One of the main criticisms of banks is that they aren’t customer-centric.
77% of customers are not satisfied with their banking experiences and only 29% of consumers trust banks with their long term financial wellbeing. Yet, over 70% of banking executives value customer centricity.
Banks do care, but there seems to be a mismatch between customer and banking expectations. So why do banks struggle with customer centricity? And where can banks begin if they are to focus more on customer centricity?
Why are banks struggling with customer centricity?
For most of the 20th century, banks were customer centric. You walked into your local bank branch and chatted with Tim, the friendly branch manager, whenever you were thinking of getting a mortgage, opening a bank account or saving for a deposit. Tim always asked about the kids, how work was doing and what were your aspirations for the future.
Fast forward a few decades, and the situation has changed. Technology means the customer is now in control. Thanks to the internet and mobile phones, you can now do your own research, compare options online and if you want, choose a bank from the other side of the country. Not only do you not need to go to your bank branch and book an appointment with Tim, you can do it from a small screen from the comfort of your home.
With technology, the definition of customer centricity has changed. It no longer means doing small talk and becoming friends with the local branch manager. It means a seamless experience across various digital channels, personalised dashboards based on your requirements and being able to access the right functionality exactly when you need it.
Many companies are embracing this new way of interacting with the customer. In 2021, banks are not competing with other financial institutions - they’re competing with the incredible experience of shopping through Amazon and Google. Unfortunately, banks seem to be lagging behind, and that’s due to their legacy technology stack.
When you’ve got technology infrastructure dating back to the 80s, it’s a lot harder to implement the right systems that enable a seamless customer experience. The lack of integration with back office processes and channels means customers are dealing with a disjointed customer experience, which results in a lack of customer centric products.
What banks can do to be more customer-centric
Most bankers are aware of the issue of having legacy technology. According to BCG, 86% of bankers agree that investing in digital is the right strategy to gain a competitive edge. But 86% also admit that their banking technology is complicated and therefore a hindrance to enabling digital interactions.
Overhauling an entire tech system takes years. It’s doable: banks like DBS and BBVA have and are doing it -- but it requires a lot of forward thinking and a large amount of resources.
What are some things banks can do to be more customer-centric that doesn’t require overhauling the entire tech system? Here are a few.
Better customer onboarding
Customers no longer want to have to head to their friend Tim in order to open a bank account. Instead, modern day customer onboarding should be done via mobile phone in less than half an hour.
Two examples of specific aspects of customer onboarding that can be automated are fast credit checks and KYC (Know Your Customer). Automated KYC allows customers to complete identity verification with just a selfie or video, helping get rid of paper based methods. Fast credit checks allow customers to get a quote on their loan much more quickly and therefore increases the rate of applications.
AIB, an Irish bank, had an outdated and lengthy onboarding process, with customers having to set up an appointment, go in branch, spend 30 - 40 minutes filling in a questionnaire and then waiting for days before the account was live. When they began their digital transformation journey, customer onboarding was one of the first issues they tackled. They set an ambitious target to make each process of the onboarding process ten times more efficient and faster.
The process involved questioning each step of the onboarding process, and removing the elements which were unnecessary. After an initial trial phase, customers could now open a new account in ten minutes and there was barely any paperwork. They also reinvented their digital mortgage application which gave customers an offer in less than a minute.
Shortly after the account application process was launched, AIB saw a 25% increase in opened accounts, along with a 20% drop in account opening costs.
Although many banks nowadays have a digital onboarding process, AIB’s approach to questioning each step and trying to make it as simple as possible can be applied to many other aspects of banking. AIB has since launched its remote account opening proposition on its app, with 40% of customers using it to open an account.
Being present at specific touchpoints
Unlike other sectors such as insurance, banks reappear throughout some of the most important moments of a customer’s life: buying a house, moving country, starting a business and even having a baby.
These are life changing moments that are opportunities for banks to add value and stand out. But according to Deloitte, 50% of survey respondents say that the relevant products are only offered once the life event has passed or once they have chosen to go with a different product.
Banks are uniquely poised to help their customers in those most important moments, but most are missing the mark. Being prepared to serve customers at the right moment is the definition of customer-centricity. Instead of selling generic banking services, banks could focus on selling specific products to specific customer segments.
Nailing this proposition would require revamping banking legacy infrastructure, but offering above the level personalisation (offering specific products based on age, demographic or survey responses) is a step in that direction.
Focus on branding
In the past year, retail investing has surged: one million new online brokerage accounts were opened in the first quarter of 2020. And it’s not just investing: consumers now enjoy purchasing items with flashy bank cards, or wearing fintech branded clothes. Yes, finances are cool again.
Financial services are essentially becoming more of a lifestyle rather than a one-off transaction. 84% of customers say they want to be treated like a human, not a number. Modern consumers want an emotional connection with their brands, and that includes banks.
Banks don’t need to overhaul their entire tech systems to embrace this new consumer trend. If banks fear they’ll become “the boring old pipes”, then they should focus on branding and becoming a larger part of the consumer’s life.
UOB is an example of a bank that has mastered their branding on Instagram. Instead of pushing images about their product or banking, their posts feature landscapes, food and people of the ASEAN region. UOB has one of the highest social media engagement rates of any financial services company, and has successfully turned their online social media presence into a lifestyle brand.
True customer centricity comes from doing customer research and building products that consumers need and love. Although banks need to be prioritising revamping their legacy infrastructure, it doesn’t mean they cannot build other functionalities along the way.
Better customer onboarding, being present at specific life moments and a focus on branding are all ways to eat the digital transformation elephant one bite at a time.