Adopting Customer-Centricity for Financial Institutions

Financial institutions (FIs) face a perfect storm: rising FinTech competition, evolving customer expectations, and a growing need to demonstrate social responsibility. To move past such challenges, FIs are investing in customer-centric transformation — from building more personalized offerings to better reputations. A 2023 IBM global study suggests that consumers care more about brand reputation and current banking relationships.

In this guide, we’ll explore the importance of becoming customer-centric, and how financial institutions can do it.?

Understanding Customer-Centricity for Financial Institutions

According to Salesforce’s 2022 Customer Engagement Research, 80% of customers claimed experience is as important as provides and services. In response, there’s also a growing desire for financial institutions to demonstrate a commitment to social responsibility — thus, embracing a customer-centric approach to community engagement.?

What is customer-centric community engagement?

In financial services, customer-centricity refers to the business strategy that puts the customers first. The company then designs everything—strategies, decisions, deliverables—around this concept.

Community engagement, in particular, is a critical element of customer-centricity. Engaging with local communities can give FIs valuable insights into the specific needs and concerns of customers. Therefore, allowing FIs to tailor their services and products to better address their customers.?

What is the primary goal of customer-centricity?

In a customer-centric organization, the primary goal is to:

• build long-term customer relationship, which aims to go beyond a single transaction, and encourage repeat business and positive word-of-mouth marketing.
• prioritize customer needs by offering personalized solutions and addressing their specific challenges — eventually, providing exceptional customer service.?

Customer-centricity aims to create an experience where customers feel valued and understood. Financial institutions, on the other hand, can achieve higher customer lifetime value, positive brand reputation, and competitive market advantage.?

Benefits of Adopting a Customer-Centric Strategy

A customer-centric strategy isn’t just a feel-good notion, but a powerful drive for success. Below are the benefits FIs can expect by prioritizing customer needs and building stronger relationships:

1. Better understanding of customer journey

Adapting customer-centricity allows companies to know more about their target audience. Hence, having better understanding of customer journey: how and why they buy. This also means understanding the consumers’ motivation, actions, and emotions at every stage of the buying process — with majority expecting businesses to recognize them as individuals and know their interests.?

This enables businesses to provide better, personalized products and services — 76% of customers get frustrated when they don’t receive personalized interactions. Customer-centricity ensures the targets receive meaningful experiences. The more they feel heard, the more likely they spend more. In fact, 86% of buyers are willing to pay more for a great customer experience.?

2. Increased customer lifetime value

Customer-centricity helps businesses to actively listen to their clients. And when customers see the value in the brand, they are more likely to purchase what’s offered. Thus, driving up lifetime value. Survey suggests that 4 in 10 consumers’ future purchase decisions are impacted by their current experiences with the brand.

The customer-centric engagement is also a way to reveal ways to improve product performance and service. Creating a more customer-centric experience with the brand increases loyalty and value. After all, acquisition costs are likely to be higher than retention costs.

3. Reduced churn, higher profits

There’s no denying how customer-centricty can help with retention. According to Zippia, a 5% boost in customer retention increases the profits by 25-95%. Businesses offering better customer experience are reported to have increased sales opportunities. Satisfied customers also often make bigger purchases or confidently advocate for the brand. That said, a customer-centric banking model can help generate better results in terms of sales and profits.?

How to Become a Customer-Centric Financial Institution

Customer-centricity is not something that happens overnight. It often requires a complete cultural shift. Below are some tips on creating a culture where customers are the top priority.

1. Provide proactive customer service — Anticipate customer needs by offering resources or tutorials on your website or app. Reach out proactively with educational content or solutions for any potential customer issues. You can offer online tutorials on budgeting managing debt, or using your mobile banking app, if any.
2. Actively gather customer feedback — Conduct a survey, launch user testing, or establish direct communications with customers to identify their concerns. Customer feedback can help in adjusting product roadmap and anticipating their needs. This can be as simple as adding a feedback button on your online banking platform. Or, run user tests with your banking app to ensure a better experience for transferring funds or managing investments.
3. Utilize a customer journey map — Create a detailed map outlining all stages of customer interaction, from initial awareness to post-purchase. A customer journey map is also beneficial for identifying touchpoints or pain points that need attention. For instance, the loan application process might be complex or tedious. Consider providing a faster, streamlined online application with clear steps and progress tracking.
4. Centralize and secure customer data — Investing in centralized platforms like board portals for credit unions is ideal for housing customer data securely. Use the data ethically and responsibly to personalize interactions and offer relevant solutions. For instance, you can cater to customers saving for retirement by providing tailored investment options or personalized retirement calculators.?
5. Invest in customer experience training — Train all employees, regardless of department, to adopt a customer-centric mindset. Empathy training can also equip employees with skills to understand customer frustrations and needs. Regular product knowledge and training are recommended to ensure the team can confidently answer customer concerns. These may include answering queries about investment products, loan terms, and features of a checking or brokerage account.?

The Role of Financial Boards and Executives in Creating Value

Creating value goes hand-in-hand with prioritizing the customers. Financial boards and executives know that customer-centric engagement isn’t about feel-good initiatives — it’s a strategic driver of long-term value creation. Here’s an overview of their roles in achieving such synergy:

Strategic Oversight and Capital Allocation

• Board role: The board is often the one responsible for setting strategic direction for the company and ensuring it aligns with customer needs. They:
• Executive role: Executives translate the board’s strategic vision into actional plans. They:

Regulatory Compliance and Operational Efficiency?

• Board role: They ensure the business operates within legal and ethical boundaries while maintaining financial health. Boards will need to:
• Executive role: As to put the board mandates into practice processes, executives will:

Innovation and Digital Transformation in Financial Services

• Board role: Fostering a culture of innovation to stay ahead of customer expectations is the board’s responsibility. They are expected to:
• Executive role: Executives lead the charge in implementing innovative solutions, wherein they:

How Board Portals Can Help Financial Services with Customer-Centricity

Every financial institution knows that prioritizing customer needs is critical for success. Board portals, like Convene, can be a game-changer for FIs by fostering a customer-centric approach through:

• Enhanced collaboration: Access easy-to-use agenda for pre-meeting preparation, track action items with minutes and resolutions for transparency, and secure communication functionalities for open dialogues and real-time feedback.
• Secure data management: Safeguard sensitive board and customer information with document encryption features. Board portals also offer granular access controls, in which all data can only be accessed by authorized personnel, protecting both board and customer privacy.
• Centralized platform: Centralized ecosystems within board portals allow seamless integrations of customer data, financial information, and market trends. Hence, empowering informed decision-making that leads to personalized financial products and services.?

Find out how Convene ticks all these boxes and request a demo now.