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The rise of the customer in Financial Services.
Financial Services. It conjures an image of a bank manager sitting in session, in my head almost judge-like, deciding the future of a lowly worker looking to start a chain of bakeries.
Admittedly, this says more about me than anyone else, but as a sector, it has a reputation of putting business needs over customer needs. A one-size-fits-all approach. Computer says no. And as many other cliches as you care to throw at the page.
Yet, today, we see some players in the sector being more forward-thinking than almost any other vertical. What’s driving that and how can the wider financial services sector elevate itself above a tired perception?
Personalisation - the bedrock of FSI?
Depending on your bent, your view and understanding of the word personalisation will differ from others. For some, it's the provision of a genuinely personal journey, built around a mutual understanding of needs. For others, it's changing a CTA because you logged into an app on Wednesday.
In the financial sector, it's so much more. When I finished my A-Levels, back in the dark ages of 2002, I took a year out to earn some money working front of house, in a retail bank. The computer system's view of the customer framed every interaction. It was cross-selling based on risk, appetite and every piece of information the bank held, to craft a conversation that drove a sale.
Fast-forward a few years to a period working in commercial banking in London. Every aspect of the connection between bank and customer was framed as a 'relationship'. And all of the nuances that come in any relationship were present. Bespoke lending. Personalised plans to encourage growth to benefit the customer and, well, the bank. The year was 2007. You know what happened next.
In recent years, the industry has seen a step-change in how it thinks about customer experience. Well, some of the industry. What has driven this? Disruption.
Disruption has occurred in pockets of the sector - retail banking, especially - but has struggled to gain a foothold in others. In retail, we've seen challenger banks growing from London-centric to holding real market share. We've seen open banking introduced, allowing aggregation of accounts and full visibility over financial positions in one app. We've seen contactless payment through phones and watches. Long gone is the old 'bank manager' image.
Except, that's not the whole story. For disruption to occur in a sector, there needs to be a problem to solve. We've seen Airbnb bring house sharing to the mass market. We've seen Amazon redefine online commerce. But it doesn't always work like that. Purple Bricks, for example, have 'disrupted' the estate agency market, but the industry has simply flexed around them rather than following in their footsteps.
In retail banking, highstreets have a new bank - Metro - and Atom, Monzo, Starling and a whole host of others have brought a new way of banking to the mass market. What's the new way? A service designed around customer needs.
Product Focus to Customer Focus
As customer experiences across other sectors quickly adapted to the changing marketplace, elements of financial services struggled to adapt. Banking was previously a relationship that lasted from birth to death and earnt you a collection of porcelain pigs that now guard lofts across the nation. But that relationship model - at least in retail banking - has pivoted to a service model.
Customers tolerate things in long term relationships. It's not quite the same when that implicit loyalty isn't there.
Switching accounts has become standard for a decent percentage of the market. In 2019, an average of 83k switches took place each month, with the total for the year topping one million.
There's limited loyalty in finance. Banks actively encourage this with switching bonuses into the hundreds. If a brand offers you money to move, and the service is acceptable, you'll likely take it. And it works. I've banked with Natwest, HSBC, Lloyds, First Direct and Nationwide, purely because they paid me to do so and I had zero loyalty.
There's a detail in there though. You're not moving for the free money. You're moving because the difference in experience is negligible, but the added financial value is tangible. If you have a high-quality experience, the financial incentive needs to increase to make you even consider moving.
But that's starting to change. First Direct were pioneers of actually offering what customers needed, rather than just a newly named product. Decent mobile banking. And actual customer service. I rang First Direct once to query my account, and they answered in just two rings - with a real human asking 'how can I help?'. I was so confused I thought I'd rung the wrong number. They had tapped into a simple truth - all customers want is for the pain to go away.
Fast-forward to 2020, and consumers' ability and desire to self-serve has never been greater. I've banked with Starling for a good year now and it 'just works' (to crib an Appleism). I have no idea where I pay cash in, but I don't use cash. Push notifications tell me when money is going in or out, and the app is perfect. It feels like my needs were pivotal in the experience's ideation - because they were.
And that experience begins at sign-up. Recent research has demonstrated the number of steps required to open an account with a UK retail bank. Unsurprisingly a number of the challenger banks sit at the lower end, with established multinationals requiring far higher levels of effort to join their bank. First Direct have lost their way.
With challenger banks allowing for account creation through apps, rather than the requirement to move to a PC, the experience starts from the first contact. It's a conscious move to make banking easy. To make it feel like something you wouldn't need to change. And it's working. HSBC - the multinational - is looking to double mobile users by 2022, reducing the cost to service and allowing account opening on mobile. Once disruption occurs, it's hard to maintain the status quo and thrive.
That's not to say everything has to chase the mobile audience. Handelsbanken is going in the opposite direction, with a focus on traditional banking that saw the sector flourish. Barclays' excellent Digital Eagles proposition is helping to bridge the gap between the future experience, and the current, and supporting that journey.
So where next?
Financial Services, as a broad and diverse collection of business types, has different challenges. There's a good reason insurance hasn't been disrupted in the same way as retail banking. Firstly, it's a sophisticated vehicle built on hyper-personalisation. Renew your insurance the day before it is due? Pay more than someone who renews 27 days earlier. Why? Because that implicitly says a lot about you as a person.
But it's more than that. Insurance is often a buy-and-forget service. On most days I'm not sure which company insures my car. Or my house. I know where to find out, but I hope not to have to think about it until 27 days before renewal. And that's the issue. Unlike banking, which underpins your daily life, insurance doesn't have constant touchpoints. Without it, it becomes a cost-based decision over experience. And the model becomes acquisition focussed to plug the inevitable cost-churn.
The opportunities come where there is a genuine need for constant contact, often in SME, Commercial and Corporate firms. Here, nothing is buy-and-forget, and the complexities of the relationship make transitioning between providers far harder than switching your personal bank account.
We will steadily see insurance, wealth management, commercial banking and the other facets of FSI moving to a more customer-centric approach. It’s no longer a question of if, but when. The ones who do it well will thrive. The ones who don’t, well...history shows us just what can happen.
No matter how complex your customer interactions are, or how regulated your product offering is, you can deliver an improved experience for your customers. We all can. And should.
And the disruptor mindset can tackle any level of complexity. It starts with spotting the pain points in any interactions your customers have with you. Map them out. Understand what they are thinking, feeling and doing as they interact with you. Understand their wants, and deliver on the need that drives them. Find the problem. And solve it.
That's what drives us at Sagittarius. It's finding the gems of insight that can engage your customers and the solutions that power an experience that delivers on every level. That can be the difference between meeting and exceeding your business objectives. That can provide real and lasting change.
Talk to us, and we'll begin that journey.