As the financial services and insurance industry evolves to embrace the challenge of digital transformation, one of the key lessons learned from other industries is the need to make customer experiences a pivotal part of the business model. In a crowded, price-competitive market, optimizing the experience that customers receive across devices and channels can bring fresh opportunities for business growth and greater market share.
Does the future belong to new players?
The financial services and insurance (FSI) industry is ripe for digital transformation as market incumbents are challenged by new, innovative players. The downward trend in corporate longevity, with company lifespans growing shorter, underscores a very real threat to established players of digital disruption. According to Professor Richard Foster of Yale University, by 2020, more than 75 percent of the S&P 500 Index will be made up of names we haven’t even heard of yet.
One of the primary concerns among established FSI players when it comes to industry disruption is the ability to appeal to younger consumers––that is, the generation known as “millennials.” Paresh Davdra, co-founder and CEO of fintech company RationalFX, calls this demographic “the most widespread, educated, and financially powerful generation that humanity has produced.” They are transforming nearly all industries beyond recognition, financial services included.
Millennials grew up with mobile technology and see the smartphones that most of us carry in our pockets as the most convenient channel for almost anything––from ordering a cab to buying products online. The majority of them do banking on their mobile devices, too; a recent study from Viacom showed that 71 percent would rather visit their dentist than their bank.
A leaf out of Amazon’s book
This perception that dentists offer a more enjoyable customer experience than a traditional bank demonstrates just how big of a task established FSI players face to avoid losing their share of the market. However, a good starting point may be for these companies to look for inspiration outside their own industry.
FSI companies surveyed by Econsultancy acknowledged that they can learn from companies such as Uber and Amazon. These tech giants have built their business models on an understanding that success means anticipating rather than simply responding to customer needs, identifying pain points, and thus turning potentially negative experiences into positive ones.
Fintech pioneers now putting CX first
Recognizing the importance of these success factors––and the fact that the power now lies squarely with the customer in the FSI sector as much as it does in other industries––innovative digital banks and fintech companies (the U.K.-based banking startups Atom and Monzo, for example) are pioneering new ways of operating. Above all, this means optimizing the customer experience.
Atom, the first mobile-only bank to receive a regulatory licence in the United Kingdom, aims to make security procedures painless for customers, with voice recognition and face scan replacing traditional ID numbers and passwords. Aware of the importance of personal contact, Atom also enables its customers to speak directly to a member of its 30-strong service team via an app.
Monzo is addressing overdraft problems by helping to prevent customers from exceeding their overdraft limit in the first place. For instance, the company offers short-term loans where appropriate. It sees itself as “a bank for people who want to get things done in a click and who don’t see the need for branches and cheque books”––clearly an attractive proposition for a generation of consumers who see traditional banking as more painful than pulling teeth.
Meanwhile, incumbents in the U.K. have picked up the gauntlet laid down by challenger companies. In response to demand from consumers for simple, secure, painless ways to make payments, services such as Paym––offered by a number of providers including NatWest––are allowing customers to send money to friends and family from their mobile phones. Barclays is taking the hassle out of document filing by offering its app users secure cloud storage. And for customers who want to withdraw money at ATMs but have forgotten their debit card, RBS uses location services to provide a temporary passcode.
The stakes are high: Lost customers are usually lost forever
FSI companies that harness the opportunities offered by digital evolution to improve customer experience can expect rewards of higher business growth and a greater ability to compete for market share. A survey carried out by Econsultancy and Adobe showed that companies consider optimizing the customer experience as the single best opportunity for differentiating their offering in a very price-competitive market.
On the flip side, the price for failing to deliver a positive experience is high. As a recent Accenture Pulse survey showed, if a customer has experienced poor service, they simply switch brands in 52 percent of cases. And once that has happened, it is often too late to respond. The same survey indicates that 68 percent of consumers, having switched, will not go back.
- The FSI sector is ripe for digital transformation, and incumbents must adapt if they are to compete with the challengers entering the market.
- Millennials are a key target group, but many of them see traditional banking as a painful experience.
- Industry disruptors, such as new digital banks and other fintech companies, have learned lessons from leading companies in the tech sector and are putting the customer experience at the heart of their business models.
- The stakes are high in this new digital world: While customer experience is viewed by FSI companies as the biggest opportunity to stand out from the competition, the price for getting it wrong is high.