Opinion

Banking: Digital challenges to age-old practices of customer loyalty and retention

6 min read

04 May 2016

If you think about the way that banks and customers typically interact, the terms are very much dictated by the bank, and always have been. However this is set to change, as customers – spoiled by mobile technology in terms of their expectations of what good customer service entails – become more choosy about the banks they use based on which can offer them the best experience.

It is true that the digitisation of banking has brought new meaning to the age-old dogma of putting the customer first. While inconvenient opening hours and application processes involving long periods of time and stacks of paperwork are representative of how retail banking used to be done, online banking services and mobile apps promised a new dawn for customers. However, these digital services are still somewhat antiquated when compared to the kinds of services consumers use for entertainment and shopping – with limited functionality and impractical authentication processes.

While “customer first” may very well be the mantra in a financial institution’s customer call centre, this is still generally not the case throughout the entire organisation. Customers of the 21st Century are quick to abandon services that don’t offer them the convenience they are used to, and financial institutions recognise this. It’s not that they don’t want to change, it’s just that change is very difficult to achieve.

One of the biggest roadblocks to improving customer experience lies in a resistance to structural change. Additionally, many financial institutions traditionally operate in silos –with different services completely disjointed from each other. On top of this, they have to deal with lengthy project timelines due to legacy applications, and face large costs for these projects. But it is clear that something must be done. The processes must be improved, and a necessary shift needs to take place. The commonplace inside-out approach adopted by banks – which begins from a legal or business perspective –needs to be reengineered to adopt the customer’s perspective.

Change your mindset

A new perspective requires a new mindset. Building a customer-oriented culture within the organisation with a sustainable long-term strategy is key, and the approach needs to be sufficiently different to stand out from those of competitors. Budgets for marketing must be used wisely and should reflect the customer-first approach. Digital should now be the core around which the whole organisation revolves. Banks can’t take existing analogue services and then add a digital element to them – the entire service needs to be built around digital, with emphasis on customer experience. To achieve this, the right organisational structure must be in place, with experienced leaders with a background in digital services at the fore.

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Re-engineer your business to consumer process

While new technologies have shortened the expected speed of delivery and customer demands are reaching new highs of personalisation, the right customer experience platform can guide banks towards digital strategies that retain their existing customer base. While banks typically focus on network and hardware, they need to shift this focus to data and user experience in order to deliver a personal experience to customers. 

Within banks, back-end system teams tend to focus on security, performance and uptime. Front-end system teams focus on customer retention, share of wallet and customer experience. These have traditionally been hard to reconcile, but by focusing first on the overall customer experience that they want to achieve, these disparate objectives can be achieved.

Win customer experience

Within the financial services landscape a new breed of challengers are winning over customers by keeping their focus narrow, offering just one service – for example, overseas money transfers. Companies such as Transferwise then use data generated by these transfers to gain a better understanding of their customers. Banks, on the other hand, tend to offer a wide product set but don’t take advantage of the customer data they have. The simplistic understanding of customers isn’t good enough – but getting an understanding of how customers behave is key to winning their preference. 

Creating smartphone apps that include GPS-based features to help users locate nearby ATM locations and live video conversations through the mobile device are examples of how banks can use this understanding to win favour with customers. Gaining this preference will then allow the banks to meet their business objectives. Thinking from the outside in – with emphasis on how customers behave and use 21st Century services – is the way forward. Banks can’t simply build services in a way that suits them but is completely alien to the customer. Trust is built through consistent brand image and customer experience, and this necessarily involves a strong digital experience coupled with human interaction.

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Jouk Pleiter is CEO of Backbase.

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