Amid the COVID-19 pandemic, the “anywhere, anytime” promise of online and omnichannel banking has raised customer expectations for financial institutions to deliver integrated solutions to help them meet financial goals and other critical life needs.
To succeed in this new environment, banks will need to reinvent their business models to put customers at the forefront of transformation. Successful FIs will demonstrate deep understanding of their customers’ needs, and will translate those needs into an ecosystem of value designed to deliver solutions through integrated and personalized experiences. It’s an approach that has helped Amazon, Peloton, Spotify and many other customer-forward firms revolutionize their respective industries.
Here are three strategies that can help FIs better prepare for the new demands and changed circumstances.
Create hyper-personalized experiences
To successfully embark on a customer-centric journey, banks and credit unions must build new ecosystems of value that supplant traditional siloed, product-centric offerings. Instead of organizing around the sale of individual products, FIs must deliver more personalized, holistic and lifestyle-based offerings – and then curate solutions that solve specific customer needs. The customer, not the product, is the P&L.
This shift will require a major rethinking of how FIs run their businesses. They will need to improve data and analytics to yield better customer insights. They will need to explore new partnerships and business models to create value-added experiences. Additionally, they will need to integrate access to these solutions to deliver seamless experiences aimed at improving their customers’ overall financial well-being.
FIs should develop interconnected “network” solutions designed around the needs of specific micro-audiences. The first step is to identify the core value propositions for each customer audience niche. From there, they develop and monetize layers of capabilities that this audience finds attractive. This is what we call “pivoting to the wedge,” a new approach to putting the customer at the center of value proposition design.
Invest in a robust data ecosystem
To truly serve each customer, FIs will need to harness all available data – this includes information on past purchases, demographics and life stages, as well as data appended from third-party sources. Customer insights derived from this data should be elevated to the highest levels of the organization to drive decision-making.
The goal is to engage clients with the right content at the right moment and with the right context to achieve a true one-to-one relationship and interaction. Personalization must be integrated into multiple channels – mobile, targeted emails and text messages, personalized videos and AI-powered chat bots. Personalization analytics should be shared with customer-facing staff to create seamless connections between the digital and physical realms.
Achieving personalization at scale is not possible without consumer trust. Transparency will be crucial in gaining and maintaining that trust, and to incentivize customers to share additional data. This means pivoting the focus around what’s best and most valuable for the customer, not what’s most profitable for the business. FIs should always proceed with the thinking that customers are the competitive advantage, not products.
Adopt a test-learn-pivot approach
Enabling hyper-personalization requires close collaboration between a financial institution’s business, technology, data, digital, marketing and risk leaders. But the process is more powerful when it pivots around customer needs.
By designing interactive concept tests, leveraging clickable prototypes and bringing the customer into the value creation process, FIs can refine their value propositions and key digital experiences. This powerful test-and-learn mentality can uncover hidden insights, unspoken needs and value-optimizing features that can drive higher confidence of market success once deployed.
Achieving hyper-personalization at scale requires banks to focus their efforts on the unique needs and preferences of individual customers so their offerings feel timely, relevant and credible. “Open banking” platforms allow consumer identities to be more portable so transactional and other behavioral data can flow more freely to trusted partners. FIs should also strategically build out their own “closed-loop” data ecosystems to leverage AI and other tools to capture customer insights and measure the value they have created.
Some FIs already have the resources and in-house expertise to build the customer-centric ecosystem described above, while others will need to make significant investments or rely on outside vendors. To get this new model of customer engagement off the ground, banks will require a sophisticated mix of capabilities in design thinking, data science, digital marketing and agile product development. These are the critical ingredients for FIs to become customer-value market leaders.
Nikhil Lele is a principal in the financial services office at EY.
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