What is customer experience?
Fundamentally, “customer experience” refers to the ways in which banks engage and interact with their customers:
Harvard Business Review: “The sum-totality of how customers engage with your company and brand, not just in a snapshot in time, but throughout the entire arc of being a customer”
Forrester: “How customers perceive their interactions with your company”
According to our survey results, traditional banks still “own” the primary financial services relationship for most consumers. But their relevance has begun to taper because of eroding trust, evolving customer expectations and the emergence of credible alternatives. That’s why customer experience matters.
The rise of FinTech
While the industry has long been aware of the threat of FinTech, consumer migration is accelerating and usage is high. The seemingly small and incremental gains new players have made in the last few years are now reaching a critical mass, largely because they have set new standards for innovation and customer experience.
Actions banks should take to innovate and enhance the customer experience
Banks can chart their course forward by thinking in terms of two tracks:
1. What needs to be done to provide better customer experiences
Transform customer journeys – better customer experiences begin with in-depth knowledge and understanding of why and how customers interact with the bank – the “customer journey.” Customer needs and expectations should drive the experience design at all steps.
Radically simplify product portfolios, product features and pricing – from the very first encounter, customers must understand the value banks provide and what different products and services cost. The first step is to make all offerings simple and transparent.
Broaden services and expand into new “territories” to create an ecosystem of value-adding services, including nonfinancial services – banks must find new ways to expand or extend the core banking value proposition into new areas beyond traditional product and transaction sets. The promising territories include tax support, education around retirement savings and special offerings for narrowly defined customer segments.
2. What needs to be done internally to enable those better experiences
Form partnerships to deliver a broader ecosystem of services and offerings – banks will be well served by forming partnerships and collaborating with FinTechs to expand the range of their offerings. There are risks to consider; simply providing a balance sheet but not owning the services or platform could lead to the erosion of customer relationships. But banks do not need to provide all products and services on their platform, and can rely on partners for the provision of parts of the product set.
Structure the organization, build the talent base and shape the culture to drive innovation – to design and deliver first-rate customer experiences, banks will need to transform their workforce, starting with how they attract, engage, develop and inspire their talent. Financial institutions that win in the market five years from now will look very different; that difference will be driven by people and teams as much as it is by technology and data.
Collaborate with FinTechs to deliver better outcomes for customers – for traditional banks, innovation can be accelerated through collaboration with FinTechs. Banks that have begun the process of collaborating with FinTechs have explored a number of approaches, including the creation of special focused teams and programs to drive innovation initiatives internally.
Winning through customer experience in a new world
The imperative to offer a great customer experience reflects the fundamentally new world in which banks operate. Whether banks can learn to act like FinTechs and master the many different manifestations of customer experience will play a major role in deciding how the next era of consumer banking plays out.