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Five customer experience predictions for financial services in 2023

2022 has been a seismic twelve months in customer experience for financial services, as a cocktail of higher interest rates and galloping inflation upended the economic realities of the past several years. 

Banks experienced a significant drop in mortgage, loan and M&A activity, with insurers facing higher costs, and wealth and investment managers having to cope with significant asset outflows. This has led to some belt-tightening, and financial institutions have had to make difficult decisions regarding discretionary spend around customer experience (CX). 

As the economic outlook continues to darken as we head into 2023, the customer-centric disruption of financial services looks set to continue.

It is not all bad news, however. Indeed, as leaders discovered during the depths of the COVID-19 pandemic, it is precisely during times of crisis that customers need their financial services providers to be there for them the most. And, for those institutions that rise to the challenge, customers stand ready to reward them with greater share of wallet over the long term.

But, to thrive in the current environment, it is necessary for firms to re-examine the business case for customer-centric transformation. This will have an impact on the types of CX initiatives that firms choose to prioritize.

 

The following predictions outline five ways we are likely to see this play out over the next 12 months.


1. Focus will tighten on business value

For many firms, customer perception metrics derived from surveys have traditionally been the primary KPI associated with customer-focused investments. While such metrics will remain a valuable ‘north star’, the ongoing economic downturn means institutions will increasingly look to financial return as the leading indicator of program success.

Market volatility means banks will require a high level of confidence that initiatives identified from customer insights will fuel net interest margin and fee income, before signing off on investment. Insurers will want to know how improvement opportunities will drive gross written premiums. Wealth and investment managers will be keen to understand how client experience can grow assets under management.

And, across the board, financial institutions will look to ensure their customer-focused investments are targeted to unlock greater operating efficiency, including better management of regulatory burden-related operational risks that push cost into operations — for example, by automating the treatment of customer complaints.

This change will require a mindset shift among CX professionals, as they seek to ‘speak the language’ of the business, and communicate how CX will directly impact their internal stakeholders’ P&Ls.


2. Firms will prioritize contact center efficiency 

In support of achieving faster time to value, we will see the acceleration of a trend already underway, where CX is viewed as less an analytics discipline and more an operational system for the frontline — most specifically, the contact center.

The rationale for this is clear — there is a direct correlation between the effectiveness of an organization’s customer service program and key monetary outcomes like first call resolution and call handling time. So, in an environment where it is critical to show a return, contact centers represent the tip of the spear. As a result, leaders are increasingly looking to evidence return on investment in their contact centers first, and use that success as a platform to build credibility with management teams for future expansion.

One might think of this as ‘earning the right to do CX’. In a recent meeting with a mid-size US insurer, the Experience Management team talked about the need to balance their personal desire to improve agent experience on one hand, with satisfying their stakeholders’ actuarial mindset on the other. Consequently, their CX program will start in the contact center, enabling them to build the trust needed to grow their program from there.


3. Journey optimization will accelerate

Optimizing contact center operations is a critical part of the solution, but there is also the matter of mending the broken processes that cause customers to call the contact center in the first place. One multinational bank headquartered in the UK estimates that only 25% of customer feedback that surfaces in the contact center actually relates to customer interactions with agents. The remaining 75% relates to breakdowns in other touchpoints upstream, where customers, finding themselves unable to complete a task, picked up the phone instead.

But taking the friction out of customer-facing processes is about more than reducing traffic to contact centers — broken customer journeys are also often a leading cause of churn. 

No surprise, therefore, that in the current macroeconomic environment, financial institutions are focusing on journeys to help achieve the stacked wins of lower operating expenditure and reduced customer attrition. First-movers have already started to adopt more sophisticated approaches to journey measurement — traditionally an overlooked part of many institutions’ measurement frameworks.

The next step is journey orchestration.

Customers today are looking for ever more personalization in their interactions. Targeted marketing offers are not enough — instead, customers want personally tailored journeys and insights that guide and suggest. Accordingly, looking into 2023, we anticipate institutions will invest further in solutions to help deliver microsegmentation at scale, orchestrating data and content across channels to generate business value by giving every customer the one-to-one experiences they want.


4. Digital investment will focus on humanizing experiences

Another major priority in 2023 is likely to be optimizing experiences in digital channels. This relates to the above predictions around customer journeys and operational efficiency — when digital journeys are broken, this pushes significant cost into operations. Firms will increasingly look to empower customers with self-service tools, so they can complete tasks for the first time in lower-cost touchpoints online (web, mobile-web, in-app), thus diverting traffic from contact centers.

As part of this, leaders are starting to look beyond redesigning UX/UI, and are asking, “What should a digital-first process look like, to contain customers in-channel?” After all, a significant opportunity cost comes from failing to do so — a quarter of US banks experience abandonment rates higher than 50% in digital deposit journeys (for larger enterprises, that figure balloons to 75%). 

Moreover, firms will look to humanize their digital experiences. Qualtrics research shows that consumers favor different modes of engagement for different tasks, with 62% of banking customers preferring human interaction when opening an account. Leaders like GM Financial are starting to bridge the "phygital" gap by deploying theme discovery and emotion recognition in digital channels, to equip chatbots to handle themes that matter most to customers. We anticipate techniques like this will be a central feature of financial institutions CX programs over the next 12 months.


5. Leaders will increasingly bring the customer’s voice into product development

Finally, 2023 will see leaders bringing the same design-thinking approach that they apply in digital innovation to product development cycles, too.

Financial services is an increasingly competitive market, where legacy players compete for wallet share in a field crowded with agile new entrants. As asset-light players continue to win market share with more modular offerings, the traditional product/service landscape has been atomized. Where consumers used to enjoy a smaller number of relationships with monolithic financial services providers, customers are increasingly comfortable selecting best-of-breed players for segments of previously bundled financial journeys.

The path to competitive advantage, therefore, is to out-innovate the innovators.

First-movers are starting to bring the voice of the customer into development cycles, fostering a ‘perpetual Beta’ culture, where an iterative approach to product development, geared around customer wants and needs, can help accelerate learning cycles and shorten time to market. As leaders continue to augment their market research practices with next-generation capabilities like video and natural language understanding, to better understand customer sentiment and emotion, this is something we expect to see much more of in 2023.


Looking to the future

Instability and market volatility look certain to characterize the financial services landscape for the foreseeable future. But, as firms continue to identify the impact their customer-focused investments are having on key financial metrics, one thing seems clear — Experience Management will continue to power differentiation and growth in financial services through 2023 and beyond.

 

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