Banks in the past have been able to count on a stable customer base.
In the business sector they have traditionally been confident of the loyalty of their SME and corporate customers, because all have more than one bank. In the retail market, many people – particularly in Europe – would bank where their parents banked.
This is changing rapidly. With customer-building opportunities created by new and different types of products and services and with Fintechs and third-party providers competing for the same customers, banks have graduated from tracking the customer journey to tracking and nurturing the customer experience.
Tomas Podmesil, co-designer/developer of KPMG’s global CX method; indicated that we are currently living in the age of customer personalization. Product cycles are increasingly faster and customer influence that much greater, thanks to the overwhelming impact of social media. His model involves six factors of various importance, from Integrity to Empathy, influencing the process of the customer experience.
Weapons of Mass Destruction
But adding the ingredient of social media is equivalent to handing the public – customers and non-customers alike – “weapons of mass destruction” , which have made it impossible to deny poor performance but enable multiplication and promotion of a positive one, giving the customer experience an unprecedented degree of importance.
Companies such as the Polish start-up Y Bank are built on this business mode- becoming the “Amazon” of Financial Services by offering a bevy of products from different banks and tailoring them to the end customer. They will also be keeping a close eye on the customer experience and ranking their products and providers accordingly.
A Customer Experience Leader at a large bank spoke to me of the challenges for a large bank moving into the “age of the customer.” A major task is having to transform their huge, product and process driven organization with its IT legacy systems to a customer centric focus, a massive burden which is unnecessary in an agile Fintech or greenfield bank.
Most Trusted Banks are the New Ones
Confirming this, a recent KPMG global study indicated that in Czech Republic & Slovakia banks were the top three most trusted companies – but these were the new and greenfield banks.
The Customer Experience Leader, relating his bank´s journey, explained they converted from a strategy based on number of customers to one of achieving highly satisfied customers who would promote and recommend the bank to others. In other words, the old fashioned and powerful word-of-mouth endorsement, but with the huge multiplying effect of social networks.
Another major change observed is the birth of a new kind of strategy consultancy returning to the basics. FreieBanker is just one example of a boutique strategy consultancy focusing on helping banks discover their statement of purpose.
In the case of the Customer Experience leader, her bank’s purpose was determined to be “to help clients, companies, and society to achieve prosperity.” They then started charting how the customer journey and experience matched up to that purpose.
Do I Get the Loan?
In one example, they believed that loan processing was an important factor for customers. Instead, they discovered that customers were less concerned about the time needed to process a loan but wanted more predictability regarding the loan approval. In this manner, banks are now working closely with their customers as they develop processes or products in order to meet their expectations.
The issues are complex and made even more so by parallel developments aimed at reinforcing the privacy of personal data, an entirely different issue.
As lawyer Andreas Fillman of Squire Boggs points out, developing a better customer experience requires new data and having a trusted relationship as far as personal data is concerned. That is a red-flag issue and the challenge at the top of the list in 2018 will be balancing, on the one hand, the data privacy legislation looming in the form of the General Data Protection Regulation (GDPR) due in May, and on the other hand, the launch of the new payment services directive (PSD2) offering customers new services through third party providers.
And until both are in effect, the questions and challenges facing banks and their customers will be whether third party providers will be able to offer a great customer experience and, at the same time, respect the data privacy rights of the customers in the same way in which the banks are regulated.