How can banks use the technical possibilities of digitization and adapt business models, services and “customer journeys”? There are a few elements that should be considered here.
Digitization is having a significant impact on the design of business models and services in the financial sector. For example, FinTech companies, i.e. modern technology companies in the field of financial services, have been gaining ever greater market shares in the traditional banking sector for several years. FinTechs offer advanced digital services, raise new expectations among customers and influence the revenue and cost dynamics of existing services.
Despite this dynamic development, only a few financial service providers have fully embraced the digital trend. While most banks already offer banking services online and also on mobile devices, many service functions are not always well organized and are limited to specific customer applications. For example, a customer can apply for a loan via a simple online interface. Afterwards, however, he finds that all further processes – from credit checks to loan approval – still require a personal presence at the bank branch, additional “paperwork” and a lot of time.
This inconsistency is annoying for the customer. In just ten minutes, you can buy a new cell phone and choose a tariff. At the same time, processing the purchase of banking products – with the exception of checking account balances, withdrawing cash and other basic services – can take several days or even weeks on average. Banks are well aware of this and are trying to shorten service cycles, but customer demands continue to rise and increasingly require real-time service.
To improve the quality of the customer experience across the board, banks should do three things:
- The customer should be at the center of product and service development.
- Processes should be completely revised, digitized and automated. This will increase efficiency and speed things up for the customer.
- The organizational structure should be optimized to firmly anchor the principles of customer centricity throughout the company.
Creation of a customer-centric mindset
A young man with a negative account balance probably won’t think about whether he needs overdraft protection or, even better, a prepaid debit card – most likely, he’ll think more about how to control his spending more effectively. A successful woman who wants to start her own business isn’t interested in the pros and cons of different retirement plans; she has other wants and needs.
While most companies in the financial services sector believe their processes come first, customers don’t value a service based on the processes behind it. They are guided only by their own needs and desires. How they develop and ultimately pursue these is called the “Customer Journey“.
The customer journey encompasses all phases of the customer decision for a product or service. It thus captures all the processes, systems, and channels used in exploring various buying, selling, and investment options. It involves analyzing, evaluating, and creating a “short list” of products and services that interest customers. This of course includes all stages of interaction, both on and offline, throughout the acquisition cycle and post-purchase.
The essence of the customer journey
The Customer Journey encompasses all interaction stages for completing a specific task and is structured so that the entire chain is well-organized, efficient, consistent and personalized from start to finish – with maximum convenience for the customer.
For example, the procedures for opening a bank account or concluding a loan agreement may consist of dozens of banking processes involving different departments, suppliers and partners. The customer should perceive all these stages of interaction as a single, established and intuitive process. It has been shown that a high quality of the customer journey has a positive impact on customer satisfaction and loyalty to the supplier. In addition, satisfied customers are more likely to recommend a company to others.
To be successful in competition, financial service providers must rethink all points of interaction with the customer as well as the processes behind them. They must overcome customer bottlenecks, find new options to offer customers differentiated services. This includes offering cutting-edge technology on a scalable and reliable digital IT platform that modernizes and simplifies the entire service experience.
Implementation plan for the customer journey
To create such a customer journey that achieves a qualitatively new level of service, an integrated customer-centric digitization concept, integrated data analysis, dematerialization – replacing tangible assets with smart technologies – and the gradual introduction of machine learning and robotization are required.
To achieve this functionality, however, financial services providers do not need a massive IT transformation. On the contrary, they need to focus on key customer paths and target innovation there. In fact, a small number of 20-30 customer paths, the ones most in demand in most banks, offer excellent opportunities for personalization and efficiency gains. For new customers, this might be opening a checking account or transferring money to a new business account. The service can also provide assistance with financing a property or debt restructuring. Financial planning can include a solution to financial problems or the creation of an optimal investment portfolio.
In four concrete steps, financial service providers can significantly improve the quality of their customer journey.
Step 1: Transition to customer-centric development of products and services
To truly understand the needs and desires of customers, banks should do much more than collect historical and demographic data and analyze customer segments. It is necessary to observe the behavior of customers in their characteristic conditions and situations.
Teams of analysts studying customer behavior at home, in the store, at work, on the road, etc., can uncover customers’ needs, wants and preferences and determine not only how they make choices about products and services, but also what annoys them. After obtaining this information, a customer journey team can brainstorm. Following this, a Minimum Viable Product (MVP) can be developed and implemented to transform key customer journeys.
