Customer Centricity & the New Role of Data in Financial Services
Strategic Imperatives for Financial Services Institutions
This is due in large part to the focus on products and services and that in the past, financial performance was more easily achieved. Today the industry has to contend with multiple regulators, higher market volatility and pressure from other markets and industries demanding new services (like mobile payment). Because of this difficult environment and that performance and beating the market has become more difficult, successful firms are now focusing on their most important and durable asset - their customers.
The regulatory environment for many financial services companies is dramatically increasing the reporting requirements and risk management considerations. Whether it is in banking, insurance, real estate, or asset management areas, companies around the world are facing a need to deliver real-time information to meet regulatory requirements. These reporting requirements are not just for regulators - investors and strategic partners are demanding access to real-time data, and they want it via mobile as well.
Some of the issues facing the industry players are:
- Promoting growth and sustaining profitability in an environment with low interest rates
- Rebuilding asset quality and strengthening capital positions
- Developing new and reliable sources of revenue
- Increasing the business value of customer relationships, especially when customers have become more demanding
- Restoring public confidence in the industry
- Competing with aggressive, innovative nontraditional competitors
- Incorporating a risk management culture into daily operations
The rapid shift in technology capabilities, especially around big data, and customer expectations require the players in the financial services industry to address issues such as:
Financial institutions have to develop and implement new digital delivery strategies to remain competitive. At a minimum, they must incorporate mobile banking as a regular delivery channel. Mobile is not only about providing data to stakeholders, together with social media it has created an unprecedented ability for the Financial Services Industry to connect with current and potential clients. To take advantage of this, the industry players much proactively prepare for how the technology and its use is evolving.
Many financial institutions rely on legacy systems to conduct operations. To address the issues facing the industry, financial institutions need to quickly migrate their old technology architectures to next-generation capabilities. Viewing new technology as a strategic growth investment rather than an operational expense will demonstrate the value of IT systems throughout an organization. They need to add multichannel cross platform process support to allow for the development of a single view and a better team approach toward customer relationships. Social media listening and campaign management have taken on a new importance, since more and more business is done outside their walls.
A PwC CEO Survey found close to 70% of industry leaders believe cyber insecurity is a threat to growth. The ongoing news reports of data breaches at retailers highlight the danger all businesses face.
So Why This Focus on Customer?
The financial crisis of 2007-2008 was the most devastating of its kind since the Great Depression. It’s no wonder that it soured customer trust across the industry. Resulting attempts to regain trust have fallen flat on the whole ever since. In the 2014 Annual Global Survey, respondents ranked financial services as the least trusted industry globally. Such a response isn’t new either, since its ranking has been stuck at the bottom since 2008.
In an increasingly mobile and digital world, customers have grown accustomed to personalized and convenient online experiences, 24/7.
Customers are moving away from in-person and phone interactions in the interest of efficiency and in-demand availability. There is no question they will flock to the financial services companies that follow this trend.
Gone are the days of advice coming directly from financial services company professionals. 67% of a buyer’s journey now takes place through digital channels, and rarely without significant comparison shopping. Customers constantly research prices, features, reviews from others and more. According to a recent blog post from Accenture, 79% of smart phone owners use their phone to help with shopping, and 64% will go 5 to 10 minutes out of their way to secure a better price. And, as expected, most prefer online reviews to advice from sales reps, and at least use that as the foundation for a discussion with a sales rep.
With lower trust and more information comes a significantly more demanding financial services company’s customer base. Financial customers are looking for simple, immediate, easy, valuable and relevant information from every interaction. Customers demand anytime, anywhere, and any-device accessibility and convenience. They want their financial institution to be a “one-stop shop” that can meet all of their financial needs. In fact, over half of respondents to a PwC survey rated the “ability to have all my financial products with one bank” as being important or very important. It is not sufficient for an institution to simply help its customers set up checking accounts or provide life insurance.
They expect financial services companies to adhere to the highest quality of service, providing quick, errorfree service at every channel – in-person, online, through a mobile device, or through a virtual face-to-face meeting. Today, customers expect everyone within a financial services company to act as an advisor, helping them understand and improve their overall financial situation. Targeting customers and pushing products is not a sustainable approach. Increasingly, today’s more sophisticated customers are looking for long- term relationships with institutions that involve them in everything from product innovation to advocacy in the online marketplace. They demand greater customization and preference recognition. Typical “plain vanilla” product offerings are also no longer sufficient. With little tolerance for complicated offerings, customers are ready for simple, personalized products and services that are tailored to their personal circumstances and spending habits, as well as flexible loyalty programs that let them accumulate and use points in various ways.
