The Finserv Sector Must Redefine Customer Experience in a Post-COVID World

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By Nerdery

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Like many industries, COVID-19 immediately changed how the finserv sector could interact with customers. Digital channels became the only way firms could engage consumers. What’s more, the digitization of banking caused large branch footprints to become redundant as foot traffic declined to a trickle — and pushed finserv organizations to operate in the digital channel. 

COVID-19 was simply a catalyst: accelerating a trend that was already in motion. But the black swan event also caught organizations off guard, forcing firms to scramble to build digital competencies overnight. 

Incumbents in the financial services industry were slow to embrace digital evolution to fend off fintech disruptors. The pandemic has accelerated this trend as the shutdowns closed branches, making it difficult for companies to connect with loyal customers. Suddenly, every finserv is playing under new game rules. 

Finserv businesses react to coronavirus with new CX strategies

Warren Buffet referred to the recession of 2008 as an “Economic Pearl Harbor,” but this crisis is different. The last recession was systemic and began within the financial industry itself. On the other hand, the coronavirus recession has caused involuntary atrophy in the labor force due to forced economic closures.

With an uncertain employment outlook affecting many sectors (airlines, lodging and entertainment) and jobs, it’s logical that finserv businesses must pivot to meet the financial product needs of millions of people who have been affected by COVID-19. As a result, finservs must re-examine their customer experience (CX) blueprints and digital capability roadmaps to assess how to react to an uncertain future.   

The impact of the pandemic on how businesses engage with customers throughout the acquisition funnel is unquestionable. More than ever, they must rely on the digital channel to execute those customer interactions. Organizations that accumulated substantial digital debt and delayed investing in the digital channel will find themselves at a disadvantage. The race to build new digital competencies has begun, but prioritizing capital dependencies on technology and building digital experiences is more important than ever before due to shrinking balance sheets.

To chart a strategic response, one must understand the morphosis in the industry’s landscape and the customer’s evolving mindset.  

The “tectonic plates” have changed the landscape 

The equilibrium of supply and demand for financial products has shifted dramatically. On the one hand, the risk profiles of many consumers have risen, on the other hand, lending standards have become more restrictive as finservs choose a risk-averse path to minimize losses. The dance between finservs and consumers will happen in the digital space; and, that’s why the CX journey should be tightly choreographed to balance risk.

The emergence of new market segments – Market segmentation will be more important than ever before. Finservs will need to use hyper-targeting tactics to customize messaging and employ different CX strategies for engaging multiple audience segments.

Building digital trust In an industry where handshakes and eye contact were prevalent, building trust in the acquisition stage will become more difficult, but vital within the digital channel. While it’s true the branch’s role has diminished, a substantial demographic remains loyal to the old ways of conducting business. Obtaining their trust will require a different approach to win their business.

Consumer demand for speed and transparency The financial condition of the customer is changing daily within a volatile economic climate. Customers are traveling much faster through their buying journey — from discovery to consideration to purchase. Customers demand fast answers to loan and credit card applications — and they want the best terms. If they don’t get it, they’ll move on. 

Work from home, shop from home With fewer branches to visit, consumers are searching for financial products online. Just as one searches for product reviews on Amazon, customers conduct their due diligence before making a purchase. From YouTube reviews to app reviews, consumers are doing their homework for comparative shopping. 

Google is the storefront of America – It’s the customer’s first destination when embarking on their shopping journey. Aggregators such as NerdWallet and LendingTree have increased their dominance within the customer acquisition space. Customers are no longer assessing the virtues of the financial product by itself; they’re also looking for signals of how well a finserv’s digital tools are built to serve their needs. For instance, the absence of certain features and lackluster technology are enough to turn away customers for good.

Shifting loyalties among consumers If consumers cannot attain the financial products they need from legacy institutions — with highly selective qualification criteria — they’ll quickly look elsewhere. Fintechs leveraging innovative business models are offering alternative financial products coupled with superior digital experiences that lure customers and create stickiness. While these options will be more expensive due to higher risk profiles, desperate times lead to desperate measures, and customers will turn to fintechs that’ll serve their needs. This is how brand fidelity is born and nurtured, especially if economic pressures continue in the long run.   

The strategy trend leveraging M&A, JVs and BaaS – Many incumbent finservs have been acquiring fintechs to amass customers and gain digital CX competencies rather than build them from scratch. Some incumbents and disruptors are choosing the joint venture (JV) route rather than compete with one another. 

And with customers flocking to fintechs, the concept of banking-as-a-service (BAAS) is gaining momentum. An impediment for fintechs is the sector’s inability to scale-up quickly to meet demand. Leveraging the infrastructure of large legacy finservs is the path of least resistance. The incumbents have become the “plumbing,” and the fintechs, a customer-facing “paper mache.” Maintaining market relevance and meeting customer needs has driven more organizations to partner with one another to offer turnkey solutions to counter competitive threats.

