Is there a growing need for digital transformation within the financial services industry?

By Rachel Armstrong, Partner

October 12, 2015   

Over the years, the democratisation of the financial services sector has introduced the notion of a ‘shared economy’. More and more customers are beginning to trust peer-to-peer services and niche product start-ups more than past traditional life-long face to face relationships, with one main high-street bank.

Customer loyalty for one single provider is diminishing due to the ever-growing choices consumers are offered. Today, consumers are more discerning and like to shop around. They have their current account with one financial services provider, their ISA and mortgage with another; then savings, loans and investments with a different provider. In addition, they review their accounts far more regularly and switch frequently to secure the best deals and rates. Yet despite this, many of the corporate banks continue with the same traditional product offerings and service experience. Why is this?

The rise of alternative banking and peer-to-peer services

By 2020 players in alternative banking will be worth approximately seven billion euros, offering customers a more simple, human, digital and personalised experience. Earlier this year Fintech presented a study, an element of which looked to sense check the sentiment of ‘trust’ amongst Millennials — surprisingly the four least trusted were corporate banking giants.

If you think about this for a moment — by 2025 Millennials, who currently only make up 7% of the FTSE500, will make up 75% of this workforce. This got me mulling over the advantages that newer players such as LendInvest, the world’s largest peer-to-peer marketplace for mortgages or Osper, a prepaid debit card specifically designed for younger people, or other new brands like EdAid, Yoyo, Simple or Nutmeg have over traditional banking giants. No tarnished relationships or lack of trust, no legacy IT estates, platforms or disconnected workflows to manage. No physical spaces or established high-street stores to operate and staff. This means these challenger players are agile, nimble and able to react quickly to customer needs, behaviours and create the desired customer experience.

Moreover the advent and combination of social, mobile, data and analytics is driving democratisation; ideas, products and services providing mobile flexibility, a new data currency and fully connected systems.

The future customer experience of banking

So how can high-street banks, that arguably have a more established eco-system with more to offer, respond and compete? Plus not only remain relevant, but lead the future customer experience of banking? How do they rapidly understand the transformation needed in order to meet their customers’ needs and deliver the end-to-end experience consumers now demand?

I firmly believe there is a growing need for transformation through customer experience that has global reach, but resonates with customers on a local level and scale.

True digital transformation can only be achieved through customer centricity — by this I mean putting the customer at the very heart of everything. It can only be truly understood by observing how customers behave and not asking them what they want in the future. Why? Because how customers behave and experience a service is extremely difficult to how they articulate what they think they want. That said, most banks right now are guilty of developing services that are created based solely on hearing what people say, not watching how they interact with a service in their everyday lives.

Understanding and observing your customer first-hand has and always will be the most impactful way, to glean insight and identify cultural needs and behaviours. This can be a costly and a time intensive process to undertake, especially when you are looking at the global needs of your customers.

This is where WAE’s RaCE (Rapid, agile, Customer, Engagement) programme is really helping to transform the customer experience. We are currently working within the financial services sector transform businesses digitally by taking a ‘customer first’ approach. Using our RaCE programme, we are able to combine contextual interviews with collaborative discovery; and design the ideal customer services for a range of audiences spanning C-suite employees and customers.

In addition we support banks to validate and implement new propositions, products and services across multiple regions, conducting interviews in parallel. RaCE enables fast, agile, iterative, design and testing to take place, heavily reducing risk and miscommunication that can happen across multiple regions. It is incredibly flexible to roll-out globally and very cost and time efficient, helping organisations to understand the cultural nuances with first-hand observations.

There is no doubt that domestic banks are seeing their market erode with these new alternative players in the mix. Those that look to really understand what their customers want will be the ones that continue to be relevant to younger generations to come. Those that don’t may face extinction as Millennials look to engage in other ways with new, trusted providers.

The new breed of financial customer

I will leave you with a few startling statistics and one final thought. The UK government’s current focus is around financial inclusion for all — especially lower income consumers. That’s because financial inclusion not only helps the individual and their family, but it can also be a powerful driver of economic growth. The technology changes we are seeing year-on-year have the potential to usher in a new era of financial inclusion to enable mobile money, branchless banking and so on, hence the reason why a lot of these agile new providers are flooding into the market. That said, over two million UK consumers currently do not have a bank account. Instead, they use on average 14 different financial services and a staggering 91% save via informal systems! Are you ready to serve this new breed of financial customer?

Say Hello

Are you struggling to develop customer centric experiences that will transform your business? We’re here to help — LDN@hellowae.com