By Anil Antony, Global Head for Financial Services, Automotive, Telecom, Technology, CX, NielsenIQ
In an era of digital disruption and changing consumer expectations, customer experience (CX) has emerged as a key differentiator across businesses. Traditionally known for its focus on products and services, the banking sector has realized the immense value of delivering exceptional customer experiences. With heightened competition from fintech (financial technology) startups and evolving consumer demand, banks recognize that the key to sustainable success lies in offering personalized, seamless and delightful experiences.
This article explores why customer experience has become the new frontier of competitive advantage and what key actions banks can take to excel in this area.
Three key dimensions affecting the banking business today
Technology integration, pervasively digital and focused on self-service, continues to persuade customers to embrace online banking for convenience and accessibility. Complementing it are payment innovations, whether Buy Now, Pay Later (BNPL) or cross-border digital-currency mandates. Fintech organizations are maturing from being solely focused on technology to being adept at serving specific customer needs. All of this is leading to data being used as a product; increasingly, consumer data is being integrated in a different way, leading to the development of new products and services. Finally, AI (artificial intelligence) is here. AI-enabled services are slowly impacting the front and back offices, leading to cost optimization and efficient customer service.
The second dimension is the focus on customer centricity. Product management, a realm of other businesses, has entered banking with a vengeance. Knowing and designing what customers value drives significant growth potential in banks. Banks are working to reimagine customer journeys, supported by omnichannel integration. Bank branches are being transformed into experience centers, whereby banks are integrating human interaction and technology to differentiate customer experiences.
And the third is the focus on environmental, social and governance (ESG). With the advent of sustainable regulations, banks are seeking to create roadmaps to increase capital flows toward a sustainable economy. According to a recent consumer-outlook study by NielsenIQ, 69 percent of consumers mentioned that sustainability is more important today than two years ago.
That said, multiple challenges can be overwhelming without a laser focus on customer centricity. Rising customer expectations, customers’ trust in the banking industry and potential losses of customer data are all pushing the banking industry to take customer experience and customer centricity much more seriously than before.
However, it is not that simple. There is a serious need to be committed to customers every day in every product, service delivery and interaction. It takes a culture change to win.
The philosophy of customer experience has evolved. From our point of view, this philosophy has evolved in three stages.
We will look at the key trends and challenges banks face in their journeys toward customer centricity as the banking sector transforms.
Balancing digital experiences with the human touch
With the integration of technology into our lives, today’s customers want their experiences to be digital yet simple and easy. From onboarding to their daily engagements with their banks, customers are looking for modular service propositions backed by digital and physical channels. Today’s requirement is a cohesive experience that allows consistent flows of information and services across touchpoints. Ultimately, customers are interested in frictionless, integrated ways of engaging with their banks.
While it is intuitive that routine tasks be managed completely digitally, customers still need human access, even in a digital setting. Complex tasks, such as billing issues or purchases of investment solutions, must be led by the human touch, with technology functioning only as an enabler.
Use of AI in customer experience
AI applications are altering the functions necessary to differentiate customer experiences. From facial scanning for payments to using machine learning (ML) for fraud detection, AI applications are aiding banks in optimizing costs and efficiencies while simultaneously providing consistent customer experiences.
To meet the expectations of today’s customers, AI helps banks offer intelligent, relevant experiences based on customers’ actual behaviors. This will happen seamlessly over physical and digital touchpoints and across the multiple devices a customer uses.
Banks that can deploy AI will be able to match the speed and agility of pure-play tech companies and launch new products and services in highly compressed timeframes. This, in turn, will allow them to collaborate with the wider digital world, thereby providing customers with new services across their life stages. A well-executed strategy around this will create a differentiated experience with customer centricity as the guiding beacon.
However, despite investments, AI-led interactions today lack depth, creating the need for human engagement.
The financial-services sector requires empathetic customer handling. A wide variety of socio-economic backgrounds and diverse customer profiles result in challenges in the standardization of responses to customers.
Resolution of inevitable friction points requires empathy, something only humans can provide. Thus, AI must still be complemented with human assistance to ensure the experience is tailored to the customer’s values.
