How FinTechs are redefining the financial services customer journey

Financial services customers no longer rely on a single supplier as it was a decade ago. In modern days they pick and choose from traditional and not-so-traditional companies and services in search of an efficient, pleasant, easy-to-use, portable and simplified customer journey.

Customer focus combined with innovation is key for future survival and growth, firms need to align their strategy and culture to adapt to the new normal. At the same time privacy, transparency, compliance, and trust are becoming key issues as the new paradigm leads to a multitude of data, which makes the customers more mindful of these aspects.

An effective customer focus involves empathizing with the customer, building trust, simplifying the customer experience, and aligning with customer goals and expectations. Having a customer-centric approach and being fully transparent while offering a pleasant, yet simple and consistent customer experience could help firms differentiate themselves.

To achieve effective customer focus, firms will need to invest in key areas of agility, digital, and operational excellence. With changing customer expectations, firms need to ensure they have cross-functional agile teams centered around the customer, that are making focused digital investments to enhance the customer experience, all while keeping costs in check through technology and simplified processes.

While there is no certain or sure strategy when it comes to consumers and customers, there are some steps that help:

1. Empathize with customers;
2. Build and maintain customer trust;
3. Keep it as simple as possible for clients;
4. Aim and strive for operational excellence;
5. Invest in digital capabilities;
6. Align customer and business goals;
7. Adopt agile practices;
8. Develop and maintain the right culture and talent pool.

Empathize with customers

Among best practices for redefining the customer journey (and one of the most important) is customer empathy.

When designing the journey company executives must put themselves in their customers’ shoes to accurately assess what they are thinking and what they want.

• Understand that customers do not care about a firm’s internal processes and departmental structures. For them the firm is a single entity.
• Customer journeys are more critical than individual touchpoints. While a customer might have an excellent experience at one touch point, if the next experience is better, then the first one becomes irrelevant.
• Firms must put themselves in their customers’ shoes and experience service levels and pain points (responsiveness, turnaround time, required number of interactions.)
• Inefficiency is a customer red flag. Mitigate it through digitization, and be sure company culture complements the firm’s customer-centricity goals.
• Sustain the changes and remain agile to incorporate modifications. Be receptive to customer feedback as less than half (47%) of retail banking customers believe their bank listens to their feedback. Align employees’ goals and incentives with the customer-centric approach.

Empower a governance body to continuously monitor these efforts. Redefining the customer journey requires more than an IT overhaul. A change in mindset is critical.

Build and maintain customer trust

Firms must retain transparency and provide reliable financial advice to win customer trust by ensuring that customer data and privacy is protected.

As a primary principle of trust, firms must ensure that customers’ data and privacy are always protected. While customer data is being utilized to develop personalized services, it should be with the consent of customers and personalization should not be intrusive. Transparency is another essential element of trust. Firms must ensure that customers are aware of what they are getting into. For example, compliance and terms and conditions must always be explained in direct, easy-to-understand language.

Customers who consider their financial firm to be a trusted partner are loyal. To that end, firms must precisely determine customer requirements based on individual customer needs and situations. Only then can a product that best suits those needs be recommended. Earning “trusted partner” status will have far-reaching impact. Conversely, broken trust can end relationships, harming customer retention and financial performance.

While it may have been easier — back in the day — to maintain customer trust through personal relationships, in the digital world firms must rely on personalized and understandable offerings.

Keep it as simple as possible for clients

Customers of all demographics value simplicity. Therefore, firms must strive to create positive and natural interactive moments via all processes and user interfaces. Overall, the customer experience must be consistently simple and delightful. However, simplicity does not imply that personalisation is sacrificed. Data and analytics can be used to deliver relevant products and services that are easy to use.

Aim and strive for operational excellence

An operationally excellent firm strives to enhance productivity as well as customer experience. As reported in the Bank of England stress test 2017, banks may face increased competitive pressure not only from traditional peers but also from FinTechs that have low operational costs. With such scenarios, banks or other incumbents must increasingly focus on cutting costs through technology and simplified processes.

Firms must acknowledge delivery of superior customer journeys as a key element of operational excellence and sensitize their employees to this. A strong customer-focused culture must be coached organisation-wide, not just at customer-facing touch points.

• Organizational structure — For the customer to have a single view of the firm, firms must ensure that they have clearly laid out cross-functional and departmental processes with well-defined roles and responsibilities. While employees should be empowered to take pre-authorized decisions in customer matters, there should also be a mechanism to address exceptional scenarios quickly.
• Optimized data — In modern days, firms have an enormous supply of data from a variety of sources, both internal and external, that can be used to simplify processes for customers (such as pre-filled forms). Applying big-data and benchmarking techniques, firms can understand how they are performing over time or in comparison to the industry.
• Enabler tools — Real-time availability of data, functionally rich dashboards and decision-making tools (creditworthiness, e-know your customer) will help firms to serve customers efficiently. Firms must keep up to date in identifying new tools, upgrading their supporting infrastructure, and maintaining a contingency plan.
• Managing costs — While the pressure is on to deliver superior customer journeys, it is no secret that resources are often limited. Therefore, careful planning is required when developing firm capabilities such as personnel, IT, and other non-forecasted expenses and liabilities. A return on investment metric will help sustain efforts. Removing inefficiencies helps with customer experience as well as cost-cutting and bolstering employee productivity. Pivot fast, listen to the customer and quickly modify the customer journey.

