Fintech Trends: Customer-Centric Banking

By Sebastian Brandner | May 23rd, 2017
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  • Only 20 years ago, the core of customer experience in the banking industry were meetings between clients and account managers. These appointments were the key for establishing a trustworthy relationship and a positive customer experience. It worked, because people came into the branches and could easily be persuaded by their familiar manager with coffee and small talk. Back then, only a few may have imagined how banking could eventually change.

    Today, the majority of banks are closing down branches. The customers went online and now, appointments with their account managers can be viewed anything between rare and redundant. Banking, brokerage, insurance, loans: The majority of traditional banking services has been digitized to a large extent and therefore is available via smartphones and computers. In addition, Fintech companies have started to create entirely new products and services that are intended for online use only.

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    The result of that transformation from offline to online is interaction points with customers steadily becoming rare. Besides offering good services, customer interaction has traditionally been a factor that determined the relation between banks and their customers. Creating new, qualitative and digital interaction points became a challenge for the financial industry. However, there are different approaches to tackle that problem in the banking industry. Newly emerging Fintech businesses mainly started to build their services and products focussing on the customer’s point of view. Hence, these products and services were created to perform well in that exact framework and digitised environment. Traditional banking companies had to change and refine existing products and thereby extend them to the customers’ needs.

    One could describe that process as a change of paradigms: Rethinking customer interaction has become a part of product development whereas only some decades ago the perspective on the product itself dominated the development processes.

    A recent study shows that banks in the UK sell 59 % of their products and services online. One can assume, that this number will increase even further in the next years. Providing customers with cookies and coffee in order to make their appointment a pleasant experience is not going to work anymore. Thus, banking companies should aim to provide customers a tailored experience by adapting their digital structure. In order to do so, more and more insights will be needed on who the customers actually are and what they really want. Technologies such as big data as well as distinguished algorithms are potential tools that can help to gain these insights.

    Banks are no longer just the listener; they are interacting with their digital consumers to develop individually tailored products. Only then, can they fulfill customer expectations. A study in the US showed that 49% of customers expect their bank to offer products for their specific needs while 52% of consumers have loyalty reward expectations. As banks and insurance companies become more aware of their potential to use data to improve the customer journey, relationships turn to more personal ones even in the absence of physical contact.

    So how will financial services and products be shaped in the future to fulfill the customer needs?

    The customer has to and therefore will be at the very core of products. Financial services are likely to become more and more individual. Considering customers’ profiles, companies will have to know what their customers need and when they need it. Clear goals and objectives need to be set for customer engagement. Companies should align their investment to build functionality that facilitates key customer actions effortlessly.

    Every financial services company needs to be customer-centric in an attempt to bring the human presence back through a digital approach. Analysis of customer data as well as a shift in the organizational behavior of banks and insurance companies will significantly change business models towards ones who incentivize and engage consumers. The situation of meeting one’s familiar account manager will be transformed into navigating through familiar and highly individual user interfaces. At the same time, products and services must not overwhelm the customers with information but be simple and easily comprehensible. Innovation and technology are likely to be the driving values in the paradigm change that has been described above. They enable the banking industry to meet the customer's’ expectations and to create interaction points that are fitted to the digital framework.

    Overall, financial firms must set their focus on the customer experiences as they never did before. In order to stay competitive, banks must redefine themselves as more service oriented organizations. Therefor the next crucial step that needs to be taken is the creation of a ‘digital engagement’. If banks want to keep up with the new competitors in this changing landscape, they should use this moment to adjust to the new realities of retail banking.


    Sources:

    http://www.bain.com/publications/articles/what-great-looks-like-in-banking-sales-practices.aspx

    https://thefinancialbrand.com/61880/bank-customer-experience-data/

    https://www.bai.org/banking-strategies/article-detail/three-ways-to-make-your-bank-customer-centric

    http://www.bankingexchange.com/news-feed/item/6774-can-wrap-and-digitize-take-you-into-digital-age?Itemid=260

    https://www.americanbanker.com/opinion/how-tech-wave-forces-bankers-to-show-their-human-side

    https://www.finextra.com/blogposting/13774/future-of-the-branch-where-do-we-go-from-here

    https://blogs.adobe.com/digitaleurope/de/customer-experience-de/neue-bankenrichtlinie-krempelt-auch-das-kundenerlebnis-um/

    Sebastian Brandner