Customer-centricity has been all the rage in every business, over the past couple of decades. However, within the banking industry, a clear majority of banks confess that they have not done enough to improve customer experience.
In any case, customers themselves have moved on beyond mere customer-centricity.
Today’s digitally empowered customers are taking control of their banking relationships, and demanding that their banks shift focus from addressing identical individuality to recognizing individual identity.
These ‘segment-of-one’ customers expect their financial service providers to help them take control of their finances, as well as enable them to achieve their aspirations and objectives. A truly digital banking model has to reflect these new expectations.
Banks can no longer succeed just by offering mass-customized products and services to their customers. They have to take ownership of each individual relationship and deliver personalized solutions that address the contextual needs in the customer’s particular financial situation.
Banks’ ability to take ownership of their customer relationships will increasingly determine their chances of success, especially given the competitive and regulatory dynamics of digital banking. Fintech innovators are increasingly wresting control of banking relationships with the promise of contextually relevant solutions and experiences. Moreover, developments like Europe’s implementation of the revised Payment Services Directive (PSD2), which among others things, seeks to open up payment APIs, have the potential to convert banks into financial utilities. Ownership and control will soon shift to the service providers who are able to deliver the best combination of experience and value.
Incumbent banks will therefore have to focus on customer experience as the key lever for achieving sustainable top- and bottom-line growth. In the experience economy, banking products, services, and experiences will have to be customized to the contextual needs and expectations of the individual.
The priority will be to design experiences that not only enhance and strengthen existing relationships, but also resonate with new and emerging customer segments, such as ten-year old children who can now independently open and operate their own savings bank accounts.
As traditional banking models get reinvented with the customer as the focal point and experience as the key competitive differentiator, every aspect of the banking model – including processes, strategies, and decisions – will have to be reimagined to reflect this shift in priority.
In the truly digital banking model, customer value and experience will have to trump even cost and revenue targets as the primary goal. Many banks are already innovating with their mainstream products and processes, to make the experience more customer-specific. For example, Fintech startup, Digit, has reinvented the savings account experience by launching a service that analyzes activity in a customer’s checking account to automatically and regularly transfer appropriate amounts to a flexible fixed deposit. The Commonwealth Bank of Australia has redefined the mortgage experience with a property guide app that allows prospective home buyers to “scan” a property and instantly receive all the information required to make a decision. For customers, the app delivers a unified and streamlined experience, while for the bank, it represents a brand new opportunity to advance its entry into the mortgage engagement cycle. Poland’s Idea Bank has literally mobilized its cash management services by allowing its SME clients to use a mobile app to order a multi-function mobile-ATM at their doorstep. Meanwhile, in Russia, Alfa-Bank is tapping into the fitness tracker trend with a new savings account called Activity, where the interest rates are linked to individual customers’ fitness regimens.
Some banks are even inviting customers to participate in designing their own banking experiences. Spain’s CaixaBank has created a community platform where banking customers and domain experts can contribute ideas to enhance the functionality of existing applications and develop new customer-specific innovations. Many banks are also hosting hackathons to accelerate innovation. BBVA’s inaugural hackathon in 2013 yielded 144 apps, representing €2.9 million in development time.
Technology will play a huge role in enabling banks to create personalized, interactive, and productive experiences. Truly digital banks will leverage technologies like gamification, advanced analytics, cognitive computing, and augmented reality to influence behaviors and enhance experience. For instance, Commonwealth Bank ran an interactive augmented reality press ad in Australian newspapers to encourage readers to explore the features of its property guide app. Readers could download a 3D reader to explore a virtual town and experience the app’s benefits.
Similarly, gamification concepts have huge potential within banking. Though adoption is yet to become fully mainstream, many banks are using this route to change the way they educate and engage with their customers. In India, ICICI Bank has been using gamification successfully to educate customers about card security and to deliver information in a more engaging manner. The bank also offers a gamified and socialized deposit product called iWish to encourage goal-based saving. DSK Bank in Bulgaria has a similarly gamified application, called Gameo, that helps customers define and work towards their financial goals and allows the bank to make personalized offers to help fulfill the same.
Rabobank in the Netherlands has created an internal gamification network to share knowledge and ideas across the bank. In addition, the bank has been able to streamline its customers’ mortgage experiences and reduce mortgage processing costs by leveraging gamification to encourage customers to do as much of the initial mortgage documentation online as possible.
In a truly digital banking model, banks will have to look beyond just enabling omnichannel cross-device transactions to drive customer experience. Banking experience will be as much about UX design, as it will be about helping customers achieve their financial goals smartly. And unless banks integrate the value of context into their business strategies, their ability to deliver a ‘segment-of-one’ experience will be severely limited.