Introduction

The financial services industry is facing a megashift. Customer loyalty is deteriorating, client expectations are through the roof, and the market is becoming increasingly crowded. This has led to a new reality for incumbents, FinTechs, and technology companies alike: they need to differentiate on their customer experience in order to win and retain clients in today’s market.

THIS HAS CAUSED A SHIFT FROM B2C TO C2B IN FINANCIAL SERVICES

Consumers today have the option to sign up for a new checking or current account by going to a local branch, of which there are many. Alternatively, they can create an account online with an online-only bank, a credit union, their credit card company who recently started offering checking/current accounts, or on a national retail bank’s website. 50 years ago, this wasn’t the case; there would only be 1, maybe 2, choices. But today consumers have a multitude of options, with the ability to compare rates and fees, digital usability, and customer service in order to decide who they want to do business with.

This increase in consumer choice has led to a degree of competition not seen before. It’s forcing financial services (FS) providers to adapt new delivery methodologies, invest in modern technologies, and completely transform the way they interact with consumers. This ideological shift has forced providers to shift from B2C to C2B. Meaning, providers can no longer survive with an inside-out mindset, selling from business to consumer. Rather, they have to take an outside-in approach focused on the consumer itself, shifting to consumer to business…

Traditionally, FS providers have released products to market — think mortgages, certificate of deposits (CDs), insurance plans, etc. — without considering the individual needs and motivations of the client. This may have worked in the past when providers drove the relationship between business and customer, but today’s consumers have a choice. And competition is stiff.

FinTechs have transformed the industry. FinTech startups operate without the same limitations as their incumbent competition — they are able to think more critically about the things that people need to do in their financial lives and build products and services around that need — not the other way around. Traditional banks have created products and then marketed them to people, i.e. offering a CD instead of asking “How can we help you meet your savings goal?”

Innovative technology companies learned this lesson quickly and built brands that consumers have learned to love and trust, like Amazon, Apple, and Google. The challenge for FS is that each of these companies have recently entered into the consumer banking market with new products that tie people’s financial lives to the products they already incorporate into their daily lifestyle.

Setting yourself apart in a crowded market

Because of mounting pressure from both FinTechs and technology companies, FS incumbents must think outside of their organizational, operational, and technological limitations to meet these radically new consumer expectations. This means not only creating new products and digital experiences, but ensuring that clients are getting the insight, value and level of service that they have come to expect.

Executing on this can be a daunting task. Financial services are inherently complex — they often involve legacy systems and complex processes that have evolved over decades to be as safe, secure and reliable as possible. Because of this, transformation in FS needs to be holistic, focused not just on improving the digital experience but on seamlessly connecting front and back office processes to give customers the experiences that drive growth and generate loyalty.

To help you get started, we’ve identified six key areas where FS providers can make a material impact on the client experience and differentiate themselves in a crowded market. This whitepaper will serve as an introductory guide to each, with case study examples of other FS providers that have seen success.

Six areas for CX differentiation

Simplicity: Cornerstone of design

Everybody needs Financial Services. Yet FS products have traditionally been complicated and confusing, cluttered with corporate jargon and providing a poor customer experience. Major incumbents have faced little competition and therefore lacked pressure to respond to customer demands for change. However, the FS landscape is changing. Competition has rapidly increased, with large numbers of FinTechs and leaders from adjacent markets (e.g. Apple) entering the FS ecosystem. As a result, this increasingly competitive market has driven greater simplicity for consumers focused around three key themes:

1. Easy to navigate, seamless & quick customer journeys

Customers have traditionally faced lengthy applications for products, with paper forms and a disjointed journey as they pass between different channels and departments. FinTechs have led the way in simplifying key FS customer journeys, such as onboarding, with the introduction of key features including digital ID verification. However, some segments of the industry, for example wealth management, have lagged behind compared to others, such as consumer banking. There is significant opportunity for incumbents and new entrants in these segments as customers value and demand greater simplicity to cut through the perceived complexity of these markets. In a recent survey, 79% of customers who managed their own portfolio identified simplicity as a key importance.

