Banks need to consider how they can pivot from business-driven transformations toward truly customer-led transformation.
2. Define and measure KPIs
Banks need to regularly review a wide range of customer-centric key performance indicators (KPIs). All too often, executives fall into the trap of thinking that their customers are happy and fulfilled because their NPS metrics are above average. But these don’t provide the entire picture, and even banks that are losing customers can have a high NPS score.
For a full assessment of customer satisfaction, combine NPS scores with other metrics. These might include the proportion of customers that abandon a product application process or the proportion that stop making a payment.
Measuring internal efforts to promote customer centricity can also be illuminating. Some banks, for instance, measure the percentage of product developments informed by consumer research or the amount of time dedicated to user testing. Given the rising focus on digital inclusivity, measuring the proportion of products that have been subject to an accessibility review is also insightful.
This type of insight helps transformation in two ways. First, this data might encourage banks to launch an entire transformation initiative designed to improve customer experiences. Second, it will help banks to assess which transformations have proved successful.
However, for banks to act on this data they need it to be displayed on a management dashboard. This will help team members to understand the importance of customer centricity and to act if satisfaction appears to be deteriorating.
3. Allocate at least 15% of budget to customer centricity
Customer-centric transformation requires budget. Money needs to be allocated to customer research, user experience, designing customer journeys, prototyping, testing and fine tuning. But, money is often prioritized for creating the proposition, demonstrating regulatory compliance and sales and marketing, and customer-centric spend has to come out of what is left.
This should not be the case. Unless 15% of the total transformation budget is earmarked at the outset for initiatives that improve customer centricity, it is likely to fail. Why 15%? A benchmarking exercise of customer centric transformation EY teams conducted with a client suggested this is the key budget threshold that needs to be met.
4. Invest in the human side of customer centricity
Customer-centric transformation requires skills that many banks lack: data analytics, user experience, customer and ethnographic research or product testing. Banks will need to invest in their people to obtain these.
Skills aside, leaders need to create a culture of customer centricity, whereby all employees — regardless of role — understand its importance and strive to improve it. Rewarding employees that have demonstrated customer-centric excellence can help here.
Team structure is also vital. Bringing together a temporary team of product designers, data specialists and those in sales and marketing will ensure that a customer-centric transformation is delivered.
5. Appoint and empower a chief customer officer
To make sure everything in points 1 to 4 happens, banks should appoint a chief customer officer to the executive management team. This individual will promote the customer agenda and put the customer at the heart of every transformation initiative.
This is not what happens in most banks today. In the worst cases, banks delegate responsibility for customer centricity to individual product teams, which means it becomes an afterthought.
And while a growing number of banks have created this position, the individual rarely has any influence over senior management. This needs to change. The chief customer officer must be a member of the senior leadership team and part of major strategic decisions. The rest of the executive team, meanwhile, needs to listen to them.
Two-thirds of businesses say that an organization’s ability to transform itself is extremely important to its future existence. Therefore, it is vital to reduce the probability of failure. Putting the customer at the heart of transformation will be key to success. This requires a large investment in people, data and research and, above all, a change in mindset. Banks should consider these key questions as they begin to embrace customer centricity:
- What do banking executives know about how customer expectations are changing? Does this knowledge inform their transformation strategy?
- Beyond NPS metrics, how does the bank measure customer satisfaction? Who within the bank has access to this data?
- How much transformation budget is allocated to customer-centric initiatives?
- Does the bank have the right skills and culture for customer-centric transformation?
- Does the bank have a chief customer officer? Does this role influence senior management and transformation plans?
It’s imperative for banks to avoid the harsh reality of transformations that are business-driven without real commitment to customer-centricity. Driven by a chief customer officer, a successful customer-led transformation will require a large investment in people, data and research and above all, a cultural and mindset shift.