Important ways TO DRIVE EXPERIENCE-LED GROWTH IN BANKING

?Important ways TO DRIVE EXPERIENCE-LED GROWTH IN BANKING

?Introduction

In this uncertain economic environment, excelling in customer experience is more vital than ever for banks—the past year has seen one of the most dynamic macroeconomic conditions in the past several decades. Over the past 12 months, interest rates have risen by more than 300 basis points, mortgage originations have dropped by 60 percent, and the flow of money between financial institutions has increased four times. Confidence is weakening—more than 65 percent of customers are pessimistic about the economic outlook for the coming year, about a ten-percentage point increase compared to last year. Their biggest concerns are inflation, the rising cost of goods, and savings for emergency funds. With the dynamic macroeconomic environment and the overall pessimism consumers are feeling, customers are thinking about the future, shifting their financial practices, and reevaluating relationships with their financial institutions. We notice a move toward increasing household spending and accelerating paying down credit card debt, as well as reducing savings for retirement and emergency funds. New financial accounts are being opened at twice the average rate, and new banking relationships and switching banks are being considered.

Presently in digital banking customers seek more from their banking experiences, banks are upping their game and delivering stronger customer experience. ?Generally speaking, customers want?digital banking services to be convenient, easy to use, personalized, and secure. They also expect access to live assistance in situations where their needs exceed a bank's digital banking capabilities are improving.?They look for more from service providers in the form of fast, frictionless, and personalized journeys. Their banking practices have also changed, with many of them now using digital and looking for it from their banks. The customer experience (CX) is proving to be the strategic differentiator for banks, with experience leaders outperforming laggards.

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By now, the importance of delivering a superb customer experience in banking is crystal clear. It’s estimated that financial brands that deliver a better customer experience (CX) receive?twice as many recommendations. Plus, their customers are also two times more likely to try new products or services. That said, there are a huge number of factors that influence the customer experience or CX of financial institutions. This includes an ever-changing landscape, increasing competition, and new technologies, among many other variables. Keeping up with the latest trends can help us understand the impact that these tendencies have on your banking customer experience. This, in turn, allows us to build better products and features designed to meet your customers’ biggest needs, all while making timely adjustments that produce better results. If we take a look at the trends that will shape the customer journey in banking in 2023 and beyond. The banks can improve customer experience, identify some bold moves they can make to gain a competitive advantage, and why they must act now, given the current dynamic macroeconomic environment. The banks that are frontrunners in customer satisfaction lead in financial metrics such as total shareholder return (TSR), increased growth, and decreased cost. We also see a positive correlation between customer satisfaction and purchasing decision—customers who are satisfied with their banking experiences say they will purchase more of that bank’s products. And satisfied customers are six times more likely to say they'll remain with a bank than dissatisfied customers are.

Before going over the biggest banking customer experience trends, let’s take a moment to analyze today’s landscape. There is no doubt that the COVID-19 health crisis has heavily influenced the current state of customer experience in banking. From a business perspective, banks and other institutions were left scrambling to adapt to their customer’s needs, which changed practically overnight.?This new set of requirements included better digital features, the ability to handle a higher number of user inquiries, and new financial products.?Let’s take a closer look at the impact, which we can still see today.?

?Balancing Digitalization for Better Financial Relationships

Consumers have wholeheartedly embraced the transition to digital banks. But this doesn’t mean they’re ready to go fully digital.?It’s estimated that?61% of bank customers?interact with their institution’s digital channels on a weekly basis. On the other hand, 32% of customers actually prefer to avoid branches altogether. With the above in mind, there’s a significant number of users who want access to branches in order to solve certain problems. According to?Samsung, 77% of customers?still seek in-person assistance when facing an unusual or complex account issue.?Having a hybrid synched system is the only way to ensure a great experience across all customer demographics. In turn, this will lead to customers migrating to financial institutions that offer such experiences. The fact that consumers have a wider range of alternatives (and are willing to exercise them) means that the relationship between banks and their customers has become more vulnerable than ever before.?This means that banks need to pay close attention to their customer’s behavioral patterns and make improvements to keep clients happy. After all, consumers are now looking beyond the elements that banks have traditionally focused on for decades, like a large number of branches.

