No one can blame banks for being confused as they struggle to meet bottom-line targets.
After all, their overall strategy is as fundamentally sound as it always has been — interact with customers in a way that drives revenue and profits. The problem is what that looks like has changed faster than banks have been able to adapt.
Traditionally, profitable customer interactions came from decreasing the cost of interactions with the bank, even if it harmed customer experience. But in a world where banking services are increasingly commoditized, banks must differentiate their customer experience to remain competitive.
In this environment, a customer-centric approach based on value provision — not a bank-first approach focused on cost savings — is required. A bank that lowers its costs at the expense of its most powerful differentiator may win the battle over cost, but will ultimately lose the war of market share, and by extension, profitability.
That customer-centric approach begins with understanding how customers want to interact, and then building the experiences you offer them on that foundation.
Customers Are Digital Only
The most important aspect to building a customer-centric approach is understanding the reality that today's customer wants to bank digitally. Although much ink has been spilled on the idea that the bank branch is not dead, there’s no denying that the data is trending in the opposite direction.
Right now, 46% of banking customers exclusively use digital channels. Even more telling, 7% of people that use a bank do so primarily via their cell phone.
In the millennial category, that number is even higher — a staggering 82% of 18 to 24 year-olds that own a cell phone use it for banking. Not only is this number incredibly high right now, but it gives you an idea of what the future will hold as millennials and the generations after them become an ever larger percentage of the overall population.
No matter which angle you approach it from, the data trends are clear. In all aspects of banking, from the execution of transactions to customer support, customers want to use digital channels.
Bottom line – banks that want to remain competitive need to invest in these technologies to keep up with the competition.
Customers Want Convenience
With all the above being said, we are still far removed from the days when simply having a digital channel was enough to win customers over. Today, everything is online, and so the ease with which customers can use the digital options your bank provides is critical.
Customer expectations for convenience stretch beyond mere transactions and include operations such as customer support for loans, financial planning and help with other highly complex products. Yet these are the types of operations where customers most likely believe their bank is falling short. In reality, this is where the customer’s needs are greatest, and a bank’s failure to meet them most likely to drive customers into the arms of a competitor.
Recent research from PricewaterhouseCoopers (PwC) suggests that customers are still waiting for banks to improve their digital presence with simple solutions to personalized problems, in real-time.
Banks that take this advice seriously are poised to win market share.
Potential Customers Turn to Online Communities for Financial Advice
If digital is the platform and convenience is the product, then referrals are the pay dirt for banks that take a customer-centric approach.
Referrals from satisfied clients have always been the most powerful way for banks to attract new customers. In the past, referrals came from personal interactions with people at home, in the neighborhood and in the office. Today, those interactions come in the form of online communities.
Research shows that 92% of customers trust brand referrals from a friend, and 88% of consumers have as much faith in online reviews as they do personal ones. This is good news for American banks, which already have the opportunity to reach more than one-and-a-half million people via Twitter and four million over Facebook.
Banks that remain relevant to the conversations going on within these communities about finances and financial products will win market share. Relevance is earned by being customer-centric and using social platforms to dialogue with consumers in a way that provides value while taking their specific needs and thoughts into account.
Customer-Centric at All Levels
Commoditization and increased competition require banks to take a customer-centric approach at both the macro and micro levels.
From platforms to convenience and all the way to word of mouth — interacting with customers in a way that drives profits is about what you can provide to them. Banks that accept this and work to drive higher value will win out. Those that continue to focus on bank-centric cost-cutting measures will become obsolete.