What does customer centricity mean to financial services?
"Customer-centricity" is a term that many organizations have adopted. While it is vague, it refers to many things that can profoundly impact how organizations interact with their customers. Unfortunately, most financial institutions do not have a strong
customer focus, primarily due to two interrelated factors - structural and cultural. Banks need to address both factors to transition from a "product-focused" approach to one focused on customers. Banks are approaching customer-centricity from a Sales perspective,
but "Customer Experience" is not just about Sales. It's about identifying needs and interacting with customers in the right and most convenient way. And that is where banks fail today.
The main question is how often customers have unrelated or non-purpose-driven financial needs. Who wakes up in the morning to decide to get a personal loan? Nobody really if it was not for buying a car or renovating the house. The consumer of today is purpose-driven.
He extracts purpose through daily life experiences. Being attracted to that new car will decide you to buy that car. How to finance the transaction is a secondary embedded aspect of that process. That is why Banking-as-a-Service is the new Holy Grail. "Sales"
is not the end of the journey. It is merely a tiny part of the process. When the financial product purpose is clear for the customer, the sales aspect becomes less important than the service delivery.
The banking industry needs to set its sights on being more than a selling organization. The future is more about product quality and speed of delivery than today's product push and hard sales. On-the-spot financing, for instance, requires strong risk engines.
That is why the bank's data engines should support a better on-the-spot understanding of a customer's profile instead of feeding expensive marketing and sales campaigns that produce weak next-to-buy proposals based on lookalikes.
Right now, a retail bank is more of a product company that sells products. In the future, it will be a company that delivers financial services through a rich user experience through third-party distributors. New distribution models that go beyond brick-and-mortar
storefronts will enable banks to provide better product quality and customer service than they could through traditional channels. Fintechs and aggregators champion on-demand servicing, and traditional banks will have to collaborate if they hope to remain
relevant in the coming years.
Basically, the needed structural change is a necessary shift away from product distribution. With such a drastic transformation, banks' culture also requires a serious revamp. Some bankers have difficulties letting go of the idea that the door to the financial
world should preferably be a bank. However, consumers are already moving away and have started getting part of their financial services from other players in the industry.
To achieve that mindset, financial institutions must make a meaningful cultural shift from products to services. They need to move away from owning the "end product" to the concept of offering relevant on-the-spot solutions. There are a few steps that banks
can take to prepare themselves for that inevitable new identity. The answer comes more from within than from the industry environment. Although some results have been delivered, the 'eliminating the clutter and removing the wax' projects should accelerate.
A successful fresh start needs lean purpose lead processing and reduced workload.
However, you can't become a successful purpose-driven organization without engaging staff. A cultural transformation from product push to quality and delivery can't happen without employee feedback and buy-in. Customer interaction will need to be reinvented
from the bottom up and embedded in unique customer experiences through merchants or communities. That task requires a different set of skills and focus. New talent will need to train and retrain the workforce for this new customer service model. Today's superficial
training programs and award programs will not help.
This transformation will need buy-in from all the bank's stakeholders to succeed, and it will take time and effort to achieve the new business model. But this is the only way to stay competitive and survive in the long run. In a changing world in which
purpose-driven customers are not shifting or loyal to financial institutions, the opportunity lies in product relevance and timely delivery while building scale will become a third-party business. The future financial institution will successfully make the
shift and regain its valuable place in the banking ecosystem.