Personalization
One key outcome of technology proliferation in our lives has been personalization. Organizations such as Netflix and Amazon routinely serve us recommendations based on what we have watched and bought. This has resulted in customers expecting the same from their banks. However, it is far easier said than done, given the complexities of banking products.
Personalization requires organizations to have a single, yet holistic, view of each customer. It requires understanding a customer’s life stages and activities, not limited to banking, and then using human understanding to create a comprehensive picture.
By understanding their customers at a granular level, banks can orchestrate tailored responses to their needs. This will not only enable profitable growth but also delight customers since the responses are adapted to what they value.
Fundamentally, banks need to move from a business-driven to a customer-driven culture
While we have examined the key actions banks must take to create unique customer experiences, this journey is fraught with challenges. As illustrated in the beginning, the key challenges to this journey are the ownership of CX, building a customer-first culture and perhaps most importantly, mapping the ROI (return on investment) of the CX-related actions. Let us look at these challenges and identify what steps the banking sector can take to address them.
Who owns CX?
CX is often relegated to being the KPI (key performance indicator) of the customer experience or contact center team. That couldn’t be further from the truth. As a function, CX should be owned across the organization, both horizontally and vertically. It needs to be the chief executive officer’s strategic priority and an executional capability for front-liners.
CX does not work in isolation. The experience that organizations deliver impacts the brand promise—a part of the organization’s identity to customers. From what we have gleaned from our various interactions with leading banks across markets, we have created a simple framework for CX ownership.
Build a customer-first culture
Customer-centric transformation requires many skills across functions. Although banks are investing in data analytics, user experience and ethnographic understanding, there is still a long way to go. Skills aside, leaders must create customer-centric cultures in which all employees, regardless of their roles, understand it, own it and strive to improve it. It is imperative that CX transformation is given airtime at the highest levels of the organization.
While building a customer-centric culture is important, actions are equally important. Build a framework that supports the organization’s strategy and drives results with a clear closed-loop feedback mechanism. Real change comes from taking action on learnings. Based on our observations of leading banks in the market, we have outlined a simple structure for how the closed-loop feedback mechanism should work.
Driving ROI through CX improvement
From an empirical viewpoint, there is no disagreement that customer experience is and will be the key differentiator for banks. However, in uncertain economic times, CX teams often find themselves at the crossroads of having to justify their investments in time and money. During the various studies we have conducted with leading banks, we often see this act as a significant barrier to the needed transformation toward customer experience.
The first step in overcoming this barrier is understanding the customer lifetime value (CLV). By definition, CLV is the amount of revenue an organization can generate from a single customer over the period that he or she remains a customer of that company. However, it is not restricted to what customers generate themselves.
At its core, CLV is the present value of all future streams of revenue that an individual generates directly or via referrals over the life of his or her business with an organization.
The second step is to create customer personas based on their interactions with their banks and the nature of their relationships. In understanding the customer relationship, it is essential that banks clearly understand the drivers of said behavior. Typically, these can be classified under the various processes and touchpoints through which the customer engages with the bank. The quality of interaction is used as an integral input in determining these drivers.
The next step is to integrate the preceding two steps to create a holistic view of each customer, replete with his or her CLV, the nature of his or her relationship and key drivers.
This approach will allow banks to test ROI improvements based on pure customer-experience actions. Based on customers’ CLVs, it will also show the inflection points and post which experience-based improvements are unlikely to yield financial improvements.
Once the model is finalized with internal stakeholders, each customer persona and CLV should be tagged in the CRM (customer relationship management) system for monitoring. Tagging in the CRM system will allow frontline teams to gauge the customer’s situation, sense his or her importance and react appropriately during engagements.
Finally, customer-experience improvement is not a destination but a journey. Before embarking on the CX transformation, banks need to realize where they are on the continuum of CX maturity. That will provide the base for customer-led transformation actions. Below is a frame highlighting this CX-improvement journey that organizations can use to determine where they stand and then continue the process of embedding customers into their businesses and ways of working.
Where are you on this continuum?