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Why Customer Experience is Not the Proposition for Digital Banks

Post one of four blogs on digital transformation…

For many years, banks have been advised to focus on customer experience and it has become very much a C level issue, with some banks going as far as appointing a Chief Experience Officer. Wikipedia defines Customer Experience as:

“Customer experience (CX) is the product of an interaction between an organization and a customer over the duration of their relationship. This interaction includes a customer's attraction, awareness, discovery, cultivation, advocacy and purchase and use of a service.”

However, for many of us not from a marketing background, we couldn’t see the fuss. Surely every bank makes their website as attractive as possible, or their online banking as easy to use as possible? Can banks really compete solely on this kind of “experience”?

Of course, as a technologist, I am not meant to understand; this is the domain of the creative marketing teams. However, even speaking to bank marketing managers I found many lacked clarity about their customer experience strategy, sometimes not even understanding that a strategy was required.

Yet if you swap the word “experience” for “proposition” and start talking about “customer value propositions” things start to make much more sense. Indeed banks that shifted their focus like this even publish their customer value propositions online. For example,OCBC in Singapore make clear it is the solid credit rating, best in class products and expertise that provide a compelling proposition of leadership for their customers.

Charryse Scapignato of Macquarie in Australia, provides a useful six point checklist of how to create a strong value proposition.

  1. Does it resonate with your target market?
  2. Is it clear, simple and succinct?
  3. Does it really set you apart?
  4. Does it sound good when you say it out loud?
  5. Could it trigger a conversation?
  6. Is it true?

For digital banks, creating a highly targeted offering for finer segments will allow them to successfully differentiate and provide value to customers. After all, many banks will claim to have fantastic customer service, market leading products or easy access through any channel.For example, in the UK looking at the student segment identifies over 2.3 million students in higher education, of which 1.5 million are first time degree students. Or if you take micro-business, and consider those with less than 9 employees, there are over 5 million. The point is that “niche” segments can be large opportunities and high street banks are still treating these like generic banking customers.

For digital banks, without the legacy of requiring “physical presence” and traditional marketing like printed brochures, there is a huge opportunity to leverage their cost advantage with targeted offerings for these segments. However, whilst the vehicle might be banking, the destination has to be a clear differentiated proposition specific to that market.

For students, it might be “the most rewarding bank” – a bank that seeks to understand all your preferences, hobbies and habits, and turn those into rewards and freebie promotions. After all, how many students would turn down a discount to see their favourite band or get a cheap meal? For micro businesses, it might be “the bank that works for you” – a bank that helps them easily keep track of business expenses, helps them with tax returns or offers to find the best P2P funding.

Whilst customer experience is important, banks wondering how to beat challengers should look to define a clear customer proposition by leveraging the benefits of going digital. As Bill Gates poignantly said, “Banking is necessary. Banks are not”. A focus on customer experience for banks only improves an existing bank; a focus on customer proposition can help redefine banking services. The former is cosmetic; the latter is transformational!

On the same basis, a bank’s approach to big data and API’s can also enhance or limit transformational banking… More to follow in my next post.


Comments: (8)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 05 April, 2016, 19:22Be the first to give this comment the thumbs up 0 likes

As a self-proclaimed member of the "creative marketing teams" and a CX fanatic:

  1. Value proposition is a given. A bank wouldn't reach the stage of discussing CX unless it already has a sizable customer base for which a strong value proposition is a prerequisite. 
  2. Today's competition is on CX since many banks already have strong enough value propositions.

If you notice, most fintechs have a very narrowly defined value proposition - e.g. "you can open a checking account and get a debit card but we can't give you a credit card". Despite that, if they're claiming to kill banks and succeeding in raising huge VC funding on that premise, it's only because of their claim to offer superior CX compared to traditional banks. To counter them, traditional banks have to treat CX as more than cosmetic - and it is.

That said, CX without value proposition is worthless and if there's anybody on that boat, they'll capsize soon.

In a lighter vein, I noticed with interest that "Is it true?" is the last point in Macquarie's checklist - it's quite easy to miss, if one is so inclined. It reminds me of the so-called "2nd Law of Software Marketing" propounded in an AMR Research note targeted at "creative marketing teams": "Don't let the product come in the way of the story"!

A Finextra member
A Finextra member 05 April, 2016, 22:46Be the first to give this comment the thumbs up 0 likes

Thanks Ketharaman, a nice collection of contradictory statements so I am confused you either agree or you don't?

From my perspective the value proposition most traditional banks have to today is based around the physical world: People, Paper, Buildings etc...

Secondly they are based on margin based on the difference between deposits and lending, and topped up with some secondary products like cards or insurance (most banks average less than 2 products per customer

A Finextra member
A Finextra member 05 April, 2016, 22:50Be the first to give this comment the thumbs up 0 likes

Continued from above...

Digitalchanges physical world into disadvantages. And fintechs disrupt traditional business model. In this context no bank on experience alone competes. Even Iver changed the business model. If getting an Uber was more expensive but just easier would it have been as successful?


João Bohner
João Bohner - Independent Consultant - Carapicuiba 06 April, 2016, 00:15Be the first to give this comment the thumbs up 0 likes

@Dharmesh Mistry,

The purpose of this comment is not to criticize, but collaborate to improve the banking business.

Taking that in mind, I'll show some disagreements on your article on the CX subject.

The definition of CX on Wikipedia is OK.

And the CX could be Excellent or Poor.

And an Excellent CX works like a 'black-hole' which will absorb all customers around it (without marketing).

For the Customer's CX:
"The more direct control that a Customer has to understand and manage its financial position, more confidence it will have in the bank holding its assets."

I also don't agree in swapping the word “experience” for “customer value proposition”.

Take Henry Ford's saying:
" If I'd asked people what they wanted, they'd have said 'faster horses' ".

So, we as technologists, we must show the way to improve Customer's CX through technology, mainly with an excellent Business/Technical Architecture.

Let's keep in touch, for better Banking!

A Finextra member
A Finextra member 06 April, 2016, 04:34Be the first to give this comment the thumbs up 0 likes

Thanks @Joao appreciate the input it is a healthy debate I believe the industry needs... 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 06 April, 2016, 09:51Be the first to give this comment the thumbs up 0 likes


In the interest of clarity, here's what I think:

  1. Value proposition is necessary but not sufficient. When it comes to mature industries like finserv, value proposition is only tablestakes.
  2. CX is where the real action is. To take your figure, many banks average < 2 products / customer precisely because they've neglected CX across sales of multiple products (e.g. by forcing multiple KYC). So, improving CX is key to selling more products per customer, with most individual products already having strong enough value proposition.
  3. I'm sorry I don't know who or what is "Iver".
A Finextra member
A Finextra member 06 April, 2016, 09:57Be the first to give this comment the thumbs up 0 likes

Hi Ketharaman... apologies for typo, "Iver" should read "Uber" ;o)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 06 April, 2016, 17:01Be the first to give this comment the thumbs up 0 likes

@DharmeshMistry: TY. Now that you've mentioned the example of UBER, I think your point is, no matter how great the CX, a weak value proposition will flop. If so, I can't agree more. However, IMHO, the same can said of marketing, sales, implementation and many other business activities; and it wouldn't mean that CX is only cosmetic.

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