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Co-Designing: How To Build Ultimate Digital Banking Experiences

Banks used to win customers over by offering competitive interest rates, great services, and accessibility by having many locations. Now, interest rates are even across the board, services are only click away, and your bank is in your pocket. The world has changed and how FinTech companies win customers’ hearts has as well. Banks and FinTech companies are being forced to compete by optimizing their customer experience.

According to a report by IBM, the majority of consumers (76%) expect organizations to understand their unique and individual needs.

That same report also reported that 68% of organizations expect to harmonize consumer experiences. That may raise the question, what do consumers really want from their banking institutions? A study by Oracle found that 81% of consumers are already using digital channels to engage with their banks. That same study found that 69% of consumers would like their entire financial life cycle on digital channels. Sure, it is clear that FinTech is the future, but what else is the consumer looking for? How can a company meet customer’s experience expectations, and at the same time innovatively create new products and services?

Financial companies are finding that the best place to find out what the consumer wants, is from the consumer directly.

Co-Design is a method that uses the internal teams with customer’ experiences and allows teams to create exactly what the consumer wants, while at the same time knowing why they want that. This way instead of executives getting a 500 page book on statistics and no game plan, companies are able to build with the customer for the customer.

Even the oldest banks are subject to losing to new FinTech companies. Neobanks and challenger banks are expected to cost the top ten big banks $159 billion. Neobanks and challenger banks are either completely online or mostly online; allowing for more agility when it comes to research. Revolut is a good example of a challenger bank that is scaling thanks to their agility. Revolut is a digital bank that gives customers all of the features that they want including a smooth UI. When customers start saying that they wanted an easy way to exchange cryptocurrencies, Revolut creates a simplistic crypto exchange.

Revolut has also created a partnership in order to allow customers to use some of their favorite financial tools such as ETFmatic (wealth management), PensionBee (pensions), LendingWorks (insurance), and many more. Revolut currently has over 4 million customers. Traditional banks are realizing that they need to start focusing on the customer experience as well. Bank of America recently launched its chatbot called Erica which is powered by AI. Within the first three months, Bank of America saw more than 1 million users. Erica is a virtual personal banker on the go that understands voice and text commands. Erica is able to everything from transfer/deposit funds to giving financial advice. The FinTech companies of the future will be the ones that focused on customer experience today.

Evolution of FinTech and Customer Experience.

FinTech has been around longer than the internet which was founded in 1983 and released to the public in the early 1990s. The first form of financial technology came about in 1918 when the US Federal Reserve Banks created the Fedwire Funds Service. This service is still used today and allows banks to transfer money between each other using the banks’ routing number, an account number, name, and dollar amount.

It wasn’t until 1967 that Barclays bank opened the first ATM machine in London an additional four years for the NASDAQ to invent electronic trading and the IPO. Online banking did not begin until 1995 when Wells Fargo opened the first online banking platform. The late nineties also saw the birth of Confinity, an online banking solution known today as PayPal. Banks original purpose was to keep customers’ money safe, in order to compete, they offered incentives such as higher interest rates. As travel became more accessible, larger banks that could afford to have locations across the country or world won customers.

Today more than 5 billion people have a cellphone that they actively use. That means 67 percent of the population has a phone in their pocket. Banks no longer need many physical locations; they need a mobile app. So if having physical locations doesn’t matter and fees are the same across the board, what does matter to the customer? A mobile app does not cost as much as opening physical locations. This means that new FinTech companies have less overhead and more agility. It also means that the competition is more. In order to stand out, original banks, and new FinTech companies are competing by offering the best customer experience. So, what defines good customer experience in today’s FinTech market?

A survey by Bain & Co. found that 73% of consumers ages 18 to 34 would try banking with a technology firm. That means traditional banks not only have to worry about FinTech startups, but big tech companies as well. According to Merchant Machine, the transaction value of mobile payments will reach $14 trillion by the year 2020. Apple and Google have already entered the mobile wallet and digital pay market, directly competing with everybody on the market. Apple pay which was launched in October of 2014 and has an estimated 252 million users, compared to PayPal which launched in 1998 and has 267 million active users. Apple and Google are a step ahead as they already have billions of people using their devices. A study by Microsoft found that there are five things customers are looking for in their financial companies.

They are:

  1. Easy and simple banking — We live in an era where we can order anything from Amazon with the click of a button from anywhere. Customers are interacting on average with their bank 17 times per month and mostly online with their mobile device. Customer expects these interactions to be simple and straightforward.
  2. Customers want options — Microsoft found that 65% of customers interact with their bank through multiple channels. Customers are more concerned about being able to interact with their bank via mobile and web, than they are about physical locations. Banks are learning that it is more important to have a seamless experience across digital channels than it is to have physical locations. Customers are also looking for options within their FinTech solutions such as other apps that they enjoy. Customers love marketplaces and the ability to choose. FinTech applications are learning that it is important to partner with other applications in order to provide options.
  3. Customers want value — Customer loyalty programs are rising within banks. Microsoft found that one-third of banking customers participated in a loyalty program only to gain access to the “best deal.” This means that customers are not looking to be loyal but are looking for a bank to be loyal to. Instead, customers are looking for deals, points, discounts, and special offerings. FinTech companies need to provide customers with convenience and value.
  4. Customers want to be understood — Customers are tired of being bombarded with ads and one-size-fits-all deals. Shoppers are greeted by name and a page filled with their interests when they log onto Amazon. This level of personalization is being expected across all industries and the FinTech industry is no exception. Customers want to be understood and they want personalization. Many banks and FinTech companies are looking directly to the customer in order to create the customer experience that they want.

Nowadays, when many businesses are focused on improving the customer experience it is critical to act proactively, understanding the fundamentals of customers behavior. Furthermore, it is even more important to stay efficient when satisfying the customers’ needs. During the past decade, we witnessed many times how giant companies spent millions trying to modernize their technology platforms and business processes; many of them lost the competition to small companies that were far more efficient.

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Paul Shumsky

Paul Shumsky

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This post is from a series of posts in the group:

Digital Banking Trends

Digital Banking trends and Industry Intelligence for Bankers, Fintechs, and Solutions Providers


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