2. An end to opaqueness

Terms such as ‘APR’, complex T&Cs and confusing pricing have often left customers feeling overwhelmed. In a recent survey, 83% expected to be offered the APR advertised (in fact on average only 51% are offered it). However, this is changing with new FinTechs using ‘everyday’ language to engage with consumers, removing hidden fees and being more transparent about the profits they are making (see the Monzo Transparency Dashboard). Regulators have also driven change in this space, for example with the UK Financial Conduct Authority (FCA), the UK banking regulator, releasing new advice in 2018 that requires wealth managers to clearly disclose all costs to consumers.

3. Product simplification

As the market has become more competitive, in a drive to keep up, companies have specialized and focused on delivering a great core product to win over customers, rather than offering secondary features such as points-based loyalty schemes. Goldman Sachs, for example, have successfully launched Marcus, a simple digital savings solution serving 3 million customers in the US and UK. As well as offering an attractive rate, Marcus offers a clean and stripped back online customer experience that lets customers transact fast and anytime.

Case study

Lemonade

Lemonade offers simple, transparent and instant insurance to clients through an engaging app. Customers can purchase insurance in as little as 90 seconds, as Lemonade leverages AI and robotics to instantly calculate coverage for clients based on answers to a couple of simple questions. Claims can also be made and paid out quickly in app, and they operate a flat fee model (25%) so have no incentive to not pay out on claims (any premiums not paid out are donated to charities chosen by customers). To ensure customers fully understand the terms of their insurance, they offer ‘Insurance Explained’ which describes insurance jargon in layman’s terms.

Customer-first: A laser focus on the customer

Jeff Bezos credits the success of Amazon to its “obsessive compulsive focus on the customer”. Companies like Amazon, Uber and Netflix have changed the game in terms of customer experience with the same laser focus on the end-customer. This has raised the question: if Amazon can provide an amazing customer experience, why can’t banks?

FinTechs, and now increasingly traditional financial services providers, are responding to and building new business models that design end-user experiences through an obsessive focus on the customer and their needs. At the core of these new business models is the use of new ways of working such as Design Thinking and Rapid Prototyping which include a few principles that drive customer-first design:

  • Tap into customer emotion. Place customer emotion at the heart of the design process and don’t just use the customer pain points as a starting point, rather continuously learn from them.
  • Unconstrained thinking. Suspend judgement and look for unconstrained ideas that create the best outcome and experience for customers.
  • Fail fast and learn. Test ideas immediately with customers, continuously improve and refine designs based on their feedback.

Whilst the majority of executives have recognized the need to transform, with 55% of CIOs at global banks citing improving client experience as the top priority, the adoption of these new techniques has focused on consumer banking and finance. On the other hand, adoption has been much slower in insurance, wealth management and private banking. This slower pace of change reflects the complexity of the products and the slower entrance of FinTechs into these markets. As competition increases in each of these markets, new consumer-centric business models are increasingly being adopted and are starting to drive greater consumer-centricity in the end experience.

Case studies

And image of the monzo logo

Monzo

Throughout development, Monzo has used customer-centric design and partnered with its customers. It initially launched with an alpha pre-paid card while they waited for approval on their banking license application. Monzo used this period to test its user experience with a small pilot group and develop a thriving community forum, incrementally releasing new propositions to gain rapid customer feedback. As a result, Monzo has been able, and continues to, tailor its features to improve customer experience. By the time it launched its full current account, it had a fully developed end-to-end digital onboarding journey that takes minutes, and innovations such as activating a new card via a customer’s phone.

An image of the Lloyds Logo

Lloyds Banking Group

In 2014, Lloyds Banking Group embarked on digital transformation with £502 million budget. At the center of this transformation was the redesign of the business around key customer journeys and needs.

This refocus on the customer was end-to-end across the business with the creation of:

  • Cross-functional teams focused on key customer journeys that delivered small chunks of customer value at an accelerated pace.
  • Utilization of design techniques such as Design Thinking to rapidly design and iterate new proposition based on customer pain points.
  • Putting in place micro-services and cloud environments to enable quick and iterative technology changes based on customer needs.
  • Clear governance structure and accountability, with empowered product owners with P&L responsibility leading cross-functional teams to enable laser focus on customer needs.

