They have their work cut out for them. Research carried out by Econsultancy for Adobe (PDF) found that 40% of financial services and insurance organisations said keeping up with changing customer expectations and behaviour is a “key challenge.” (Adobe is CMO.com’s parent company.) The study also found that 63% of financial services organisations ranked customer experience as their No. 1 priority. Other priorities include data-driven marketing and cross-channel marketing.
Several factors are driving this growing emphasis on the customer experience. The most fundamental is the adoption of the mobile phone as the tool of choice for handling everyday tasks, such as payment and travel. Linked to that is the much-noted point that consumers’ expectations of great online experiences don’t stem from just the best in each particular sector but by the best across the board. In other words, consumers no longer judge the quality of their banks’ online experience only against other banks, but against the likes of Uber and Airbnb, too.
Customer experience is also crucial to maintain trust in financial services companies. Exceeding customer-experience expectations leads to increased advocacy, especially for customers who are unhappy with their financial providers.
Then there’s the question of differentiation in a market where new products are easily replicated.
“We asked financial services companies what would be the primary way they’d differentiate themselves from their competitors, and 35% said it would be through the customer experience, compared to an average of 28% across all industries,” said Mike Plimsoll, industry marketing director for financial services at Adobe. “We’re now reaching the point where mainstream banks are realising they need to refocus. Gone are the days when people opened a bank account and were customers for life. Now they’re swapping and changing.”
The problem for the financial services industry is that it’s starting from a long way back. According to the Econsultancy/Adobe report, only 9% of financial services businesses described themselves as “digital-first” in 2017, the same percentage as in 2016. In comparison, the average across all industry sectors in 2017 was 11%, with 22% of media businesses and 19% of technology businesses saying they were digital-first.
Accenture research, which found European financial services companies ranked 2.35 out of 4 on a scale of digital readiness, backs that up. The management consultancy also found that a little more than a third (37%) of the companies it surveyed had committed budget to digital transformation.
Meanwhile, new fintech startups have been seizing the opportunity. New-generation banks in the U.K., such as Atom Bank, Starling Bank, and Monzo Bank, are all based on mobile apps and are having a significant effect on customer attitudes. According to Ernst & Young research, 41% of customers they surveyed were excited about online-only competition to traditional banks. And while the most popular reason given to consider switching to an online-only bank was “more attractive rates/fees,” the second most popular was “better online experience and functionality.”
But while the rise of online-only banks has worried traditional financial services businesses, it has also provided them with a way of seeing what their industry might look like in the future, either by watching the new players for indications of new best practices or more directly through partnerships or even acquisitions.
That said, Adobe’s Plimsoll doesn’t expect the online-only players to take over.
“We’re actually seeing big players acquire small fintechs to help them become more agile,” he said. “As a result, the startups’ emphasis on customer experience will permeate the parent companies.”
Benefits go beyond improved customer experience. The paperless approach of app-based challenger brands is expected to cut costs and increase revenue. Fintech bosses also expect increased customer satisfaction and brand value, increased productivity, and a reduction in risk around compliance.
The result of all this is a massive change in thinking among financial services firms. “While some financial institutions still need convincing that customer experience is essential, the majority have started to recognise its importance,” the Adobe white paper stated. ”With that in mind, the challenge is therefore not necessarily about convincing organisations of the importance of customer experience–rather, it is about delivering a superior customer experience in a world that is moving at an ever-increasing pace.”