User experience is the new competitive advantage for banks
There are many trends and forecasting in digital banking, many of which focus on the use of technology. Things like biometrics, blockchain, IoT and AI — but none of these technologies are important if humans do not become the core focus.
Focusing on creating an exceptional user experience is the single most important differentiator to improve customer retention. Convenience, simplicity and speed aren’t just extra benefits in users’ minds anymore. They are the new standard. It costs 5x more to attract new customers than it does to retain existing customers. Repeat customers also refer 50% more people than one-time buyers. In a study by Gartner 80% of future profits come from 20% of current customers. Even though it was a different time and medium, Walt Disney still said it very well;
Furthermore in a study by Customer Think consumers mentions the user experience, including the ease of use, layout and setup as the most important factors for them, when it comes to banking.
In the future the digital customer experience becomes the whole customer experience.
A broken digital banking experience
When you start to look at the current digital solutions the incumbent banks are offering today, you begin to understand where things are broken in the digital banking experience. Take a bank like HSBC — the biggest bank in the UK, yet their current banking app is a disaster. It is not like HSBC does not have the means to design and build a proper banking app. The App Store is filled with one-star reviews from deeply frustrated users who cant even accomplish simple tasks within the app. And often it’s not just the app itself that annoys consumers, but the lack of customer service when they encounter problems. Every single touchpoint a user has adds up to the experience. It’s not just about the pixels.
“I decided to speak to someone in the chat who maybe could help, just to realize that the chat works through an overlay making it a real nightmare to control — Finally, after many attempts, I was able to chat with someone who had little- to no interest in assisting.”
HSBC is failing to help its customers and that’s dangerous — and it goes far beyond bad reviews in the App Store. For most customers the app is the only interaction, they will ever have with HSBC.
If customers are left with a frustrating experience, they will seek out an alternative that provides them the service and experience they need, and frankly, deserve.
Banks can no longer rest on their laurels
Banks have traditionally fared very well without needing to overextend themselves when it comes to user experience. The general rule is that if a bank can sell you three products (e.g., checking account, savings account, plus credit card or loan) then you are likely to stay for 50 years because it’s just too inconvenient to switch banks. As a result, banks don’t see a reason to deliver better products or lower fees. In fact, they typically focus on selling more products and making existing products more complicated — neglecting real user needs like convenience, transparency, accessibility and simplicity, in the process.
It does seem, however, that banks are beginning to see the signs of danger. There is an increasing trend among millennials actively seeking banking alternatives due to a lack of trust with their current financial institutions. They are seeking the same level of innovation and convenience that Uber brought to transportation and Amazon brought to shopping.
We trust those who serve us best — even if that means going with a non-bank.
So what is a bank to do?
Most banks have come a long way, but in reality most improvements that were done were in favor of banks rather than their customers. So what can banks do? Even though it’s cliché in the world of experience design, banks need to take a cue and be better at empathizing with their users. Otherwise all the money in the world won’t be able to create banking experiences suitable to the people in search of them.
Bottom line, it should be about solving people problems instead of banking problems.
1) Cover the basic stuff, before you dive into the delights
We live in a mobile first world with 90% of people under the age of 35 no longer using a computer. Yet most banks still don’t offer the ability to open a bank account, refinance a loan, or even set up simple bill-pay via mobile. Banks need to come to where people are, which is on their phones. They also need to make an effort to understand the platform and its users’ behavior when they do. For many, banking apps are too vital a part of managing their financial lives to be built half-stacked.
Which would you use?
If you look at the banking app from Wells Fargo and compare it to a bank like of German startup bank N26 — which would you use?
2) Stop focusing on products and start thinking about your customers
Gone are the days of Milton Friedman — “The business of a business is business.” What people love is great experiences and something they find valuable — something that helps them alleviate their frustrations and makes their lives easier. This doesn’t start with products that make money for the bank, but rather, with a deep understanding of your customers and their needs. Don’t just offer ’banking’ — teach your customers how to have a healthy financial life and make smart financial decisions.
Moven offers a way to see what is safe to spend
People want to see more than just their balance and transactions. What they really want to know is — how are they doing? What can they safely afford to spend? Moven bank has a thing called “Spending Meter” where you can quickly see what is safe to spent.
3) Offer value even when it doesn’t directly make you money
Why should you offer something if it doesn’t yield profit? CEO of Microsoft, Satya Nadella doesn’t really worry about revenue. He’s more interested in people using their products than chasing after revenue or as Satya Nadella likes to say: “Revenue is a lagging indicator, usage is a leading indicator”. The key takeaway here is that if you double down on making products that customers really like, revenue will follow.
App Store ecosystem
UK challenger bank Starling, has created an App Store type ecosystem within their app, that offers 3rd party integratable financial products in one place. Users will be able to choose from a range of products and services, to give them control of their money. This way users can integrate services like investment, mortgages, insurance and pension.
Building the right thing and building it right
As a UX Strategist I’ve been working with one leg in each department behind that very statement. One leg in the “Building the right thing” and the other leg in the “Building it right”.
Building the right thing: Strategy — doing research and defining the purpose and coming up with insights that will inform the product.
Building it right: UX — sketching out how the product will eventually look like and how it will work when put in front of users.
Coming up with the insights that will inform the product is immensely important and very difficult because having a real understanding of what motivates people to do what they do is one of the most important skills you can have as a designer. But even if you get the first part right, there is no guarantee that it is a home run from there, which the HSBC banking app is a clear example of.
Building the thing right is equally difficult. I often hear: “Building digital products is easy — as long as we know what we are building”. You could argue that HSBC knew what they were building from the get-go. If you were to describe what the app does, it probably wouldn’t be far off from what N26 do. But they are still wildly different experiences. On paper, features are just features, but there’s a ton of different ways to design a product experience.
It’s not about what the app does — it’s about how it does it. What it does are features. How it does it, is the experience. And the experience is the differentiator. It’s what sets a good product aside from a bad product — regardless of features.