Adopting this new approach enabled Lloyds to overhaul 10 key customer journeys within just the first 3 years, establish a new operating model able to respond to client needs, and delivering savings and revenue increases of £500 million.

Regulation: Burden to opportunity

Since the 2008 financial crisis, FS providers have faced a plethora of new regulation, ever increasing compliance costs and heavy fines for conduct breaches. Although often perceived as only a burden, regulators have also sought to strengthen competition and minimize barriers to entry, ultimately leading to greater customer experiences.

In European markets, one specific regulation is at the forefront of the shift towards a more accessible and open FS arena – the Revised Payment Services Directive (PSD2). PSD2 is an E.U. directive that states banks must make customer data freely accessible to third parties, in a secure manner, via a common API. PSD2 offers the opportunity for customer-centric challenger companies to gain access to rich and valuable customer data, enabling them to provide personalized and seamless experiences. Building on PSD2, Open Banking is a UK legal development that forces major UK banks to release their data to authorized third parties.

An open API world is leading to more partnerships and enables organizations to bypass traditional value chains and seek new ways to drive revenue. To survive, companies are building scalable platforms that can engage with multiple entities from a single channel, in real time via APIs that offer tailored experiences to individuals; in June 2019, over 66 million successful API calls were completed. For the customer, this means they can aggregate their financial data to provide a holistic view with personalized insights and recommendations, whilst maintaining choice of providers.

With open APIs, innovators now have even greater potential to disrupt incumbent providers and their often-cumbersome processes. For example, customers can grant access to financial data from their bank account to complete identity checks compliant with KYC standards which can be completed in seconds, rather than traditionally lengthy application forms. For incumbents, this is a serious threat, they now must share their customer data and leaves them with little option to not only compete, but to outpace, the innovators.

Case studies

Yolt

Yolt is an ING backed platform company that allows customers to track and manage all their accounts and credit cards in simple, intuitive way. Yolt relies on regulations such as PSD2 and Open Banking to aggregate all their accounts, offering a holistic view to customers and enabling them to manage them all in one place. Yolt provides customers the ability to view smart balances, average spending reports and set specific budgets. Recently, Yolt announced the launch of Yolt for Business. Yolt for Business offers financial services the opportunity to white label Yolt’s API to open up financial data in a single API, covering account aggregation services and payment initiation services. Yolt’s Chief Business Offer (Leon Muis) believes that data sharing amongst FS companies will become a global phenomenon.

FCA (Financial Conduct Authority)

The FCA have launched a sandbox enabling both established banks and FinTechs to experiment with new innovations in UX. The sandbox allows companies to test in a controlled environment, reduce the time to market and assist in identifying customer protection safeguards for new services. There have been over 146 applicants (65% startups) involved in the sandbox since its initiation. Testing done in the sandbox has mainly been in the retail banking sector with over 50% of all testing, and the second largest has been insurance. ONFINDO, a digital identity recognition company recently announced that they will be joining the FCA sandbox. ONFINDO aims to improve the user experience through the availability of a safer identity verification approach for both customers and businesses.

Data: Personalization for each individual

At the center of this transformation is a renewed focus on using what we know about the customer to deliver more personalized experiences. In FS, each customer has different needs. They may just be graduating high school or preparing for retirement, and because of these differences they need to be engaged in different ways in order to effectively accomplish their goals. Each individual has a different aptitude for certain channels and varying expectations for how and when a FS provider should interact with them. The one-sizefits-all strategies of the past will quickly fall short as companies that already know your customer are beginning to offer similar products and services. FS providers do have a distinct benefit; they have an enormous amount of data about their customers. They know where they live, their age, their buying patterns, and their financial profile. But more importantly, they have a customer base that is not only willing, but eager, to share this data in order to develop a more meaningful relationship with their FS providers.