?Real-Time Everything

Consumers rely on real-time support for everything from?assistance?to financial transactions. As a matter of fact,?79% of consumers prefer live chat?support because it means that they receive assistance right away. Likewise, consumers react extremely well to short holding times when calling customer service and prompt email replies. Now, banks are not only expected to provide immediate assistance but also to adopt real-time payment technologies. Real-time payments have?well-documented advantages?for both banks and customers, plus this type of technology is already standard in many financial institutions.?

?Direct Banks and Non-Bank Financial Institutions

Modern consumers are in the process of drastically changing their banking habits, including the institutions they work with.?According to PwC’s data, direct or digital banks now hold 20% of the market share,?doubling since 2019. Large traditional banks hold around 42% of the market share, but community banks and other small institutions have suffered. This is especially true if you consider the rise of non-banks, which are companies that don’t traditionally compete with financial institutions, yet have started to offer similar services.??

?Some of the critical CX moves banks can make to sustain ahead

The following are the most crucial for those that want to seize the moment and become industry leaders.

Personalizing Digital Interactions, Including Chatbot, and Human Interactions?

According to Gartner,?86% of financial organizations?already look to compete on a customer experience basis. Additionally, customers are more likely to spend around?140% more?on companies that provide a great experience. Digital personalization can help financial institutions improve their CX while meeting the growing demand for a great experience. When asked if they would like to receive personalized alerts with important advice, 37% of customers expressed interest in?receiving such alerts.?Chatbots are a superb way to deliver more personalized alerts and support. A great chatbot interaction can actually improve the way your customers see your brand?72% of the time.?But, even though the use of chatbots in the financial sector has?increased by 200% since 2020, the key to delivering a great experience is to balance both chatbots and human interactions.?For example,?one in three customers?wants more personal interactions with their banks after the pandemic. Meanwhile,?82% of customers?still rank the ability to visit a branch as a high priority when choosing banks.

An archetypal regional bank has over 1,500 customer journeys (across business units, product lines, and customer interactions), these journeys can be categorized into two broad categories—those that a bank needs to “de-friction” and those that need to be reimagined. Most journeys fall into the de-friction bucket, as streamlined, seamless experiences still matter and drive customer satisfaction. However, customer shopping, onboarding, and problem resolution disparity drive the overall experience that a customer has with their bank. It is here that a bank could consider flexing its reimagination skill and capability.

?Reimagination or visualization

Reimagination or visualization acknowledges the competition, including recognizing that experience leaders also come from adjacent and other B2C industries outside pure banking—for example, a mobile payment application. Take inspiration from other industries as a customer’s bar for great experiences is driven by interactions and experiences outside banking. Leverage the concept of a zero-based design (“clean sheeting”): Start with a blank canvas and imagine a new journey without considering the current state or any constraints; layer on (technical and operational) constraints afterward. Co-create with customers to increase the chances of success, especially for novel signature moments. Push innovation to the next level. For example,?how could something happen with no user-inputted data, with one click (or even no clicks)? Sweeping shifts in customer behavior can be disruptive, but by delivering differentiated value for their customers, banks can take advantage of this defining moment to stand out.

So, while banks have correctly focused on building digital experiences to enable customers to bank in their channel of choice and self-serve for many interactions, there is still an opportunity for banks to actively help customers migrate to digital channels. This, in turn, will likely not only drive higher customer satisfaction but result in a lower cost-to-serve and convenience. Banks can actively migrate customers to digital in several ways:?Banks can streamline enrollment into digital, seamless login, pre-authentication, and more. They can drive awareness of new digital offerings or features with marketing and communications, such as “how-to” videos on the website and mobile app. Banks can utilize in-branch and call center or IVR intercepts to direct customers to digital channels, for example, in-branch digital and co-browse tutorials. They can consider charging fees for using non-digital channels, and reward employees who redirect customers to digital channels, for instance.?Lastly, they can encourage customers to migrate with messaging on statements, reminders in emails or emails, gamified experiences, and so forth.

