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Why Financial Services Institutions Should Invest in Customer Experience
May 13, 2021 • 3 Minute Read
For many years, customers did not have much of a choice in terms of their banking institution. The bank you chose was the bank that was within driving distance, or the bank that had an ATM close by. Because competition was so limited, most banks didn’t see the need to invest in their customer experience in order to obtain and retain customers.
Now, financial services institutions (FSI) have become massively diversified— banks are no longer tethered to any physical location. Customers might open bank accounts and stock portfolios or acquire loans and mortgages without ever speaking to a bank teller either over the phone or in person. Because of this, the average consumer has a vastly expanded choice of banks and FSIs need to level up their customer experiences in order to compete in this rapidly evolving industry.
What Consumers Want from a Financial Services Institution.
Recent studies about customer experience in financial services have uncovered that that consumers want more engagement and a different kind of engagement with their banks.
Research from Accenture shows that 79% of banking customers want more advice and support from their banks, as opposed to a simply transactional relationship. In addition, 40% of banking customers increase their loyalty to a banking brand if they can access this kind of personalized experience.
There are a few problems and opportunities here.
First, consumers are changing their relationships with their banks. Traditional bank branches have tellers and financial advisers that can provide the kind of personalized banking advice that consumers want. However, consumers—especially younger consumers—want to bank digitally. Research from the Boston Consulting Group shows that nearly one-in-four banking customers will reduce their visits to bank branches or stop visiting altogether during the pandemic.
A recent survey shows that 90% of banks with assets over $10 billion (and 86% of banks with assets less than that) rank “improving digital customer experiences” as their top strategic priority for 2021. In spite of all this effort and investment, consumers still aren’t convinced. Many consumers distrust the traditional banking establishment and are looking into startup FSIs.
There’s a window of hope, however. Per the BCG study, many consumers praise the banking industry’s pandemic response. Only 5% of customers criticize the way that banks have handled the crisis, and 25% of customers have promoted banks to others based on their ability to assist.
The upshot of this is that banks may now have a grace period where they can begin improving their personalization efforts, allowing them to capture renewed customer sentiment before their goodwill runs out.
How Can Financial Services Institutions Improve Their Customer Experience?
There is a significant gap between the experience that consumers want and the experience FSIs are providing:
- 76% of banking customers want an omnichannel banking experience; Only 58% of banks prioritize this.
- 65% of banking customers want a focus on social responsibility; Only 25% of banks prioritize this.
- 48% of banking customers would like lower-cost services; Only 24% of banks prioritize this.
- 31% of banking customers would like improved customer support services; Only 12% of banks prioritize this.
Much of this gap can be traced to a single source: legacy computer hardware. Many banks are still running on computer systems from the 1980s and 1990s. For example, 43% of banking systems still use COBOL—a computer language that dates back to the 1950s—and 95% of ATM transactions do the same.
It can be very difficult to rig interfaces from COBOL operating systems to modern computer devices. This means that it can be very hard to provide banking applications on mobile devices with the same features and responsiveness as their desktop counterparts. Meanwhile, it can be very expensive to maintain and upgrade COBOL systems, and this cost gets passed on to consumers. Even customer support is affected, because it can be hard for support desks to call up customer information in a timely manner.
Banks have a big hurdle to overcome, in other words—and they don’t necessarily have the tools and skills to surmount it. Only 12% of banks consider themselves to be digital transformation leaders, and 55% report that they’re behind the curve.
Creating a Successful Digital Transformation Strategy.
To be successful at digital transformation, banks need to undertake individual projects rapidly while effecting strategic changes gradually. Rabobank, a Dutch multinational, is a good example of this. Instead of completely ripping and replacing their legacy infrastructure, they worked to consolidate 50 siloed databases into a single CRM, a change that allowed them to improve onboarding speeds by 99%.
Many banks tend to take an all-of-the-above approach to digital transformation—and then they fail. Total rip-and-replace digital transformations are extremely expensive, which means that they can run out of budget midstream, and they’re hard to pivot. In other words, if a massive digital transformation effort doesn’t end up meeting customer experience goals, then most of its costs are already sunk.
Here at Verndale, we help financial services institutions improve their customer experiences by identifying your target metrics, examining any roadblocks, and bringing customer experience projects from the pilot phase through to company-wide implementation and support. For more information, contact us today.