On top of this, most FS interactions are moving towards an almost exclusively digital world. This means every time you interact with a FS provider, they can use that information to give you experiences, recommendations, and guidance that are more relevant to you as a client. This makes the intersection between digital and data one of the most strategic areas for FS providers today. How they collect, analyze, and activate that data is going to be critical to their ability to fend off technology behemoths like Amazon but also FinTech startups like Wealthfront or Ally who were born in the digital world and already delivering on that promise.

Case studies

Zesty.ai

Zesty.ai’s model currently uses over 115bn data points helping insurers to automate underwriting, increase pricing accuracy, optimize inspection accuracy and enhance claims management. It is an advanced risk analytics platform that uses artificial intelligence applied to digital imagery to improve property risk and causality assessment. Their solution uses geospatial data, including satellite, aircraft and drones, to understand property assets, infrastructure and nearby environments and assess their associated risk profile. Zesty.ai also overlays this imagery with data from third parties, including real-estate records, utility records, building permits, demographic and credit records, to construct a complete risk profile of the person and property.

Zesty.ai then applies advanced computer vision, digital imaging analytics and deep learning to help enhance insurers’ property risk models. Their deep learning algorithms are able to detect roof shape, material, housing dimensions, distance to flammable vegetation and additional outdoor assets, such as sheds, swimming pools or solar panels.

Starling Bank

UK challenger bank, Starling, provides an open API platform to enable third party developers to leverage user data to build additional features and enhance the core client proposition. The Starling platform has integrated with three key new startups to enable clients to view detailed receipts of their transactions (Flux), save as they spend via a round-up facility (MoneyBox) and receive exclusive offers, discounts and cashback directly into their account (Tail) all within the Starling app. Moreover, Starling offers clients the opportunity to connect with a wider range of financial services apps via the carefully curated Starling Marketplace. As a marketplace partner, developers are able to showcase their apps and be presented as a potential option for Starling customers to integrate with.

Omnichannel: Creating a seamless experience

Banking was built on face-to-face relationships and a single channel of engagement. As products and services grew, FS providers re-thought their channel strategies in-line with technology growth and the explosion of digital banking. However, technology has grown in sophistication as the millennial generation has reached maturity. Now providers must offer a leading “omnichannel” experience – providing a consistent, seamless and personalized experience, regardless of channel. Customers expect information on-demand in their channel of choice and to be able to switch their interaction mid-process. It is complex to get right, but when achieved, it leaves customers with the impression that the whole experience has been built for them.

The challenge for FS providers is developing the means to deliver this, requiring all of their customer touch points to be orchestrated and integrated. The effort can be high, but the prize is clear, a recent study highlighted that 52% of consumers are less likely to engage with a brand after a bad experience via just one channel. In a world where social media rules, 39% of customers expect a one-hour response across these channels; with barriers to switch lower than ever, if providers don’t continuously delight their customers, they will lose them.

Integral to delivering a leading experience is the goldmine of data FS providers have. Through analysis of their customer’s demographics, location, transaction history and general click data, providers can gain deeper insights into their customers’ needs, allowing them to produce tailored products and services. Understanding the customer to this level of detail also allows providers to pro-actively identify pain points and implement solutions before customers can comprehend their own engagement, surpassing expectations and growing loyalty – a 5% increase in client retention rates can increase profits by up to 95%.

Providers need to be a step ahead of where their consumers are today and imagine where they will be next. For example, voice-controlled technologies are relatively immature, but it is not difficult to imagine consumers instructing their home devices such as Alexa to transfer funds between current and savings account and prompting bio-metric authentication via their mobile device. Digital innovation in FS is undeniably the future, and the pressure is on providers to build and offer leading omni-channel experiences which go beyond singular great experiences.

Case study

MetLife

MetLife, who are one of the largest global providers of insurance, has recognized the need to invest in technology and innovation in order to ensure customer satisfaction and retainment. They have established the “Collab” program, offering InsurTech innovators the chance to win the opportunity to pilot their solutions with MetLife through a USD $100,000 contract. Lucep are the 2018 winners of Collab 3.0, providing an omni-channel engagement system that manipulates leads from digital channels, to direct calls via the best equipped agent for that query. Lucep further utilizes this capability to provide the service agents with analytics and data on each call, with the intention that this will “convert callers into customers”. MetLife’s recognition of Lucep’s goldmine demonstrates that innovation is vital if FS providers hope to tackle the rapidly evolving FS landscape successfully and ensure that customer expectations are not only met, but exceeded.

