by Adam Oldfield
Technological innovations have transformed people’s expectations of the customer experience. With just a few taps on the Uber mobile app, consumers can have a taxi collect them from wherever they are, watch it on the app head towards them and pay without needing cash. Amazon online shopping provides tailored recommendations based on previous purchases and product search history. And it’s getting difficult to find a brand that isn’t available to its customers 24/7 on social media.
Consumers want a seamless, personalised digital experience regardless of the sector they are engaging with. All service industries must keep pace with these rapidly-changing digital demands to delight existing customers and entice prospective ones. The customer is still always right, especially in the digital age. The Financial Services industry, however, faces more than its fair share of challenges when it comes to meeting consumer expectations of the digital experience. Obstacles to overcome include the burden of legacy systems, internal competition for resources and stringent regulatory requirements. The solutions will not be easy or immediate, but they will give financial institutions the edge they need to remain competitive in the future.
The barriers to delivering a cutting-edge digital experience
It could be argued that the Financial Services industry has not been as responsive to changing customer expectations as, say, the Retail industry. But this is potentially an unfair comparison to make, as retailers do not face the same pressures as financial institutions. When it comes to providing the customer experience digital consumers expect, often the barrier isn’t the bank or the lender itself, and it isn’t always something that technology can fix.
For a start, many financial institutions do not have the bandwidth to respond to evolving consumer technology needs quickly or easily. As with any organisation, banks and lenders are going to have limited capacity and internal competition for budget is going to be fierce. With the Mortgage Market Review and the Mortgage Credit Directive, the industry has had to undergo an enormous amount of recent regulatory change and this will likely have colonised most available resource.
It’s not that banks don’t want to implement the technology and services that customers crave, it’s just that this has to be placed in context with other business objectives and resourcing commitments. Even when a piece of regulation explicitly calls for new customer-facing technology – such as the recent Competition and Markets Authority rules requiring all banks to allow customer access to their entire finances through a single mobile app by 2018 – enacting it will come at the expense of other initiatives and projects. There is also the fact that customer expectations of the digital experience are not static. The rate of technological change is rapid and customer demands evolve just as quickly, which can be particularly challenging for large financial institutions with dense, complex legacy systems. Updating or supplementing legacy systems to provide more cutting-edge solutions could potentially take years, by which time technology and customer needs will have long moved on.
Start-ups and analytics to the rescue
Conventional wisdom states that new start-ups or ‘Challenger Banks’ can be much more agile and responsive to changing customer requirements because they do not have the baggage of legacy systems. Furthermore, because many of these start-ups are building something new, they do not have to consider how they continue to service hundreds of thousands, possibly millions, of existing customers.
In the face of such disruptive, agile competition, one option available to larger financial institutions is to build an ecosystem of specialist partners or fintech start-up partners on the bleeding edge of digital innovation. This is a win-win for all involved – banks can leverage the agility and innovations of fintech movement, whereas as the fintechs can leverage the infrastructure, substantial customer base and brand loyalty of established players in the sector. It is one possible way to deliver the digital experience customers want when they want it.
Looking further ahead, the major challenge facing financial institutions is how to use analytics to improve the customer experience. Consumers expect the personalisation that far-sighted brands such as Amazon and many Supermarkets offer – analysing spending patterns and providing specific, tailored offers, coupons and product suggestions. Generic, one-size-fits-all offerings are no longer relevant.
Financial institutions have an extraordinary amount of data available to them about their customers, far more exhaustive and deeper than anything Amazon or the supermarkets possess. But therein lies the challenge: How does the Financial Services industry analyse that data and use it to provide targeted, personalised offers and services to customers? And how, for example, can they leverage data from social media or biometrics to further precision-calibrate their offerings to customers at the right time or right place? This is an area of the market that’s very broad at the moment and a long way off being mature. Yet, institutions know that if they crack this conundrum, the rewards will be huge.
The author, Adam Oldfield is specialized in consulting financial institutions at their digital journey at EMEA Financial Services at Unisys.
