RIP ROI, hello 'ROX'

Article published by American Bankers Association

Many outdated ways of banking are dying—and we should terminate ancient ways of measuring success as well.

Today, banking customers view their financial services providers through a holistic lens, looking less for a repository for their funds and more for a lifestyle partner to help them centrally manage their financial lives and financial wellbeing. Meeting and exceeding these customers’ expectations now hinges upon far more than having a slick, intuitive mobile app and bank-from-anywhere capabilities. Modern banking customers want compelling experiences built around their specific needs that integrate seamlessly with their day-to-day lives. And if a financial institution can’t deliver that, their customers will swiftly take their business elsewhere.

This is why traditional, ROI-centric success metrics such as revenue, efficiency ratio, customer numbers and deposit growth are no longer sufficient to inform banks’ long-term strategic planning. They do not take into account the speed with which customers’ expectations are evolving, and they cannot paint a full picture of a customer’s likelihood to stick around or grow their business with the institution.

For example, a customer may maintain a primary deposit account or have a car loan with a bank—which looks good for the institution’s balance sheet—but take their mortgage or wealth management business to a more user-friendly fintech firm with better rates at time of the decision. This means lost revenue for the bank and a deteriorating relationship with the customer—something established ROI measurements likely would not show.

In other words, today’s successes should no longer be considered an accurate forecast for future viability. It’s vital for financial institutions to consider the impact of experiences created, as well as customer engagement—even when these do not immediately translate to cash flow. Return on experience, or ROX, is the new ROI.

A shifting digital mindset

Tech leaders such as Netflix and Uber have set the standard within their respective industries for customer experience. Both leverage individual platforms and sophisticated algorithms to deliver consumers a deeply personalized, relevant experience. This approach holds promise for the banking sector as well, with customization being the key to building an outstanding CX.

In order to redesign the banking experience to center the customer, not products—the way other platform players have—institutions must undertake a significant, cross-channel digital transformation effort. Unfortunately, the financial industry tends to create siloes between functions and the adoption of new, enterprise-wide innovation is often stopped by those who are afraid of change, or those only interested in defending their own “turf.” However, according to Gartner, these rigid institutional mindsets, processes and structures are predicted to severely impact 80 percent of financial institutions by 2030 if they don’t embrace digital transformation.

So, how can banks break down these silos? The first step is letting go of the idea that digital transformation simply means adopting new digital tools. This is a misconception. Instead, financial institutions benefit when they rethink their digital strategies, soup to nuts, and focus on creating engaging, memorable experiences for both customers and employees. Here’s how:

First, banks realize advantages when adopting a single-platform approach that consolidates customers’ financial needs—deposit accounts, credit cards, mortgages, leasing, business banking and investments—in one virtual place.

The easiest way to level up a lagging CX is to eliminate the need for customers to play phone tag with different departments. Or worse, to open up and log into a different app.

Second, banks benefit when they prioritize customer choice when it comes to interactions with the institution. Customers should be empowered to conduct their business however they choose, online, over the phone or in-person. And the experience should be equally smooth and satisfactory regardless of the channel they use. Empowering customers, versus forcing their hand, helps to build loyalty and positive associations.

Combining a unified digital platform with options for self-directedness provides banks with end-to-end visibility into customer behaviors, patterns, needs and pain points. This, in turn, allows institutions to identify which elements of the CX are enjoyable and where expectations still aren’t being met – and to quickly eliminate friction points. This is not limited to CX alone. Customer experience is a great identifier of friction in the process.

At the same time, this holistic view of not just channels and journeys but more importantly, the entire front, mid, and back office, enables banks to view each customer as an individual, allowing for a more tailored approach to retention and upselling.

The kind of digital transformation prescribed above may seem intimidating. Make no mistake, it will require significant organizational investment and buy-in. However, technology has evolved to address the problems associated with legacy systems and siloed functionality, enabling banks to quickly upgrade their tech stacks and get on the right path. The key is identifying technology partners and solutions that will layer over existing technology to unify them as a single platform.

Quantifying the intangible

Locating a way to quantify something as seemingly intangible as ROX is non-negotiable for banks hoping to use it to inform their strategic decision-making. Why? Because this information empowers bank executives to make critical long-term business decisions, such as which digital capabilities to invest in, what organizational adjustments should be made, and more.

The good news is that the tools for making the qualitative quantifiable already exist. Here are three key steps banks can take to establish some rigor around measuring ROX and evaluating the success of their investments in CX:

First, measure customers’ ability to problem-solve with the same efficiency and high-touch service regardless of channel. Determine if products and services are available in all channels. Identify where there is operational friction. Data to gather might include how long it takes for customers to complete a transaction, how many touchpoints are required, whether they experience unwanted hand-offs between departments or channels, and where customers may drop out of the process altogether.

Then, gather direct feedback from customers, such as how satisfied they are with their experiences, whether they recommend the bank to friends and family, to better understand their level of satisfaction and loyalty. Measurements such as Net Promoter Score or the results of customer surveys can help quantify this.

And finally, evaluate how customer behaviors have shifted following investments in digitization or modernization. Have deposits increased? Are customers expressing interest in additional services? How has their engagement with the mobile app changed—such as duration of visits, size of transaction and number of transactions?

The goal, of course, is to demonstrate a correlation between an improved CX and increased customer loyalty or satisfaction, to then establish an additional correlation between happier customers and business growth. Over time, banks can expect to identify a direct through-line between investments in experiences and customer attraction and retention.

In short, near-term ROI should no longer be the guarantor of long-term success. The customers who make the balance sheet look great today can be gone in an instant, taking their money to a newer, flashier competitor. Banks looking to stay competitive in this marketplace only stand to benefit from continually investing in and measuring the success of top-notch customer experiences. Placing the customer at the center of the business strategy is the only way to survive.

If you’d like to learn more, let’s have a 15-minute discussion. Reach out to me at [email protected] or right here on LinkedIn .??