According to a survey conducted by the North Carolina State Poole College of Management and Protiviti, competing against digital disruptors is the top risk factor for 2019 (shooting up from the 10th position last year), reiterating the need for traditional lenders to prioritise customer-centricity in this age of rising expectations.

Finextra spoke to Bill Waid, General Manager, FICO Decision Management, about the company’s recent report, ‘For financial institutions, customer centricity is now or never,’ and how the cloud can help banks communicate with their consumers in a holistic manner.

Personalisation is key

Accenture research found that around 50% of consumers want their financial services providers to offer personalised financial advice in addition to integrated packages of products around their core needs. But it’s challenging for financial institutions (FIs) to meet these demands, as most are complex organisations, both geographically and technically.

“Important decision assets that are logically connected may not be physically or technologically connected, and many of them rely on streaming data to ensure integrity in real time.” Waid says that cloud solution providers can integrate geographically-dispersed data assets into a scalable environment.

Waid adds: “Personalisation can—by helping each customer feel as though they are the bank’s only customer—dramatically improve customer acquisition, satisfaction and retention; this, in turn, optimises cross-selling, revenue, and profitability across the bank’s entire portfolio.”

The profitability of predictions

Personalised and predictive selling can offer the customer exactly the right product at precisely the right moment, which can be a formidable advantage. Studies by Harvard Business Review, Bain & Company and Strategic Insight found that increasing customer retention rates by just 5% can increase profits by at least 25%.

“Consider too, that the probability of converting an existing customer - that is, upselling them to premium products, or cross-selling them to new ones - is 60-70%; conversely, companies are only likely to convert a new prospect 5-20% of the time,” Waid says.

This helps FIs in their planning and execution in seven key ways:

1. Alleviating uncertainty, by giving line-of-sight and predictability—both to decisions and their outcomes
2. Creating a closed-loop mechanism for continual evaluation and improvement
3. Empowering the entire enterprise with connected customer awareness
4. Maintaining a centralised view of the entire customer journey
5. Providing a single, data-connected view of analytics, business moments, audit and compliance
6. Informing every customer interaction
7. Driving more value at every touchpoint

Data-driven ROI

As with all industries, financial services processes have evolved over time. Decades ago, FIs invested in point software applications that were designed to meet the specific needs of a single functional line of business. As each department automated its own operations, customers accepted different, inconsistent experiences that were not interconnected.

Waid explains that FIs are now “being forced to up their game and provide best-in-class customer experiences across all products, and all channels, for the duration of the customer lifecycle. This, of course, forces traditional banks to reinvent themselves, rethink their approach to their customers, unpack years of valuable data stored away in siloes, and rebuild it in a 360-degree arc around each customer.”

“‘Customer centricity’ is the term used by the industry analysts and consulting firms urging their banking clients to take action to avoid being disrupted.” However, Waid goes on to say that banks are at an advantage, because they already have years of customer information that—if leveraged efficiently—would make them “more resilient to overtures from would-be disruptors.” The result would be increased customer satisfaction and retention, plus greater profitability per account.

Removing blind spots

Migrating to cloud-based customer-centric operations allows FIs to understand customers at an “enterprise-360° level” and enrich their understanding of consumers with additional sourced and streaming data, thereby removing blind spots in the decisioning process and resulting in actionable insights.

At the same time, companies become significantly more agile, capable of iteratively simulating, fine-tuning, and perfecting strategies prior to launching them. Better data-driven preparation leads to more predictable, optimal results, while maximising the success rate and ROI of their decision strategies. Over time, even small incremental improvements with each cycle will have a compounding effect on overall effectiveness.

“The cloud ensures that information, whatever its nature and wherever it resides, stays on the decisioning radar and is updated in real time. At a customer or segment level, the effects of strategies can be captured and displayed instantaneously and compared to simulations conducted prior.

“At a macro-level, market trends, economic fluctuations, and changing industry events - all things that can render yesterday’s decisioning strategy moot - can immediately be infused into a revised strategy to guide course corrections necessary to respond to changing market conditions.”

According to Waid, the combination of cloud solutions and decisioning tools provide “unprecedented situational awareness to conditions in the market, as well as extraordinary capabilities for anticipating market shifts, pre-empting adverse developments, and seizing emerging opportunities before the competition.”

However, firms should not view cloud-based, advanced decisioning tools as mere “nice-to-haves” in some future, TBD date. Organisational transformation toward customer-centrism is critical to survival in an increasingly competitive, digitally-transformed industry.

Waid concludes by warning that “the greatest risk is doing nothing. Waiting for disruption to hit so you can wait-and-see how to respond isn’t an advisable strategy; neither is hoping that it just passes you by. Companies who will come out winners are those who ‘self-disrupted’ by seizing the opportunity of transformation, rather than succumb to the threat of someone else doing so.”