Digital has become the pulse of banking customers’ interactions, and it continues to strongly influence their behavior, expectations and needs. Yet, banks are still vulnerable as the new digital customers still find difficulties in solving issues regardless of the channel they use. How can banks enhance customer engagement and leverage this new digital opportunity?
Every customer is a digital customer, period. And that is irreversible. Digital has become more important to customers in every single aspect, although customers have embraced digital technologies at different degrees. It’s known that many customers have become digital-only users, preferring to prospect, purchase and interact online, yet there are customers who still lean heavily on traditional channels, but even they are likely to use available digital channels at different times for certain activities, which shows that there is a fast progression towards digital usage from a customer perspective.
Creating an optimal customer digital journey makes every step and touch point in the buying cycle streamlined, efficient, consistent and personalized from the consumer perspective and, with that in mind, financial institutions and banks must re-imagine their core journeys from front to back by addressing their customers’ pain points, identifying new opportunities to please customers in differentiated ways. The current issue is that the relatively poor performance by a majority of traditional financial services organizations and banks in delivering a customer-focused digital journey, such as account opening, onboarding and cross-selling process has become an opportunity for many companies who want to leverage and embrace the potential of becoming a “Digital Bank.”
According a recently published report by DBR, the chart below shows that the greatest concern of banks in 2017 is to remove the friction from the customer digital journey:
In today’s digital market, in general, financial institutions and banks of all sizes are still struggling and rather not prepared to combat the increasing incursion by FinTech startups that focus on solving recurrent banks’ business issues and transforming every stage of the customer digital journey easy, simple, mobile and contextual, but the sad reality is that there are some segments of the industry that are falling significantly behind current customer expectations. According to the same study mentioned above, it possible to enlist some of the issues that many customers are currently facing in their digital experience and journey with banks and financial institutions globally:
The majority of banks and financial institutions can’t open a new account entirely online or on a mobile device;
About 16 percent of financial organizations currently provide a tablet assist account-opening option in their branches;
Onsite ID verification and/or signatures/supporting documentation are required at the majority of organizations;
Multichannel digital account opening is not supported at most banks and financial institutions;
Rates of new account opening abandonment are still high for institutions that offer online or mobile account opening;
About 55 percent of banks and financial institutions count on a structured onboarding process;
About 22 percent of banks and financial institutions onboard new customers with a low amount of communication;
Roughly 30 percent of banks and financial institutions are marketing their products within their mobile banking app.
Most banks’ customer strategies, fueled by customer analytics, will need to change to really take advantage of customers’ new channel preferences, for many different researches show that consumers who have grown up immersed in digital technologies, are two to three times more likely to want more digital interactions than what banks currently support, yet older customers are becoming surprisingly open to adding other channels to their portfolio and are increasingly experimenting with online interactions, using a wider variety of contact channels and apps. As a result, customers from all ages find it easier to compare a bank’s or financial institution’s promise with its delivery and how the overall experience meets their own expectations and, subsequently, make changes if they consider their bank isn’t as digitally ready as they would want it to be.
That situation has increased the proportion of banks that are now counting with an innovation strategy, as shown on the chart below, comparing this proportion from 2009 to 2016 globally:
The innovation and the digitalization agendas have practically merged into one, with both requiring changes in culture and back office operating systems within banks and financial institutions. Although the focus is still on reducing costs and innovation investments have slowed around the globe, improving engagement and making banking easier continues to be the focus of innovation efforts throughout the financial services industry.
As shown on the chart above, the proportion of banks with an innovation strategy has increased marginally in 2016 to 74 percent, which represents only one percentage point rise from 2015, but it has significantly increased when compared to 2009.
The chart below shows the areas where banks are investing more in innovation in order to better meet their customers’ expectations and enhance their digital journey:
Historically, customers know that starting a relationship with a bank or a financial institution has never been an easy task because, traditionally, consumers were required to go to a branch, provide identification and documentation, fund the account and sign the necessary documents. Unquestionably it has been quite difficult for banks and financial institutions to become mobile-first while having so much paperwork to be done, even despite the increasing demands from digital customers for simple and intuitive applications that leverage the capabilities of the smartphone.
Currently, the vast majority of the mobile application processes that are offered by banks and other financial institutions are simply digital versions of their existing web-based applications, which are difficult to navigate, interact and not user friendly.
