My daughter recently got her bank account. He doesn’t care about going to the branch, or talking to a human. For all practical purposes, “Bank” is an app for that. She builds trust based on the experience provided by the banking app. The difference in expectations is huge and I’m not sure banks Has become completely internalized and adapted to the implications.
This is a wake-up call for banks. Those who take care of it will be able to take advantage of it customer experience As a strategic difference to them. Those who don’t will soon understand that in a world of empowered customers who are spoiled for choice, providers of suboptimal experience quickly become irrelevant.
In the last decade, consumer expectations The banking industry has begun to change much faster than its ability to adapt. The NTT Global Banking and Investment Guide to the 2020 Global Customer Experience Benchmarking Report highlights a vast gap in how banks understand and operate customer experience parameters. Of the banks and investment firms surveyed, 83.9% agreed that CX offered a competitive edge, while 60.9% considered it a primary differentiator. Yet only 17.4% of surveyed entities agreed that CX is an important part of organizational strategy.
There are four secular trends in consumer behavior that are only going to accelerate over the next decade:
1. Consumers build trust differently than before. Historically, consumers have built trust in a bank through the presence of a brick-and-mortar building that they can visit and build a relationship with. While this may still be true for many customer segments, we are seeing a new generation of consumers who build trust based on the quality, feedback and consistency of their experience.
2. Consumers are more tech-savvy than ever, and their reference benchmarks are evolving. They have best-in-class (eg heroine, Googleand Instagram) apps on their mobile devices and expect the same experience from their financial service providers.
3. Consumers have more choices and are demanding more. Consumers have a lot of options when choosing financial products. In the days of the past, limited choices of financial service providers and products meant less flexibility for the consumer. Now consumers demand greater flexibility and the ability to customize financial products to meet their needs, not the other way around.
4. The evolving needs of consumers require the pace of innovation. Evolving consumer needs require rapid innovation of features and experiences. These days, becoming best-in-class is far more complicated than becoming best-in-class. The rate of innovation has become critical to long-term success. Financial services startups have taken advantage of the significant impedance mismatch between the growing consumer needs and responsiveness of the banking industry to carve a niche for themselves.
Some common themes of how they approach the customer experience are:
1. Work backwards from the client: They typically pick a specific use case and work backwards from a need to design the right offering to the consumer rather than working ahead of a product.
2. Inventions on behalf of customers: They use a technology-first approach to inventing on behalf of their customers, often focusing on delights and experiences that allow customers to form habits.
3. Iteration on rapidly putting efficiencies in the hands of customers: They understand that cycle times matter and most fintechs practice an iterative design-build-test-deployment cycle to continuously launch new capabilities and functionality.
4. Build Operational Excellence in Design: They often understand the operation and scaling features of their systems before the first line of code is written.
5. Focus on Continuous Improvement of Inputs: They obsessively monitor and measure input metrics that deliver high quality customer experiences and continually improve upon them. This has enabled these companies to capture wallet share and more importantly consumer mindshare.
As consumers form new habits, the risk for the banking industry is that they become alienated from their customers, accusing them of becoming the railroads of the financial system.
It is important for the worldwide banking industry to begin prioritizing the consumer experience as a strategic growth lever:
1. Selection: Invest in an in-depth understanding of customer needs and work backwards to invent solutions on their behalf. Put choice, selection and control back in the hands of the consumer. This is in stark contrast to historical practice.
2. Price: Financial products should be priced on the basis of delivered value and not on cost basis. Value-based pricing forces service providers to increase their service level and quality. This requires a fundamental rethinking of the value proposition as well as the delivery mechanism.
3. Convenience: Instead of focusing only on results, focus on inputs that enhance customer convenience. The historical outlook has been output and financial results focused. When done properly, it enables customers to consume experiences when they want, where they want, and how they want them.
When banks organize, plan and execute against these three pillars, the consumer experience can unlock non-linear growth and drive substantial operational efficiencies. Tech companies have figured it out and built a trillion-dollar market cap. The time has come for the banking industry to keep and prioritize customer experience as a growth lever.
(The author is President and Head of Customer Experience, Kotak Mahindra Bank, Views expressed are personal)