My search for the Customer-activated Bank

I am currently in the process of financing our new family home, and have been advised by my broker the only way to “beat the banks” is to make the switch.  Peg large bank vs. little bank;  traditional bank vs. financial institution — make them fight for my business.  Which made me question:  Why do we treat what could be a life-long partnership with an “us vs. them” mentality?

A recent survey of over 4,000 C-suite Executives across 70 countries indicates that banking and financial institutions do in fact want long-term strategic relationships with their customers.  They highlighted their immediate priorities are to:

  1. Open up to customer influence;
  2. Pioneer digital-physical innovation; and
  3. Craft engaging customer experiences.

So what happened?

I should start by highlighting:  80% of CEOs think they deliver a superior customer experience…only 8% of customers agree!

Perhaps therein lies the problem.

The rapid development and adoption of technology has significantly impacted the traditional business model for the banking sector.  Mobile devices are rapidly becoming the primary channel for customer banking, and financial institutions are increasingly leveraging the self-service opportunity to secure cost-effective operations.  But this creates new challenges in establishing and maintaining a relationship with each customer.  Mobile banking capabilities are still maturing, and most banks have yet to grasp the growth opportunity – we are rapidly moving from multi-channel to omni-channel thinking.  Like all customer-facing organizations, Banks will need to provide a seamless channel experience in order to compete in the new world.

A war for the customer is brewing… and the battle ground is customer experience.

 

Priority #1:  Open up to customer influence

CEOs indicated they want customers to have a much greater influence in how their bank operates, far beyond traditional influence over developing new products and services.  Instead, CEOs stand ready to relinquish absolute control of what is typically considered their domain – developing business strategy.

In 2004, CEOs ranked their own customers sixth on the list of all market factors they believed would drive the most change in their organisations.  Today, digitally enfranchised and empowered customers lead the agenda for every CxO profession.  More than half of Banking and Finance CxOs say customers now have a considerable influence on their enterprises.

Organizations that collaborate better with customers are 54% more likely to achieve greater financial success and outperform their peers.  In two-thirds of leading organisations, CxOs are not just managing customer experiences; they are reorienting their organisations, strategies and investments to cultivate contemporary relationships across all manner of customer interactions.

IBV Collaboration

Some of the most advanced enterprises are establishing customer advisory boards to get direct input on strategic issues.  This form of deep collaboration is a universal ambition — in fact 9 out of 10 CxOs foresee doing so in the near future.

Accepting customers as stakeholders in determining an enterprise’s future has huge cultural and organizational implications.  Banks can’t just be customer-centric.  They must be customer-activated.  That requires creating fully reciprocal relationships with customers.  It means being ready, and willing, to change course to pursue areas of mutual value.  And it requires finding ways to include customers in key decisions.

Banks will need to respond to client needs and wants in terms of value and propositions, not just products and services.  True collaboration and attractive value propositions will be based on customer insight and providing a single view of the customer, where such value propositions must be enhanced, extended, or reshaped with digital content and engagement.

 

Priority #2:  Pioneer digital-physical innovation

The emergence of social, mobile and digital networks have played a big part in changing the relationship between organisations and their customers.  It’s also forcing them to rethink how they work.

The intersection between the digital and physical is the leading edge of innovation.  CMOs, in particular, consider it critical to put the components of a strong digital strategy in place.  They want to overhaul every aspect of the customer interface.

CMOs indicated they want to see personalized and transparent risk-priced value propositions, constructed with deep customer insight based on a real-time single view of the customer, and delivered to any channel at the right time with seamless experience.

And they’re not alone.  Four-fifths of CIOs aim to digitize their front office to sync with customers more effectively.  Use of mobile devices, such as smartphones and tablets, play a key role in doing that.

Unfortunately, two-thirds of enterprises today recognize they have a weak digital-physical strategy, or none at all.  Some organisations are reconfiguring their offerings to capitalize on social networks and mobile connectivity.  Others are reshaping their operating models to inject customer input into every aspect of the buying and selling chain.  But they’re rarely doing both at once.

Getting the balance between the digital and physical will be important to getting the right business model.

Establishing the optimal blend is critical – and will change over time.  Branches are evolving to maximize the effectiveness of ‘high touch’, ‘Branch of the Future’ designs are becoming more targeted, and ATMs are being re-imagined – interacting with customer-owned devices.

Outperformers are again ahead of the game.  They are pioneering innovation at the intersection of the digital and physical to transform their organisations.  Organizations with a fully integrated digital-physical strategy are 26% more likely to achieve greater financial success and outperform their peers.

IBV Digital Physical

 

Priority #3:  Craft engaging customer experiences

Recognizing that digitization has transformed customers’ expectations, CxOs are re-balancing their priorities.  They plan to spend less of their personal time on IT systems and operations and other such issues, and more time improving the customer experience.

That said, CxOs who have launched multiple initiatives to improve the customer experience are lagging in one area: the social component.  CxOs understand that creating consistent customer experience is a top priority – 81% see this as a major focus area.

Banks need to architect the new customer experience by:

  • Understanding the customer as an individual, in context of his/her network;
  • Building a system of engagement delivering exceptional value at every touch;
  • Interconnecting all of the above; and
  • Fully activating the bank to deliver exceptional customer experiences while continually innovating.

Without a social strategy, CxOs are missing much of the equation, and there’s a huge payoff for making the effort.  The better an enterprise understands its customers, the more likely it is to thrive – 62% more likely in fact!

IBM Customer Understanding

The most progressive banking and financial institutions analyze social data to understand customers’ core values and what’s happening in their lives.  Such attributes, when well understood, become the basis for customer experiences tailored to the individual.

 

What does all this mean in my search for the Customer-activated Bank?  It means I may be a little premature.  Banking and finance C-suite Executives have the right vision – it’s just taking a little longer than we’d hoped to help get them there. 🙂

 

 

 

See full report:  “The Customer-activated Enterprise:  Insights from the Global C-suite Study“.