The financial services industry is facing a digital transformation driven mainly with the goal of improving customer experience and increasing retention. With companies such as Facebook, Apple, Amazon and Netflix leading the charge of revolutionizing customer engagement based on data collected on customer behavior, consumer expectation from other industries, including financial services, has gone up several notches as well. How customers are interacting with their financial service institution and what a typical customer journey looks like today has changed signficantly, pushing the industry to sit up and take action.
Simply put, technology and consumer behavior in today’s connected world is propelling financial services industry to innovate and offer customer centric engagement, on any channel, not only for acquisition but more importantly to foster customer loyalty.
This is the first in a series of blogs that delves into the digital transformation occuring in the financial services world. In this particular blog, I will focus on the drivers of these changes.
The Rise of Mobile Banking
One significant factor that has propelled this digital transformation for financial services is the increased use of mobile devices by consumers to perform many of their day-to-day financial tasks. This activity could be anything from checking balance, doing a check deposit, transferring funds, shopping for an auto loan, buying insurance, and so on.
Recent research shows that mobile devices have become central to the interactions between a financial services institution and its user base.
In addition to the increased use of mobile devices, one can simply not ignore the changes in consumer behaviour in the past five years. What a user used to do at his or her desk or at the bank has now moved to a task that they do between their daily activities on their mobile phone or on their desktop. Technology has enabled time and tasks to become very fragmented. These tasks could be anything from checking balance, doing a check deposit, transferring funds, shopping for an auto loan, or buying insurance. The consumer today also works across multiple channels to complete any given activity or task: the desktop at their home, mobile web or mobile app as they go about their daily routine, and perhaps a tablet in the evening.
A Changing Customer Mix
Yet another factor to consider are the Millennials. Millennials and Gen Xers are setting expectations and benchmarks in a highly competitive landscape. As the percentages of population of these two groups are growing, they have become the most significant group of consumers for financial institutions to not only win, but also to retain.
Millennials are significant contributors to consumer spending— spending $600 billion each year in the United States, according to a study by Accenture. As a group, 18% of Millennials (18 years to 34- yars-old) switched from their primary bank within the past year compared to 10% of customers in the 35- to- 54-year age group and just 3% of people 55 years and older. Millennials say that they are most likely to stay with their current bank if online banking services are good. Yet another study, by Fair Isaac Corp., states that Millennials conduct the most banking-related activities via digital channels.
Overall, the Millennial and Gen X population is looking for a personalized and relevant experience from their bank that satisfies their needs when they want it and how they want it. According to Accenture, 2015 North America Consumer Digital Banking Survey:
“Banks can capture millennial mindshare by delivering a seamless omnichannel experience with personalized, proactive interactions. More than developing digital products and services, this is about using digital as a springboard to meaningful experiences that bring new value to Millennials’ financial and non-financial lives.”
Impact on Customer Journeys
These drivers clearly show that today’s customer behaviour requires an entirely different approach to customer journeys and how institutions need to engage with their user base to add the most value and foster the strongest loyalty. This trend has also empowered the user base more. The users now decide when and how to engage, or not to engage, with the institutions. The expectation is of real-time interactions and communication as customers traverse their individual journeys. The expectation is also that institutions should personalize and add value to the users’ journey across channels.