5th May 2017

Customer experience: banks must think – and innovate – like FinTechs

Written by Rob Colwell, Partner, Strategy & Customer Advisory, Financial Services, EY

Perhaps more than any other factor in business, customer experience (CX) determines success. Thanks to Amazon, Uber, Apple and other CX leaders, today’s consumers expect levels of personalization and convenience that would have been unthinkable just a few years ago. And these new standards apply to nearly every kind of business – retailers and restaurants, consumer goods and electronics makers, airlines and hotels, insurers and, yes, even banks.

But what does the CX revolution mean for traditional banks? And how can they respond effectively?

First and foremost, banking leaders are coming to terms with just how fundamental the shift to CX is. In the past, banks competed primarily on price, product and scale. Now, banks must not only provide the services customers want, but also deliver them precisely how customers want them.

EY’s Global Consumer Banking Survey of more than 55,000 consumers revealed that increasing commoditization and new competition are making  better experiences an imperative, not an option. Banks must be proactive in measuring and enhancing the experiences they offer their different customer segments if they are to differentiate themselves from traditional competitors and stay ahead of new ones.

The clearest way forward is to take a page out of FinTechs’ playbooks. Recent market entrants have given consumers a new vision of what to expect from financial providers. To keep up with the upstarts, traditional banks need to:

  • Radically simplify the customer journey
  • Design and implement for end-to-end customer engagement – with effective integration across channels
  • Branch out into new service lines and product territories to enhance customer relationships

The new focus on experience means banks need to rethink the way they interact with their customers. The EY survey also provides good news. Traditional banks meet most consumers’ primary financial services needs, and in many cases have a strong digital foundation to build from. But when new entrants emerge with more convenient and personalized customer experiences, consumers’ trust and loyalty to their current bank may be threatened.

The survey results also confirm five concrete actions that banks can take to shape better experiences for their customers:

  • Transform customer journeys. Customer needs should drive every move that banks make, whether that’s expanding a product line or implementing customer-facing digital portals.
  • Radically simplify product features and pricing. Effectively communicating value is often the key determinant of whether consumers will trust a bank with their business or not. From the onset, banks need to ensure that potential customers know exactly what they will receive – transparency is key.
  • Broaden services and expand into new “territories.” Enhancing the core banking value proposition into new areas beyond traditional product sets, such as financial education and counseling, can improve customer trust and competitive ability when compared to new market entrants.
  • Form partnerships to deliver a broader ecosystem of services and offerings. Banks that decide to form partnerships with FinTechs and other new entrants stand to improve their industry standing and show customers that their best interests come first.
  • Structure the organization to drive innovation. Transforming the organization requires rethinking not only outward-reaching aspects of the business – the most important changes can come from the inside. An innovative mindset fosters long-term development and positions the organization for the next industry shift down the line.

These steps represent the beginning of a long-term journey to enhanced CX. To truly reap the benefits of positive customer experiences requires not only a commitment to understanding consumers’ needs, but also dedicating the organization to delivering it and in the channels and formats they prefer.

The extent to which banks can learn from FinTechs and retain customer loyalty depends on how they tackle the challenges that the new era of consumer banking brings.

For more on EY’s findings on the state of the consumer banking industry and how banks can improve their relevance, read the full report.

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