It’s imperative that banks and financial institutions fully understand the need to differentiate their operations using the mobile channel, once it is evident the significant increase of the usage of smartphones. As this trend grows, the willingness to consider a branchless bank and the number of consumers who are using their mobile device to obtain a financial product or service is deeply changing the value perception of banking services.
As a matter of fact, according a study performed by Adobe, one in five Millennials and one in seven Gen Xers would apply for a new account or loan using their phone, and 92 percent of Millennials consider their smartphone their primary device against 84 percent of Gen X they claim to feel the same way. Another interesting data in this study is that 20 percent of Millennials would apply for a new account or loan using a mobile device, while 14 percent of Gen X and only 2 percent of Boomers would do the same, although, as mentioned before, this last group would consider new channels for interacting with their banks and financial institutions.
Traditional banks and financial institutions continue to have a positive image before their customers in the some of the most important foundational areas such as trust and security, and that is the reason why, although delivering customer-centric solutions at lower costs without the burden of legacy infrastructure, FinTechs still lack scale in many cases. The undeniable truth is that both traditional and non-traditional financial service providers are struggling to keep up with the demands of the increasingly digital consumer.
The chart below show a small piece on how the value perception of customers from traditional and non-traditional banks and financial institutions is behaving:
After the information exposed above and based on personal experiences, it’s possible to enlist 5 strategies that banks and financial institutions should adopt to better decode their digital customers:
Monitor market trends: Make sure your bank or financial institution is aware of all the critical innovations taking place around the world and understand how these are impacting the business model of the financial services industry.
Establish priorities:With limited resources and many options on the table to invest, banks and financial institutions must be very selective and disciplined in choosing in which areas they will focus, combined with what their customers are expecting or looking for.
Balance security and use experience: Make the most of new authentication, access and privacy technologies in a user-friendly and simpler way.
Simplify the mobile approach: Balance user experience with device capabilities, providing a high level of continuity in terms of both usability and a design made with customer intent
Use content for customer conversion: Build applications that provide how-to guides, video content, interaction and other tools (person finance management, loan calculators, etc.), so your bank or financial institution can generate customer trust, influence decisions and increase mobile and online sales.
When it comes to financial services, customers expect a simple and seamless digital experience, and whenever that expectation is not properly met, it will resonate in improved satisfaction, loyalty and referral scores. If the digital customer does not experience a positive end-to-end digital process, banks and other financial institution will experience significant customer churn.
It’s essential for banks and financial institutions to realize that by focusing too much on millennials, most are missing an important opportunity within a large amount of not digital-born customers that are willing to adopt more and more new channels to interact and buy from financial services providers. Enabled by technology, customers expect to easily control and vary their routes within and across channels to suit their needs at any given moment. While customers move at different speeds and take different paths, the most important fact to bet understood once and for all is that every customer is now a digital customer.
Marco Antonio Cavallo is a technology/digital transformation evangelist and expert when it comes to the strategic role of CIOs, technology strategy and trends, FinTech, InsureTech and technology applied to business in many different countries and cultures, providing cross-border strategic orientation for different industries and executives. Given his corporate experience of almost 20 years, he brings a variety of insights, trends and market perceptions about different technologies and their usages in the Digital Economy.
Marco is the Founder and Chief of Research of the CGN Research & Advisory Group and has a successful professional history in many well-known international companies, such as Gartner, SAP Ariba, Comarch Systems, Volkswagen Financial Services (LeasePlan) and Lexmark International. He is also the founder of the CIO Global Network Group that gathers 7.500+ CIOs and other IT senior executives around the world, advisory board member for the Innovation and Technology Committee at the Florida International Bankers Association (FIBA), advisory board member for the Innovation and Technology Committee at Federación Latinoamericana de Bancos (FELABAN), author of many articles about digital transformation, technology trends and the role of the strategic CIO, among other IT-related topics and an active member of the IDG Influencer Network. Marco is an international keynote speaker for many different themes and conferences, such as Cl@b/Felaban 2017 (USA), Gartner CIO Summit (México), Mondato LATAM Summit (Argentina), APICON 2017 (Brazil) and Data Science Forum 2017 (Brazil).
Marco graduated in business administration by ESPM-SP University, MBA in Corporate Finance and Economics by FGV-SP University and has been through different specializations in many international renowned institutions such as Northwestern University/Kellogg School of Management (U.S.), McGill University (Canada), Florida International University (U.S.) and Erasmus University (the Netherlands).
The opinions expressed in this blog are those of Marco Antonio Cavallo and do not necessarily represent those of IDG Communications, Inc., its parent, subsidiary or affiliated companies.