 2023 to put these changes into place.

Customer data is at the heart of banks understanding their customers and providing valuable help and support. Next year, we will begin to see increasing pressure on financial organisations to become truly customer-centric, in the form of more legislation and tighter regulations. Banks will need to do everything within their power to help customers. Those that fail to transform will risk losing customers, or even facing regulatory action.

A strategy to weather the storms

By putting consumer needs at the heart of their strategy, banks can prove that customers are ‘more than just a revenue source’ and provide better care to help customers weather economic storms. To achieve this, banks should focus on making better use of customer data, being sensitive to the concerns customers are facing today, and offering proactive support to help support them through these issues.

Banks that offer this support now will come out of the recession with loyal and trusting customers that are willing to give them a larger share of their wallet as economic hardship eases off. On the other hand, banks that don’t transform their customer support strategies will likely face problems for years to come – as customers won’t be quick to forget that they were left to fend for themselves in difficult times.