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Why European banks must obsess over customer experience to compete

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7 minute read 25 Jul 2023
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Redefine ‘know your customer’ to drive truly client-centric bank transformation.

In brief

  • Understanding customers’ aspirations, goals and challenges beyond just their banking needs is key to customer-centric transformation.
  • Primary customer research, combined with transactional and behavioral data, can yield actionable insights on customers’ evolving needs and expectations.
  • Customer focus must be embedded and scaled across the entire organization to achieve true customer centricity.

Successful bank transformations are driven by the needs of the customer, not simply by business priorities or compliance with regulators. This was highlighted in our recent article on customer centricity in banking transformation, which identified the lack of commitment to customers as a contributing factor to underperforming transformations – and the key ways that banks can change that.

It all starts by obsessing over customer needs and prioritizing the customer experience in banking.

Customer obsession: The key to success

Consider the success of large US-based, technology companies and their relentless focus on services that delight and engage their customers on a personal level. European banks must adopt a similar degree of obsession to thrive. While some lenders have gained insights from transactional data, true customer centricity must go further – all the way to understanding customers’ life goals, challenges and aspirations.

With FinTech and Big Tech continually enticing people with ever more innovative services and solutions, banks have little choice but to match or top these to enhance the customer experience in banking. This can only be achieved by treating customers as individuals with unique needs and making them feel understood.

Banks should regularly survey and interview their customers and conduct external research to gain insights into customer preferences, attitudes, needs and values to inform customer-centric transformation from inception to delivery.

Two recent EY surveys – NextWave Consumer Banking Survey and the Future Consumer Index – identified several trends for improving customer experience in banking to drive transformation:

  • Trust around privacy
    French, German and UK consumers prioritize strong privacy policies and features such as ID theft protection and data usage control. This is especially important as European banks develop increasingly personalized products.

            Factors influencing purchase decisions and consumer interest in benefits
                (% of French, German and UK respondents who selected each factor)

privacy trust
rewards
rate or fee benefits
  • Need for segmentation
    Personalization is more important for Gen Z consumers (81%) compared with 47% of those over 65, highlighting the challenge of tailoring services and products for a diverse customer base.

  • Demand for super-apps
    European banking consumers increasingly expect highly integrated experiences among multiple providers, leading to growing demand for “super-apps” that combine various financial services (e.g., current and savings accounts, investments and payments) within a single digital platform.
of EMEIA consumers use Neobanks, FinTech firms that offer payments, savings and investment apps to streamine the mobile banking
  • Cost of living concerns
    Nearly half (46%) of French, German and UK consumers feel their life will be worse in three years’ time, with a third (33%) worried about having enough money to spend on things beyond the essentials.

  • The rise of digital assets
    One in 10 consumers have used digital currencies, experienced the metaverse or purchased a virtual product. Banks need to consider these trends in their transformation effort.

Recent upheavals, from the pandemic to geopolitical instability, have also altered consumer perspectives and priorities. Understanding how these events affect customers can help banks foster stronger relationships and gain additional insights for successful and cost-effective transformation projects that focus on services and solutions that customers genuinely value. This is the path to delivering a richer and more granular customer experience in banking.

Such insights should then be combined with a thorough analysis of internal transaction data to identify which potential features and services customers would value. For example, analyzing points where customers typically drop out of product application processes can enable banks to redefine and streamline the onboarding experience. For a truly connected customer-centric experience, this process must happen at the outset rather than post-design or pre-implementation.

Moreover, banking customer experience data is only useful if it is widely accessible across an organization and not siloed within individual systems and functions. Banks may therefore need to carry out data transformation at the same time so key customer data can be shared with relevant teams in real-time, enabling rapid, effective and consistent decision-making. These efforts must be balanced against consumer concerns around data privacy and cyber security.

How EY can Help

Evolving regulations

In addition to evolving expectations around the customer experience, banks need to align customer-centric transformation with changing regulatory requirements. Under the UK Financial Conduct Authority’s Consumer Duty, for example, banks must offer products and services that are fit for purpose and represent fair value. The European Accessibility Act, meanwhile, requires all member states to ensure banking services can be accessed by disabled and elderly individuals. Other initiatives that impact banks and its customers include the EU’s new Sustainable Finance Strategy, which seeks to give small- and medium-sized enterprises (SMEs) and consumers the right tools and incentives to access transition finance.

Six ways to embed and scale customer centricity

Once banks achieve this level of customer understanding, they then face the challenge of adopting and activating customer centricity at scale across divisions.

Many clients we have worked with have often limited their focus to the development of new customer-facing products and point solutions rather than the end-to-end journeys and processes that are vital to boosting the overall customer experience in banking.

We have thus identified six key steps that can enable banks to scale their customer-centric approach and place customer-focused design at the core of their operations:

  1. Design leadership and positioning: Secure appropriate sponsorship at the top levels of management and raise broader design awareness among senior executives.

  2. Engagement model and funding: Incorporate design activities as a mandatory step in the internal resource allocation process, with dedicated budget allocation for user research.

  3. Global framework and local delivery: Establish a global, customer-centric framework for a consistent customer experience in the banking sector while identifying and leveraging synergies between global and local design teams.

  4. Design and data integration: Schedule regular meetings between the design and data teams to promote an informed and joined-up approach, with input from the Customer Analytics team.

  5. Culture and values: Promote induction sessions, bootcamps and innovation labs to foster a mindset shift. Reinforce the benefits with a business case and success stories.

  6. Performance management: Define and adopt customer-centric metrics in employee appraisals.

Case study: Journey to customer centricity

How EY helped one large bank transform its customer experience:

  • Commissioned a specialist design company to conduct Customer Experience Analysis and identify key areas for improvement from the customer’s perspective.
  • Established direct connections with existing and potential customers to gather insights on how they view its products and services.
  • Used focus groups, ideation sessions, mystery shopping and surveys to understand the customer lifecycle and identify opportunities for impactful changes.
  • Reviewed existing customer satisfaction tools, metrics and quality assurance programs in customer care centers.

By combining these insights with transactional data, the bank revamped its marketing image and applied technology to personalize day-to-day customer experiences, increasing engagement rates by up to 10 times.

This article is co-authored by Oliver Kenton, Senior Manager, Business Consulting, EY-Seren Limited.

Summary

Customer obsession must be at the heart of transformation for European banks in today’s competitive landscape. Organizations must go beyond understanding their customers’ banking needs and delve deeply into their goals, aspirations and challenges. Advances in automation, the cloud and AI will become increasingly important for extracting insights from behavioral and transactional data. Following workshops with several European banks, EY teams found many are also working with external providers, such as FinTechs, to achieve true customer centricity. By combining all these efforts, banks can deliver the personalized, seamless and meaningful experiences that lead to strong and lasting customer relationships.

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