As customer demands and expectations rise, especially in the face of unprepared financial services companies, it is no surprise that customer loyalty is diminishing. It doesn’t help that switching financial institutions is easier than ever. In fact, 10% of consumers switched primary banks at the end of 2013. Financial Services companies with infrequent customer interaction are even more at risk. For example, loyalty to insurance carriers is strongly correlated with a positive customer experience solely at touch points, which typically only occur during purchase and claims processing. In 2013, nearly 20% of 18 to 34 year olds changed their primary bank, with a lack of online and mobile services reported as their top reasons for leaving.
Towards Customer Centricity
This can be achieved through the following measures.
Listening to the customer
Every touch point is an opportunity to collect customer data, which can then be used to improve a customer’s end-to-end experience. The key is to listen to everyone, at all times. Harnessing the collective intelligence of that listening—from structured, transactional data (e.g. income, current products) to unstructured, behavioral and social data (e.g. digital preferences, social media interactions)—can drive insights and correlations between every day activities and the current or lifetime value of a customer. With this listening and a greater gathering of data comes an elevated focus on trust. Everything collected must be used appropriately, with security and privacy as a technical imperative and a marketing priority.
Soliciting customer feedback
Customers are more willing to share their data if they feel that they are receiving value in return. In fact, two-thirds of customers of all ages would let financial companies track their mobile device’s location in the interest of real-time fraud sensing. They perceive this as their financial company watching out for them, which is a high-value and engaging trade-off for privacy. Clear opt-in processes are a great way to feel less intrusive and garner greater faith from the customer.
Turning data into insights
Listening and collecting data is an important step, but it is not very valuable on its own. The key is to turn that information into insights that are helpful to all cross-functional teams, creating opportunities to make better, more informed decisions and offerings. IDC confirms that an integrated customer view for customercentricity is the need of the hour, and that enterprises must learn to act on customer data as it continues to grow. In fact, IDC estimates that by end of this year, 2015, 68% of all unstructured customer data will be generated by the customers themselves, who are hungry for a financial services company that understands them.
Creating effective Omni channel experiences
Most financial services companies would consider zero-attrition to be a pipe dream, but smarter companies are at least searching for that Holy Grail. The key to getting as close as possible to 100% customer loyalty is a tricky but effective Omni channel strategy. Omni channel is a step beyond multi-channel, because it is not simply about offering multiple options for customer touch; it is about true continuity of the customer experience. Near zero-attrition will come when customers can move seamlessly between digital devices and live interactions, based entirely on the customer’s channel of preference at anytime, anywhere.
Personalizing the experience
Customers have grown accustomed to personalized online experiences, from news sites to online shopping, and they expect nothing less from their financial services companies. Meanwhile, financial services companies are barely keeping up with digitizing their interactions, let alone customizing them. By segmenting the data collected in daily interactions, financial services companies can easily customize marketing material – such as sending an older, high value customer digital advertising that outlines minimum 401K distributions. Even more advanced customization is possible by plugging behaviors and preferences into predictive analytics platforms that can estimate likelihood of interest in particular financial offerings.
New Technology Capabilities
This will allow institutions to become customer-centric by:
- Improving speed-to-market,
- Enabling better and faster decision making,
- Optimizing points of contact,
- Enhancing customer intimacy in an integrated, multi-channel approach,
- Gaining a better understanding of the customer,
- Optimizing opportunities from social media, and
- Increasing accessibility and mobility
The new financial services customer is unlike the customers of the past. Smart, forward-thinking financial services companies will see this as an opportunity to excel and to rise above the countless financial services businesses that are still looking inward for a solution rather than outward at the customer. With that shift will come a restoration in customer and market trust, increased customer engagement and loyalty, lower costs per transaction, new revenue streams, and ultimately, significant profitable growth and competitive advantage.
Tomorrow’s customer-centric financial services companies will look nothing like the financial businesses of today, a change that is long overdue as we build the industry back into the trusted position it held so many years ago.
1. http://blogs.forrester.com/lori_wizdo/12-10-04- buyer_behavior_helps_b2b_marketers_guide_the_buyers_journey
4. http://www.businesswire.com/news/home/20120719005875/en/About.com%E2%80%99s- %E2%80%9CThe-Trust-Factor%E2%80%9D-Study-Finds-Trust#.U_Z91mSwL60
5. McKinsey Global Institute - Big Data : The next frontier for innovation, competition and productivity
6. Oliver Wyman – State of the Financial Services industry 2014