The financial sector’s digital transformation gives banks, as well as pension and insurance companies, new opportunities to compete by offering tailored customer experiences. At the same time, this allows for novel and significant business potential.
Despite the fact that many companies offer loans, insurance, and pension savings, they tend to look very similar. Because these services have become commodities, it is hard for companies to diversify their offerings and set themselves apart from their competition.
“This means that customers aren’t very engaged in their relationship with banks, insurance, and pension companies, and their loyalty follows. The barriers associated with changing providers is primarily what keeps customers from shuffling between them,” according to Lars Bjørn Falkenberg Chief Executive Officer, Charlie Tango A/S.
Historically, customers were loyal to financial institutions, but this changed in recent years. So much so, that the highest rate (ever) of customers switching banks occurred in 2018. While the volume of customers switching banks is driven, to some degree, by discontent with the ongoing scandals across the sector, Falkenberg also suggests another part of the explanation is discontent with the services and experience customers receive.
As Falkenberg sees it, “New, as well as less established players, are hijacking customers from the bigger and more established players. Their offers are to a large degree driven by new technologies, new business models, and new ways to deliver their services, which are way less complicated – and let the customers decide much more for themselves through strong self-service solutions.”
For that reason, Charlie Tango helps established players in the financial world to offer greater personal service. It stands to reason that companies offering the most personalised digital experience will win in the financial sector – especially in the younger segment of the population (under 30 years old).
Customers still need service after onboarding
“The last couple of years, we’ve seen strong investment in the marketing area, which means that everything going on before the customer is onboarded has been digitised, automated, and, for many, also personalised. Now is the time to take the next step, to ensure the digitised customer experience – after the customer is onboarded – is also engaging and personalised,” Falkenberg cautions.
In other words, it doesn’t matter whether the customer requires banking, insurance, or pension support. Waiting for the customer to reach out for service – or letting them terminate their engagement before they hear from campaigns or sellers to lure them back as customers – is no longer good enough.
“When customers are onboarded, all proactive and personalised service often stops. That has to change, and financial companies have to differentiate how customers experience and receive services and products through all of their lifecycles,” Falkenberg explains.
The customer experience that companies have mastered starts on the website and lures customers to continue as a seamless, digital onboarding process and organically transitions into ongoing service. A key pain point is to make self-service more readily available – as per the segment of the population under 30. Said another way, the human advisor becomes optional. At the same time, new digital tools can help advisers keep up-to-date with their customer’s current situation, so they know what the customer needs before they even reach out.
“It’s a completely different challenge. To date, the challenge had more or less been possible to solve by the marketing division, in collaboration with digital experts and IT people. The new challenge is a relatively IT-heavy one, which touches the core processes of financial companies. The new solutions still have to be based on a strong understanding of the customer and the customer journey.
However, there are new demands for strategy, creativity, and technology to work together, which has to be executed in operations,” according to Falkenberg.
The financial sector is underway – and has the experience to endure
In the first months of this year, innovative apps and new digital solutions have already been launched. Few of them offer proactive and personalised services.
Falkenberg observes, “A majority of the solutions are developed in marketing and innovation garages, and have never made their way from project to operations for a lot of good reasons. From an IT perspective, those solutions have become islands and silos, adding complexity to the overall IT landscape. This makes it difficult to create a smooth customer experience across the engagement platform.” He goes on to add that the solutions have only rarely led to absolutely needed cost savings.
That said, the experience the solution offers can benefit existing financial companies. If they start spending as much energy building new digital services into their core business model and structure as they spend digitising marketing and building complementary solutions for the core business, they will create a strong foundation to meet the needs of existing customers and stand out to potential ones.
“In addition to challenging the existing, there needs to be a focus on creating better and more profitable processes for the core business. The easiest way to do this, in our eyes, is to go through every single customer interaction process. How do you buy car insurance, create children’s savings, or pick an investment profile? We think each process all the way through and spend the resources required to build new, innovative services instead of building on top of relatively inefficient customer processes,” Falkenberg advises.
New competitive arena
New fintech companies have already proved that it’s possible to deliver reliable solutions with a novel and lower cost-base thanks to technology.
“The work that has been done so far doesn’t give the businesses a big boost in turnover or affect costs significantly. There is significant business potential in personalising the entire customer journey,” Falkenberg suggests.
Of course, this requires the digital changes to run deep into the core business. While there is no silver bullet, strong and validated methods and platforms are available.
“In many cases, it will also be beneficial for financial institutions to use third-party platforms to reduce their costs and offer better customer experiences – before, during, and after they become customers… while getting rid of many IT-related issues,” says Falkenberg.
As the financial world continues to open through the European Union’s revised payment service directive (PSD2), the need for financial institutions to deliver personalised and proactive services is becoming increasingly urgent. That is because the PSD2 allows customers to do even more shopping around for financial providers, not to mention non-financial providers after their financial needs have been met.
Once established companies manage to personalise their customer journey cost-effectively, PSD2 opens up excellent business potential.
“With the many digital initiatives that have already been created, we can see that financial institutions have begun to regroup and use the experience to address the root of the problem; namely, optimising the entire customer journey in the core business by using new technology – instead of having new technology running next to the core business. It’s those initiatives that can change the business significantly, and that is what is needed to challenge new players,” Falkenberg concludes.