A leading Latin American bank launched a holistic digital adoption campaign to drive digital migration for its new web and mobile experiences. The bank rolled out a broad advertising campaign to encourage customers to download the new mobile app, developed incentives for recurring digital users (such as digital payments), sent out targeted customer messages after non-digital transactions were completed (for instance, in branch transfers), and thoroughly trained its front-line branch employees so they could redirect customers to digital. This broad campaign resulted in a 20 percent increase in customer satisfaction, a 5 percent increase in digitally active customers, a 25 percent increase in digital payments, and a 10 percent reduction in branch costs.

Rebuilding strong trust

Our research shows that around 60 percent of customers currently trust that their primary bank will be helpful in navigating the next financial downturn. And this number jumps to more than 80 percent for customers who report high satisfaction with the experience their bank delivers. First, they can be transparent for emotionally charged interactions such as the ways fees are charged and explained, the status of a loan application, and how disputes are handled. One leading payments player recently underwent a company-wide program to dramatically simplify its customer communications—from everything such as statements to the terms of loan applications to product offers on its mobile app. This program resulted not only in higher customer satisfaction (CSAT) scores but also fewer calls coming into the contact centers. Second, they can deeply know how customers want to bank and then give them the power to interact across any channel. For example, the marketing messages they want to opt into, what channel with which they prefer to interact (email, mail, phone call, or text message), and what data they would like the bank to use when making their product offers.

Third, banks can proactively identify and help customers resolve fraud by leveraging advanced analytics. Fraud resolution is one of the most emotionally charged journeys for customers, and anything that can help them feel at ease dramatically drives trust, as well as “advocacy” by the bank on their behalf. Several banks now send text messages or emails and phone customers at the first sign of potential fraud—offering customers an opportunity to “dismiss” the alert or follow through with a fraud claim. Many banks also use this to drive advocacy by removing the charge from statements while they investigate (versus charging customers first and then refunding the charge). And last, banks can offer a window into a customer’s financial wealth, based on customer spend and transaction history, credit bureau data, balance information, interest charges, fees, and so forth. This opens the space for banks to offer a “financial-health” score for their customers. For example, a fintech company took this to the next level by not only showing a financial-health score for its clients but also offering advice on how to improve that score (for instance, through paying off high-interest debts and savings strategies). With this move, they aimed to become more customer-centric and develop clients’ trust.

Close the twist on measurement

“You cannot manage what you don’t measure” is a common adage in business. This is especially true for customer experience. Traditionally banks have relied on surveys, which are necessary but not sufficient to achieve these capabilities. In fact, only 16 percent of chief customer experience officers believe surveys are granular enough to act on, and only 4 percent think that surveys allow them to calculate the ROI of a decision. Organizations that measure up well do so across four capabilities: capture (how feedback is collected and integrated), interpret (how feedback is analyzed and insights produced), act (how insights are implemented), and monitor (how dashboards are updated in near real-time).

Leaders in the industry use predictive analytics, machine learning, and big data?(augmenting survey data with operational data) to overcome the well-known limitations of customer feedback.?For example, only 7 percent on average complete surveys, 25 percent believe surveys provide timely insights to act on, while just 4 percent allow banks to quantify ROI.3?Banks can leverage the analytics-driven customer feedback system to?personalize the experience by identifying unique customer needs and trends at the scale that may go unnoticed with one-off surveys. They can also proactively resolve issues?by ensuring that drivers of customer experience are updated in real-time from all available data—as opposed to the limited survey questions that are only updated sporadically to quickly resolve trouble areas. Banks can predict with confidence the satisfaction for 100 percent of customers?with a “single source of truth” versus the 7 to 10 percent in typical survey responses. Lastly, they can improve “hidden” customer interaction points;?that is, quickly see how customer experience changes along a customer’s interaction with various parts of a given journey. For example, a global bank is building a capability that scores the experience of every customer based on data such as transactions, balances, recent branch and contact center experiences, and location. It then uses machine learning to predict customer satisfaction for each customer based on their individual experience. This new capability allows the bank to dramatically improve its follow-up with customers immediately after poor service experiences and identify opportunities to deepen relationships.