Invest in digital capabilities

Apart from organisational changes, IT digital transformation is a given. Abandoning legacy systems can be costly, but firms must modernize their core to support compatibility with the latest technologies and third-party systems. APIs can help achieve this by connecting a firm’s internal systems with third parties. A scalable, robust IT infrastructure must be built depending on requirements, cloud-based infrastructure might offer a solution.

Kick-start or strengthen the practice of agile development. Quickly develop minimal viable products (MVPs) and test them in a sandbox environment. Keep a holistic approach in mind during product development strategy assessment.

Empower the digital team to redefine the customer journey under the leadership of a Journey Product Manager. These initiatives will identify and implement customer journey programs that may require cross-functional collaboration. The team should continuously enhance services in order of prioritization based on customer feedback, relevance to the customer journey, potential return on investment, and technical and financial feasibility.

Investing in digital is not a sunken cost because an enhanced customer experience not only results in higher loyalty, 79% of retail banking customers are willing to spend more for a better experience. Predefined metrics can help firms track return on investment to justify and motivate further investments.

Align customer and business goals

It is imperative for firms to align customer journeys with business goals to avoid conflict, mixed messages, or wasted resources. Alignment may not happen overnight, but by motivating staff to serve customers better, a comprehensive awareness of customer-centricity can be driven across the organisation, ensuring that all phases of the customer life cycle are prioritized and that customers stay top of mind even after they have purchased a product.

Adopt agile practices

Collaboration with FinTechs can help traditional financial services firms boost agility and responsiveness towards changing customer expectations. Incumbents must develop truly agile teams through a top-down approach that starts with executive leadership. Agile teams work well cross-functionally because they strive to quickly understand the business objectives of those involved, and mitigate unresolved conflicts. An agile culture may begin with a series of small or midsize efforts, rather than big-bang transformations that may require capital expenses and risk.

Change software development models: In the past, firms relied on a traditional (waterfall) model for software development. However, FinTech firms pioneered a more agile approach that incorporates elements of design thinking to create unique customer-centred processes to leverage cheaper and faster software methodologies that are more flexible and responsive.

Agility helps firms to experiment fast and fail fast. Why is that a good thing? Because it saves time and money over the long term and it channels valuable investment to the most feasible ideas in the near term.

Develop and maintain the right culture and talent pool

While all the strategies mentioned above are essential to great customer journeys, firms require the complete support and buy-in from leadership to successfully implement them. Customer-focused leadership will nurture the culture of innovation and customer-centricity for quick wins as well as long-term relationship building.

As noted in the World FinTech Report 2017, nearly two thirds of executives (64%) cited leadership buy-in as a key success factor in applying innovation. Leading by example motivates employees to respond and act in ways that keep customers at the center. With changing customer expectations, executives, as well as employees, must champion the customer.

Beyond creating an agility-fostering culture and environment, firms must also ensure they are building teams with the right mix of skills. Success in the future will require new and different skills. Many firms have been adding talent from a mix of financial institutions from incumbents to FinTechs and BigTechs, as well as non-financial sectors such as retail. As financial institutions look to innovate and to partner with FinTechs, they need the right people and culture in place to drive organisational change.

Incumbents must objectively rethink their approach to customer journey enrichment. Experiencing the journey through a customer lens will help firms understand the mindsets of users. Furthermore, a fresh perspective may unearth actionable intelligence to help meet goals.

Embracing emerging technologies and developing capabilities to accommodate redefined and dynamic customer journeys today and tomorrow will require sustained effort and investment. Capability transformation covering human resources, IT, and finance must be deployed across the spectrum of the customer life cycle.

Firms can hit roadblocks when they are technologically constrained. In such cases, collaboration with FinTechs could leverage already-developed applications and solutions. To ensure successful collaboration, however, FinTech and traditional financial services firms must commit to understanding each other’s viewpoints.

The competition and customer expectations are revitalizing the customer-centricity focus. The industry is being reshaped by evolving customer expectations for convenience and personalisation — driven by the standard set by BigTech firms such as GAFA (Google, Amazon, Facebook, Apple) — combined with FinTechs meeting these expectations with agility and an improved customer journey. FinTech firms are now earning a reputation for customer-centricity by bridging the gap between what financial services firms currently offer versus what today’s customers want. By using key principles such as personalisation, quick response (speed), relevance, and seamless delivery the FinTechs are building differentiated customer experiences.

This is made possible by emerging technologies that enable customer journey transformation. Emerging technologies, heavily leveraged by FinTech and BigTech firms have created a pattern shift in customer experience that eliminates multiple pain points across the customer life cycle. Infrastructure-based technology is reshaping the future of the financial services industry through open APIs (Application Programming Interfaces) and platformification which enables variety of industry participants to connect to it and offer products/services to other participants. The operational advancements are offered by robotic process automation (RPA), chat bots, and distributed ledger technology (DLT) are enabling greater agility, efficiency, and accuracy. Design-based thinking and simple-to-follow user-interfaces are making the customer journey quick, convenient, and seamless, while insights driven through data-focused technologies are ensuring relevant, personalized offerings.

Alignment with customer goals, creation of trust and delivery of digital, agile and efficient processes are catalysts for success

• Innovation with a central focus on the customer is vital for survival and growth.
• Customer focus means sympathizing and empathizing with the customer, earning their trust, simplifying their customer experience and aligning with their customer goals and expectations.
• Bringing in top talent with the relevant skill-sets and creating the right culture, while also making strategic investments in agility, digital, and operational excellence will maximize firms’ ability to achieve customer focus.