Platform Model: Building partnerships

The platform model is a digital marketplace that connects buyers and sellers. Whilst the platform model has always existed (think shopping center), the rise of new digital platforms, such as Amazon, Uber and Deliveroo, has shown the power of this model. As competition in the FS market has increased, and companies have specialized in single verticals to be able to compete, the importance of the platform model has grown. Customers have also shown that they are open to using these new models, with 80% in a recent survey saying that they are open to using a platform that provides them with an ecosystem of services. The emergence of the platform model is reflected in 3 key banking trends:

1. Open API toolkits

Banks across the world from BBVA, Citi Bank to HSBC have publicly released developer hubs and toolkits. These open portals enable third party developers to interact with and access data about the bank’s customers. Rather than competing with innovators in the market, the banks are building a platform where specialist can build tailored products for their customers. Whilst many of the major insurers who dominate the market have begun to launch developer portals, there remains a significant opportunity to drive innovation via improved access to client data.

2. Partnerships

Companies are also partnering to provide the most compelling and relevant proposition possible to clients. For example, Monzo have partnered with a range of savings providers to offer their clients access to an extensive selection of products at competitive rates. Monzo customers can access different fixed term and easy access accounts from banks such as Oaknorth, Shawbrook and Charter Savings.

3. Peer-to-peer

These platforms connecting different groups have emerged over the last 10 years, with Lending Club launching in 2006 and IPOing in 2014. The peer-to-peer market is relatively mature within the lending space, with the market now valued at $15bn, however there is significant opportunity also in insurance that is only starting to be properly explored.

Case study

Lending Club – Peer-to-peer lending

Lending Club is platform that connects personal investors to individuals or SMEs who are looking to borrow, with Lending Club not providing any financing directly. Borrowers apply for a loan through a simple digital process, which is much faster than traditional loan applications. The customer has control of the loan terms they then publish on the Lending Club platform. The loan is then featured on Lending Club’s online platform and investors browse through and select loans they would like to finance. Lending Club’s specialism is its simple onboarding process, attracting borrowers, and its verification of potential borrowers, which attracts investors. Since launching in 2006, Lending Club has issued $50bn.

Getting Started

In each of these key areas, we recommend FS providers take an agile approach to their transformation. Successfully tackling all six of these initiative areas at once is an impossible feat. In our experience, incumbents have much more success when they focus their efforts on a single area of improvement and build the technology, process, and team to make it work.

By focusing efforts on a single initiative, FS providers can apply an agile CX methodology that accelerates time-to-learning, time-to-market and time-to-impact for their customers. There are four steps:

BUILD | LAUNCH | MEASURE | ITERATE

This agile approach ensures that at each step, customers have an experience, product or service that they can derive value from. This is opposed to a traditional waterfall approach that leaves clients in the dust until the final ‘ideal state’ is achieved. We’ve found that FS providers that apply agile CX are more likely to move the needle on key business metrics and can do so faster without getting stuck trying to deliver the perfect final outcome.

To learn more about how to go from planning to executing your CX initiative, read our complementary whitepaper, Accelerating your customer experience program: 4 steps to success. You can find it here.

Next Steps

Usermind and Elixirr have teamed up to combine best-in-class technology with industry-leading consulting services to help FS providers accelerate the business and client impact of their CX transformation.

Elixirr provides an innovative, customer-centric design → rapid prototyping → testing → iteration approach that quickly informs FS providers which customer journeys to start with, while accelerating their learning and validation cycles. Usermind offers a robust technology platform for operationalizing client journeys within an organizations’ existing technology, channel and organizational landscapes.

Together, we offer the most comprehensive solution for CX transformation in financial services today. CX transformation is challenging for large, complex organizations – especially in FS – but we’ve seen our clients experience tremendous value from this approach.

We would love to answer any questions you have regarding specific CX challenges. Get in touch today.