Future proof your CX with modern digital strategies  

Now that finservs have survived the initial shock, it’s time to revive and thrive in a post-COVID-19 era. It’s clear that investing in the digital channel is no longer optional to maintain business continuity and growth in the long run.

Diversify or die Managing multiple relationships and accounts with several financial institutions has been an ongoing pain point for some customers. Indeed, consumers want a single company that can provide a broad range of financial products throughout their life journeys. Think student loans, personal loans, credit cards, mortgages and investments. 

For instance, SoFi has expanded into brokerage; and Robinhood went from solely offering brokerage accounts to becoming a chartered bank. Many fintechs are expanding their offerings to bridge the gaps in a customer’s financial needs. Finservs that don’t offer diversified product portfolios won’t remain competitive. Moreover, companies that quickly change business strategies (new business models and product positioning) to better compete in today’s market, while simultaneously improving the customer’s experience, will have an edge over those firms that remain dormant. 

Conversely, if market expansion is beyond the reach of some companies, finservs should consider creating an ecosystem that introduces third-party services to attract customers. 

White glove service through personalization at scale – Every customer’s financial situation will require personalized attention to cater to their individual needs. Yet, offering a high level of personalization is expensive. This is where the need to achieve data maturity and leveraging cutting-edge tech— such as AI—will help companies offer more tailored services. But one must learn to walk before running; and harnessing insights gained from online behavior is the starting point to decipher a customer’s emotional triggers to making decisions. While finservs have turned to single technology platforms as a quick solution to address this issue, there is no substitute for the human-centered approach to formulate solutions that address and validate a customer’s perception of great CX. 

Building the customer’s aspirational financial state – Human behavior changes during uncertain times. This is an opportunity for finservs to help customers chart their financial future—when investing, applying for a loan or paying down a loan. Providing customers the planning tools that’ll help them attain their financial goals creates and fosters affinity for your brand. From adherence to payment plans, savings targets, or growing their investments, customers are attracted to the tools that help them navigate complex financial products. 

Shift to being predictive, rather than reactive – Finservs cannot afford to remain inert and wait for customers to reach out at a time of need. Predict your customer’s future needs at pivotal life events. Knowing the customer at an intimate level and making those connections when a need arises is what builds relationship continuity, trust and fidelity. 

The employee experience is as vital as CX – While prioritizing CX is an imperative, finservs shouldn’t neglect the employee experience (EX). In-person and high-touch interactions between customers and employees are now conducted in the digital space. Empowering your employees to conduct their work and help service your customers is equally as important. Mission-critical operations, communications and remedying customer issues in the digital channel still needs to be executed seamlessly and flawlessly. If you fail here it will threaten your core business.  

Repurpose branches – While there’s no denying the  importance of the branch is diminishing, finservs will continue to need physical presence. The key is striking the right balance within the omnichannel experience. Capital One, for example, has turned its branches into cafes that customers can use as venues for financial education. The future of the branch in a post-COVID-19 world is being redefined by customers with changing wants and needs.

This isn’t a moment to retrench; it’s a time to innovate

A fintech CEO was famously asked what he thought of legacy banks. His response: “My child likes to play with dinosaurs, so do I!” The cause and effect of this crisis should be seen as an opportunity for many financial institutions to shift their attention and resources to improving their digital capabilities. Consumer perception of legacy finservs as relics of the past can be changed by adopting the digital habits of digital natives.

Once consumers have been conditioned to think digitally, there will be little reason to conduct business the way it was done prior to the coronavirus. Over time, customer expectations change and finservs should be quick to recognize changes in buyer behaviors. This increase in consumer power means finservs have no choice but to continue to innovate, surprise, delight and disrupt the status quo.

Rapid experimentation will be necessary to validate hypotheses on customer expectations. If you view data as the new “oil,” then finservs must learn how to mine it to power their CX engines. AI, Blockchain, no-code, low-code platforms and chatbots are all technologies that can be orchestrated in the back stage. But it’s the customer interactions that matter the most. 

The majority of finserv organizations shouldn’t be looking for customers; they should be looking for brand fanatics. Robinhood, SoFi, Affirm and Simple Bank are some firms that attract a tremendous amount of passion from fans. These brands’ CX-first approach to business creates gravity and customer stickiness by transforming complex, financial transactions into delightful experiences. 

For finservs, this fanaticism can only be born and fostered at the seamless point of interaction between the customer and the digital channel. To create their financial futures, all consumers are looking for speed, safety and security. Helping them navigate this journey should be the priority of every finserv. Let’s start the conversation — contact us today.

*This blog post was authored by members of the experience strategy team