Step 2: Comprehensive modernization of processes
The very best customer paths meet the highest standards. The key here is not to resort to off-the-shelf solutions, but to pick up best practices in related sectors and use advanced technologies.
Once the goal is set, cross-functional teams of product managers, designers, customer experience specialists, programmers and many others begin the agile process of building an MVP. The optimal balance between required functionality, required capital investment, available expertise and expected overall benefits ultimately defines the target corridor.
After teams go “live,” they refine the product by making repeated improvements in rapid, sequential cycles. And they do this until all elements of the customer journey meet the predefined requirements. In parallel, back-office functionality is developed to ensure the entire process runs smoothly. Operations and service components also need to be modernized to align the organizational structure and underlying business principles. In many cases, this type of complex process transformation enables financial services companies to shorten the development process for new functionalities from several months to a few weeks.
Step 3: Digitization, machine learning and robotics
Cognitive tools capable of processing large amounts of data and performing complex analysis in near real time enable the development of a personalized customer journey. This uses highly accurate insights and predictions that enable financial service providers to make informed decisions for their customers.
In the banking sector, such tools help to significantly improve the quality of interactions in various departments, be it the call center, the credit assessment department or the retail banking department. Many of these tools are designed to perform predefined procedures based on advanced scoring and decisioning technologies. And because these tools are adaptive, the more they are used, the more accurate decisions and conclusions become.
In the investment sector, predictive analytics platforms also enable advisors to adjust portfolios to political, economic and other factors, and help analysts build detailed models in minutes, rather than days.
Step 4: Optimization of the organizational structure
Comprehensive transformation of the entire customer journey requires establishing collaboration between technology and business units within an organization. Differences in reporting hierarchies across cross-functional teams and rapid adaptation cycles may require new skills, talent, reward systems, and metrics (KPIs) that can differ significantly from traditional ones. Finance organizations can leverage a variety of resources to build collaboration and increase innovation across the organization, such as innovation labs.
Very important: Nothing works without the support of senior management.
Start with what?
The concept of the Customer Journey implies a fundamental shift in the way the banking sector thinks and works.
Digital leaders in finance and other industries are developing products and services based on the customer journey to radically improve the customer experience, differentiate their own brand, and drive growth. Significant sums are being invested to achieve this. To begin the transformation, financial institutions should take the following steps:
1. Calculate possible advantages
It is extremely important to set an ambitious goal and then justify it by making a detailed calculation of the potential benefits. This assessment should take into account all growth opportunities, including increased cross-selling, new value-added services, and increased market presence through better data utilization. Further, cost and operational optimization through faster cycle times, increased automation, and last but not least, workforce redeployment.
2. Perform an objective evaluation
Financial institutions should critically evaluate their tools and technologies and consider how effectively they are achieving their goal of modernizing the customer journey. Diagnosis, analysis of existing data and IT systems, creation of a qualifying list of skills and capabilities, benchmarking against competitors, and other assessments can identify segments of the digital IT platform that require investment. Areas that improve the finance enterprise require collaboration with other organizations to quickly build the necessary capabilities and resources.
3. Visualize success
Defining a vision is one thing, internalizing it and implementing it quickly is quite another. Implementing a customer-centric approach changes reporting methods, benchmarks and performance-based incentives. There is a need to adapt internal policies to these changes and to change the company’s culture.
Those that embrace transformation, rethink customer pathways, implement digital tools and customer-centric design principles to improve the customer experience at all stages of service will eventually significantly outperform their competition. The rest will either have to catch up or leave the market altogether.
Conclusion – Digitization of banks
The topic of digitization in the banking sector has been widely discussed around the world in recent years. However, it is often not the technology that slows down the digitization process, but the traditional banking culture, due to which many financial institutions are late in implementing groundbreaking digital innovations. In this sense, it is precisely the process of customer interaction, the customer journey, that is one of the most critical links for a bank’s digital optimization. The modern consumer wants a digital bank to provide them with holistic, customizable and interactive features that allow them to manage their finances quickly, conveniently and easily.
If you look at other B2C industries on a global scale, the bar for customer service quality is now defined by leading “new economy” companies like Amazon, Uber, Airbnb. They manage to fully meet the needs of the customer as they build the interaction with him in the framework of a holistic and intuitive process.
Nevertheless, new FinTech companies are also already showing successful examples of holistic customer interactions – although the hype around the FinTech industry has already subsided and no one expects FinTechs to completely replace traditional banking. These new players offer customers the same products as traditional banks, but in a fully integrated process, meaning they are much faster and or cheaper.
It is time to act quickly and decisively.