5 customer experience trends in banking
The banking industry is in a state of rapid transformation. Amidst these challenges, banks have opportunities to create new revenue streams and establish themselves as leaders in customer experiences.
By
Few, if any, would argue with the statement, “Customer experience matters.” Banks with great customer experiences have customers who are 1.9x more willing to recommend their services and 2x more likely to adopt new services. Yet, only 30% of respondents would rate their primary bank’s customer service as excellent, and 59% recently acquired financial services from a provider other than their primary bank.
Part of this disconnect can be explained by a rapidly evolving industry, combined with changing consumer expectations, including:
- Emerging competition – Growth of the Fintech industry creates both new competition and opportunities for partnerships
- Digital adoption – Adoption and expectations of digital banking services are growing and evolving rapidly.
- Changing expectations – Expectations for fast and seamless application and onboarding experiences are becoming widespread.
- Industry consolidation – Recent mergers have reduced small businesses’ access to local banks in small, rural communities.
- Third-party partnerships – The number of consumers purchasing financial products via third parties is on the rise.
While these challenges are daunting, they also provide an opportunity for banks to identify and build new revenue streams, while differentiating themselves from the competition by creating exceptional customer experiences. Banks looking for a competitive advantage should consider the following five trends.
1. Re-use existing data
Using more sophisticated technology, it is becoming easier to extract meaningful insights from bank data, even if it resides in a legacy core.
For example, banks can use transaction data from existing depositors to better segment and market to current customers. One European bank used machine learning algorithms to predict which customers were likely to churn. Based on that segmentation, the bank could create a targeted marketing campaign that reduced churn by 15%.
Similarly, banks can use data to segment customers into groups that are likely to benefit from a particular product and even prequalify that customer for that product or service.
2. Tailor experiences to customer needs
Customers crave personalized advice and experiences, yet only 25% said their bank performs ‘extremely well’ at being aware of changes to their financial and personal situations. By better-utilizing data as discussed above, banks can provide highly personalized offers based on a customer’s current financial situation.
For example, imagine a scenario where a bank can utilize transaction data from existing small business owner customer accounts to develop a lending profile and pre-qualify that business owner for a loan. The bank then sends a personalized email, text message, or push notification from the mobile app to that customer, telling them they’ve been prequalified for a loan up to a certain amount.
Now, not only does the bank have a pool of qualified prospects to market to, but the bank’s current customer base is now getting highly personalized, relevant offers that can help them achieve their goals along with a personalized borrower experience via pre-filled applications from the bank’s customer data.
3. Develop integrated experiences
Despite many opportunities for cross-selling, only 23% of respondents rate their bank highly for its range of products and services and the competency of its tailored financial advice.
To start, banks can create integrated experiences across lending, credit card, and bank account products for loan applications, loan management, deposit information, and mobile experiences. This involves reducing silos within the institution itself, but can also be expanded further by using aggregators like Plaid or Finicity to connect accounts across multiple institutions.
By better utilizing and integrating data, banks can create a holistic offering for their customers. This moves the bank away from a strictly transactional relationship to the role of an advisor or partner—especially for the small business demographic.
Thinking holistically also creates new opportunities for the bank to create and demonstrate value to its customers. A business owner’s personal and business bank accounts may not be large enough to warrant a special offer or rate, but what about the personal and business bank accounts combined with a loan? When the offer goes out to the business owner, the application can be prefilled with data from the bank’s core dataset.
Now, instead of shopping around for the best rate every time a customer needs a new financial product, the customer has a reason to stick with their primary banking institution.
4. Adopt proactive outreach based on tailored needs
Seventy-six percent of small business owners are interested in receiving financial advice, yet only 15% say they receive comprehensive advice from their financial institution.
According to the same survey data, top areas in which banks can provide guidance to business owners’ include:
- Advice on lending products
- Ways to improve cash/deposit management
- Practical advice on ways to reduce banking fees
- Tips to help improve the business’ financial situation
- Information on how the bank’s technology can benefit the business
Once again, better access to and analysis of data can help financial institutions meet these needs. By combining bank data with other partner data, banks could provide pre-qualified loan offers, pre-filled tax documents, or even notifications on inventory supply.
Banks have also started to adopt artificial intelligence to improve direct customer interactions including using chatbots for basic service requests. For the SMB customer, these could be applied to provide business advice from an AI-powered advisor.
5. Focus on speed and timely communication
Consumers have a growing expectation for quick applications, onboarding, and approval flows across payments, pending transactions, loan applications, and any other “in-flight” activities.
Amazon’s embedded financing shows how AI can speed up processing and approval times by using existing customer data to almost instantaneously approve Amazon’s customer for a business credit card, payment plan or loan while using existing or third-party data to pre-fill or skip application forms altogether.
Similarly, banks can adopt AI and data automation to significantly boost speed-to-offer. In lending, for example, a bank could run automated checks against internal and third-party data based on the bank’s pre-determined risk profile to create a near-instant loan offer for a borrower.
Additionally, banks can offer their services through embedded financing to expand their customer pool, reach customers where they are, and access additional third-party data that will better personalize communication with the customer.
The future is now
Rather than a hypothetical look at the future, the ideas and capabilities discussed in this article are ready to be implemented now. By evaluating and adopting SaaS technology that is API-ready with responsive parameters, banks can avoid an extensive development process and start providing a better customer experience today.
Learn more about how automation in lending can boost the customer experience.
