Why customer experience in financial services is the new differentiator

By Julien Traversini, Financial Services, Valtech

Julien Traversini, Financial Services, Valtech

Over the last few years, the banking sector has faced severe disruption which has dramatically accelerated digital transformation across the banking sector. Catalysed by the Covid-19 pandemic, the transformation has irreversibly changed banking as we know it.

Previously, banks would attract new customers through their various offerings and services and people physically going into their local bank branch. However, when it comes to customer expectations, in-person interactions have fallen to the bottom of list, especially for simple or recurrent transactions and interactions. Most customers now expect and prefer the convenience of being able to carry out these kinds of transactions using online banking and mobile banking solutions.

The surge in demand for digital banking services has levelled the playing field for financial services providers. With the sharp rise of digital banks and legacy banks transforming their products and services, customers are now spoilt for choice when it comes to how and who they choose to bank with. Consequently, identifying differentiators between banks and fintechs is becoming increasingly difficult in an already saturated industry. What’s more, economic uncertainty is set to limit attractive interest rates set by lenders, so there isn’t much financial services providers can do to remain competitive. As a result, greater emphasis has been put on customer experience (CX), as providers try to strike the balance between attracting new customers and ensuring 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 CX their strongest asset?

The growing importance of CX

According to Insider Intelligence’s Mobile Banking Competitive Edge Study, 89% of consumers said they use mobile banking, rising to 97% of millennials. These users don’t leave their bank for fees. Instead, they’re most likely to leave because of dissatisfaction around mobile banking capabilities (43%), online banking capabilities (35%) and customer service (33%).

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

With in-person interactions playing a much smaller role in banking, CX is one of the main ways that 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 learning how to offer this through digital channels.

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

This will bolster consumer confidence and loyalty. Although the journey towards customer-centricity doesn’t happen overnight, banks that invest in good CX have higher rates of recommendation, greater wallet share, and are more likely to up-sell or cross-sell products and services to existing customers.

Ultimately, customers have increasingly high expectations and are demanding more from their banking experiences. The onus is therefore on banks to rethink their business models and focus on providing an overwhelmingly easy, convenient, and distinctive CX. The key to success lies in understanding customer needs, and then fulfilling those needs in a way that no other brand can.

Building a customer-centric experience

Financial services customers are generally looking for four things: help in maximising the benefits of existing products, relevant product offers at the right time, personal knowledge of things they care about, and customised product features. Therefore, banks strengthen their customer knowledge so they can serve customers holistically.

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

Once the CX vision has been defined, banks should then set up an analytics framework to measure their progress. Any effective analytics framework will have highly defined KPIs, data sourcing and reporting – along with market analysts who can generate and interpret insights that will enable real-time customer guidance and help banks track their success.

The final step is workforce transformation, which should be addressed from an operational and cultural perspective. Operational in terms of defining ways of working, organisational and process improvements, and access to applications for employees to work more effectively. Cultural in terms of identifying skills gaps and building a culture that encourages employees to adopt new technologies and a customer-centric mindset.

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

Digital banking is prevalent in today’s society and it 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 this front. With consumers facing more choice than ever before, banks must lay the groundwork to provide unbeatable customer experiences. Failure to do so could be detrimental to their ability to maintain existing customers as well as attracting new ones, so banks must prioritise CX and ensure they’re meeting customer expectations.