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Re-imagining The Entire Customer Experience In Financial Services

In an increasingly commoditized and competitive marketplace, financial institutions are battling to stay top of mind and retain primacy. (See our whitepaper on that here.) As a result they are determining how they can best compete through a range of product, price and service.

According to the value disciplines model there is an inherent trade-off between these three areas of competition. Few organizations have managed to become market leaders by focusing on all three. The ones that have been successful have focused in one area while having a secondary focus on the other.


According to Deloitte, in terms of how this specifically relates to financial services, the three areas are:

1) Operational Excellence: Focuses on reducing costs and improving efficiency. This translates into a ‘price-led’ or ‘value-for-money’ strategy.

2) Product Leadership: Focuses on product innovation or speed to market. This can be offering differentiated products or being first to market with technological advancements. This translates into a ‘value based’ strategy, advocating a specific ideology or set of principles.

3) Customer Experience: Focuses on customer centricity and putting the customer first. It is a ‘service-led’ approach which aims to increase the value of existing customers through cross and up-sales.


Note: This post was inspired by our interview with Augie Ray, a customer experience professional at a F100 financial institution

For the purpose of this post we will focus on customer experience.


The Current State of Customer Experience in Financial Services
Across every consumer-facing vertical, including financial services, customer experience is high on the C-Suite’s agenda. PWC found that 90% of US CEOs are strengthening their customer and client engagement programsUnfortunately these customer experience programs have failed to live up to expectations to date though.

Forrester found that only 25% of CX professionals say their companies’ CX programs actually improve customer experience, and Avaya recently published a study indicating that 81% of organizations have seen their Customer Experience Management (CXM) initiatives fail in the last three years.

While a lot of customer experience programs haven’t lived up to expectations, there is a lot of opportunity with a strategy focused on customer experience. Ernst & Young found that the top three reasons account holders opened or closed financial accounts in the past 12 months were their experience, rates/fees, and the convenience of having everything in one place.


Source: Ernst & Young

Why Customer Advocacy and Trust Are the Key Priorities
As we discussed in our UX webinar, consumers are becoming more and more demanding. As a result, their overall experience is becoming much more of a priority for them. According to a study by the White House Office of Consumer Affairs, 80% of U.S. consumers would pay more for a product or service to ensure a superior customer experience.

We all know that putting the account holder first leads to higher satisfaction, greater retention, reduced churn rate, more cross-sell opportunities and more word-of-mouth recommendations. According to the Emmet and Mark Murphy in Leading on the Edge of Chaos, reducing your customer defection rate by 5% can increase your profitability by 25 to 125%.

On the flip-side, as it is become harder and harder to differentiate between different financial institutions, according to Infosys financial institutions need to “look beyond their traditional goals- like driving customer satisfaction, customer revenue, and customer retention. Instead, they must focus their energy on winning customer advocacy.”

Advocacy is incredibly important because according to Ernst and Young, “it not only drives referrals but it also dictates the amount of business customers are placing with their PFSP.” As Ernst and Young’s diagram below demonstrates, in order to achieve high levels of advocacy there has to be complete trust.

Money-Summit_-_Re-imagining_The_Entire_Customer_Experience_In_Financial_Services_-_3.pngSource: Ernst & Young

As you can see, the difference between minimal, moderate and complete trust is significant. While minimal trust only generates a 3% chance that account holders are very likely to recommend their financial institution, moderate trust causes a 20% likelihood and complete trust leads to a 68% likelihood.

Trust and Advocacy Leads to Increased Share of Wallet
Trust and advocacy becomes very important because they make account holders more engaged. According to Emilio Cristobal from Santander Bank U.S on our recent webinar, "engaged customers are 37% more profitable." More trust, advocacy and engagement also makes your institution more likely to become the primary financial institution. See the chart below from PWC, which shows how much more likely consumers are to buy other products from you — if you are their primary financial institution.



For more on becoming the battle to become the primary financial institution, check out our whitepaper here.

Why Most Financial Institutions Are Thinking About Customer Experience Wrong
As mentioned earlier, this post was inspired by our interview with Augie Ray, a leading customer experience professional from a F100 financial services firm. He believes, “The problem is that most companies view customer experience as a program and not a purpose — something to be assigned to a couple of employees while the rest of the company goes about its business improving efficiency, acquisition and margins. Most of today's CX initiatives focus on incremental change in existing processes, which limits those programs to solving the least important needs at the bottom of the pyramid (reactive)."

To read more on this, check out the full interview here.


What are your thoughts on this? Do you agree? Disagree? Feel free to comment below!