How Financial Services Providers Can Give Customers What They Want

Here’s a hint: it starts with flexibility.

Photo by Blake Wisz on Unsplash

We’ve seen how COVID-19 accelerated the shift to digital ways of working and living over the past year and a half. This includes how we bank, save, and manage our money. According to Chase’s Digital Banking Attitudes Study, 93 percent of consumers have used at least one digital payment method in the past year.

In addition to being able to bank from anywhere, new market entrants are solving other unmet needs for customers, including Buy Now Pay Later (BNPL). BNPL providers such as Affirm and Klarna allow users to split purchases into smaller installments with no interest or fees. While BNPL volume is still small in comparison to other payment methods, it’s growing and part of a larger theme and shift: customers crave flexibility.

This theme is playing out in several ways, including removing overdraft fees. It was recently announced that Capital One will completely eliminate overdraft fees for its customers. While smaller banks such as Ally have already eliminated these fees, Capital One is America’s sixth-largest retail bank and the only top-10 retail bank to make this move for all its consumer bank products.

To provide flexibility and get ahead of the next industry shift, financial services executives should follow three key principles: partner well, nimbly enable seamless experiences, and establish strategies with the long-term view.

Partner well

There’s been an explosion of small-size challengers providing pieces of the financial services suite to customers, including new, innovative products. Many of the products provided are hip, sleek, and specialized to provide customers the flexibility they desire. For example, Lili addresses the specific needs of gig workers by offering a checking account with tax planning tools. These tools allow users to automate tax filings by tracking expenses and generating expense reports without charging overdraft fees or requiring a minimum balance.

Partnerships can take many forms. A common example for regional banks is “renting out” their compliance or regulatory function to a fintech company, which enables the fintech to accept deposits and have its customers’ funds insured by the FDIC. In return, the bank gains access to the fintech’s technology without having to build it in-house.

One example of this is MapleMark Bank partnering with Raisin — a German fintech specializing in certificates of deposit (CDs). MapleMark gave Raisin access to the American market and, in return, uses Raisin’s technology. This gave the bank the ability to offer three different CD options — including a CD ladder — to existing and prospective customers.

Partnerships can be used as a trial run for a company to decide its future strategy in the space, including how to satisfy evolving customer needs. Options after the trial include continuing the partnership, acquire the partner, ending the partnership and exiting the product, or ending the partnership and building the product in-house. Financial services companies should consider these components when developing their partner strategy.

Key questions:

1. Do you have operating models in place that enable sharing of competitor research, insights, and partnership opportunities?
2. What is your partnership strategy?

Steps to take:

1. Set up a recurring environmental scan to assess competitors and disruptors.
2. Based on the findings of the scan, define the goals you want to achieve in the space.
3. Establish objectives and key results (OKRs) to propel your organization toward its goals.

Nimbly enable seamless experiences

Tech companies such as Amazon and Google have set the bar for flawless digital experiences across all industries. This, combined with the sleekness new fintechs are providing, has customers expecting excellence. Every interaction counts, and one bad experience can lose a customer or cause reputational damage. Financial services firms should strive to make each of these interactions seamless and can do so without investing in a large budget or long roadmap.

Low code Intelligent Automation applications are gaining popularity since they cost less than a typical system implementation — a result of the shorter development time required to implement them. For example, implementing virtual assistant chatbots that can answer simple questions by leveraging the customer’s data on file adds value by providing the customer with quick answers. Financial services firms can nimbly build out similar workflows by utilizing tools such as Robotic Process Automation to automate manual tasks and Optical Character Recognition to digitize and ingest printed text into machine processes. These are some examples that can be quick, cost-effective wins for customer experience and operational efficiency.

Key questions:

1. Are you focused on continuously improving the customer experience?
2. What tools are you using to solve customer problems?

Steps to take:

1. Establish principles to follow when building new experiences.
2. Determine whether you can solve the problem with low code, low-cost solutions.

Establish strategies with the long-term view

Historically, banks have been short-term focused, driven by delivering quarterly and annual earnings projections to investors and prospective shareholders. However, this type of thinking hinders an innovative and proactive mindset.

In a rapidly changing world, leaders must take the long-term view — not just one or two years out, but five, 10, or 20 years from now — and identify new opportunities to shape their industry. To do this, your team should think through a variety of possible futures and identify the actions needed to be a disruptor in those new areas.

At Slalom, we help clients imagine the future through methods such as Strategic Foresight, where a workshop to identify emerging themes and patterns could yield a possible future that you can plan for today. For example, if we took the current themes of financial services customers craving flexibility and combine it with the emergence of decentralized finance and the metaverse, we might imagine a future where customers have new options in how, who, and where they live their financial lives. What implications would customers using newly invented products in the metaverse have on a bank’s product offerings, partner strategy, and customer experience principles? These are the types of exercises and questions that can help organizations plan more strategically.

Key questions:

1. What will the next big change be after the digital shift caused by COVID-19?
2. Is the current flexibility theme a signal that will become stronger?
3. Which possible futures can you and your team imagine?

Steps to take:

1. Think laterally by identifying trends outside of the financial services industry that point to bigger patterns.
2. Develop a big vision of where the world is going.
3. Define the value your company will bring to the table.

In summary

Financial services providers have a unique opportunity to learn from the recent digital shift and use the momentum to provide the flexibility customers are looking for. Taking the steps to modernize partner strategy, deliver seamless, low-cost experiences, and establish a culture of long-term thinking will position firms for success. As new themes emerge, evolving these principles will allow organizations to be at the forefront of the next big customer priority.

Slalom is a global consulting firm focused on strategy, technology, and business transformation. Learn more and reach out today.