Ingrain the philosophy of “customer success” in every part of the organization

Customer success is a proactive, data-led, and client-centric approach that seeks to understand client priorities and help B2B customers optimize their outcomes. The customer-success discipline is well developed in high-tech companies and the software-as-a-service (SaaS) industry but is still only slowly finding relevance in banking. Customer success equates to understanding existing B2B customers’ needs and helping them achieve their objectives (which often includes improved outcomes or experience for an end consumer or user). As a result, customer success can be successful in driving growth and reducing churn, while also increasing the adoption and usage of products and services.

To implement an effective customer success model, banks can consider taking the following steps:

Build customer success capabilities:?Like sales, customer success is a discipline with established practices. Setting up a customer success function requires dedicated capability building, especially if a bank is converting a team of existing client-relationship executives (such as bankers or account managers) to become customer-success managers.

Create capacity for high-value activities:?In many organizations, an existing account or relationship manager is inundated with servicing requests and has limited capacity to be proactive. To create space, banks could find a way to reduce the demand on these teams to react to client “problems”, through product improvements, automation, or off-loading servicing activities to lower-cost teams.

Define the operating model with sales:?Successful customer success representatives will uncover upsell and cross-sell opportunities as they work with clients to help them achieve their objectives. Therefore, it is critical to have a defined operating model and success-to-sales motion, which may differ based on the customer segmentation and coverage model (for example, teams of customer success and sales reps working together on accounts or using a model that “passes on” customer success opportunities to the sales team).

Measurement of customer health

A deep understanding of customer health is beneficial to customer success as it helps indicate likely-to-churn customers and assists customer success teams to prioritize how to invest their time across their customer portfolio. Banks can use all the data they have available for a customer—such as financial performance, industry trends, engagement with product and digital journeys, customer satisfaction (for instance, NPS, CSAT), product performance, and the ability to meet customer service level agreements—to develop a predictive measure of “customer health” as a key enabler of customer success. For instance, a large wealth management player is moving to a customer-success model for its B2B business. It has introduced a “teaming” coverage model, in which large customers each have a dedicated representative for sales and customer success. The company has also defined an operating model for how sales, customer success, and sales operations will work together throughout the customer’s lifecycle. This new model has helped it better understand the needs of its customers and increased the opportunities to pursue new products and services with its existing customer base.

Combining all the above together

So how can banks achieve CX success in a competitive environment where customers want more, swiftly? The good news is that we have seen companies attain leading positions by addressing?three core building blocks?of customer experience: a clearly defined, strong aspiration; a disciplined transformation journey; and thoughtful deployment of new capabilities such as analytics. By using these building blocks to achieve successful customer-centric transformations, and embedding the above bold steps move described above, banks can take gold in the customer-experience race and attain a competitive advantage that boosts growth, lowers costs, and provides superior customer satisfaction.

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CONCLUSION

The financial services industry is in a state of flux, so CX and CI managers need to keep a close eye on the latest tendencies and adapt accordingly.?It’s important for?banks to build better services and products that meet their customers’ biggest needs, while at the same time ensuring that every change will benefit the business.?We hope the above trends help you build a better strategy and prepare for the upcoming changes that will shape the industry.?

To learn more about the latest customer journey banking trends stay tuned to our blog. Want to build a better customer feedback and sentiment analysis mechanism? Contact our team and find out how Lumoa can help.

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