The business case for customer-led transformation in financial services
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Hervé Mazenod, Gobeyond Partners' Managing Director of Financial Services, recently attended the MoneyLIVE Summit as part of the Webhelp group, hosting a Think Tank which considered the business case for customer-led transformation in financial services. Hervé shares his thoughts in this article.
The financial services (FS) sector is under increasing pressure to modernise operational models whilst driving profitability, improving customer experience (CX), managing higher levels of risk, and looking after its people.
In this rapidly changing business environment, customer-led transformation can enable firms to tackle these challenges, get ahead of potential disruptors, provide the proper channels to retain customers, and become agile enough to pivot when consumer behaviours inevitably change.
As such, the firms that will most successfully evolve are those that commit to holistic, flexible, and connected customer-led transformation programmes. This article explores the crucial business case for doing so, providing advice and examples to guide firms in the right direction.
1. Why is customer-led transformation so crucial in financial services?
2. The outcomes of a successful transformation
3. Friction in the transformation process
4. Transformation friction in the fraud customer journey
5. Implementing end-to-end customer journey transformation
6. Quality is free
Why is customer-led transformation so crucial in Financial Services?
In a recent article, we explored the next wave of challenges that organisations were facing, many of which are already coming to the fore.
For the general population, the long-term issue of the rising cost of living is significantly impacting consumers’ financial well-being. Plus, we are seeing an exacerbation of the narrative around increasing wages, increasing resignations, and an inability to recruit adequately.
Regulatory pressure continues to build, with the Financial Conduct Authority’s (FCA) proposed Consumer Duty being an example. While the Duty is there to protect customers, it will also complicate the supply of retail financial products and services for firms.
Alongside these challenges, the importance of customer experience remains, with competition in the market continuing to grow relentlessly. In the UK, poor customer experience costs businesses over £37 billion per year, and there is a strong connection between customer satisfaction and sales gains, with companies seeing a 4.4% drop in sales when CSAT scores fall at least one point below the sector average.
There are also continuous changes in consumer behaviour, with some considerable differences in customer experience expectations across Europe.
Webhelp recently conducted a European survey to analyse customer perceptions of banking and insurance interactions. Here are some of the most prescient results.
Customers prefer to avoid branch visits
Survey respondents preferred online channels, but voice was still popular in some countries. Still, interaction through a physical store or branch was the lowest preferred channel across Europe (19%). These findings mean that firms have an opportunity to better serve customers by investing in email, webchat, SMS, and social media, leading to enhanced customer experience and fewer overheads related to physical locations.
Improving first-time resolution will boost loyalty
Around 25% of respondents said their provider did not resolve issues first time, and over 40% said it was a high effort to drive a resolution. When measuring these results against customer loyalty, 10% said they would reduce or cease their relationship with the business after their interaction, showing a clear opportunity to retain customers through improved experiences.
The threat of disruptive business models
Over 40% of customers said they would actively leave their current provider if brands such as Google or Amazon started offering banking services. By working to understand why customers would so willingly switch brands, businesses could pivot their offering to better meet customer needs, and pre-emptively disrupt the market.
Customer needs are also becoming more complex and personal. With the proliferation of automation in the customer journey, the need for a human touch with empathetic customer experience agents will become more important for dealing with complex tasks.
By meeting the combined weight of these challenges and recognising the customer’s evolving demands, firms have a clear opportunity to differentiate in the market – a differentiation that begins with developing a robust customer-led transformation programme.
The outcomes of a successful transformation
The external factors justifying customer-led transformation are highly compelling, with a broad range of outcomes that firms can factor into an associated business case.
While customer experience transformation requires investment, the benefits quickly outweigh the costs. By focusing on fluidity of service, the often hidden cost of poor experience is brought to the surface as unnecessary hand-offs, delays, errors, queries and other failure points are gradually reduced.
Organisations can achieve higher productivity and create interactions that are of real value to customers; leading to better reputation, a reduction in operational headcount and an increase in potential revenue.
Enhanced customer experience
Ultimately, by giving customers efficient digital channels, fast resolutions, and personalised interactions at every step of the journey, the experience of dealing with your organisation becomes effortless, impactful, and worth talking about, attracting more customers and boosting business.
Engaged people and talent
Creating awareness of the customer journey allows colleagues to see the value in their role and how their interactions fit the overall experience, increasing engagement and driving a continuous improvement mindset. This cultural shift results in less attrition and helps attract new talent to the organisation.
More protection for customer and business
Customer-led transformation can enhance debt management or financial support services during inflation and job insecurity, making firms trusted partners to customers. It can also help prevent fraud and other economic crimes since many aspects of transformation require a re-visiting of data security practices and systems.
In striving to achieve these outcomes, what pitfalls can firms expect to face along the way?
Friction in the transformation process
In our experience, many transformation initiatives appear to be sensible, well thought out, and rigorously planned, but they often fail to deliver the total value that stakeholders anticipated at the outset, and sometimes have negative impacts on other parts of the business and customer experience.
Lack of an end-to-end view
Transformation programmes often focus on individual segments of the customer journey. For example, an insurance firm might hone in on transforming the underwriting process rather than the entire policy renewal process. This approach often fails to impact the customer as it neglects to improve all other steps in the journey.
Not truly understanding the customer
Many enterprises fail to understand customer emotions because they map journeys based on their interactions rather than from a customer’s perspective. In our experience, the absence of end-to-end data systems holds organisations back even further, preventing them from joining the dots across the journey and seeing the first-hand customer experience.
Failing to take a holistic approach
The actual cost of transformation can be significantly greater when organisations focus on single-point solutions that fail to take a broader, enterprise-level approach. For instance, the automation of a mortgage decision/underwriting process should be one of a number of changes driven by a holistic design that looks at the overall experience of the customer looking to move home (or at the very least looking for credit). Too often, these instances are single point solutions which do not link with a broader strategy.
Transformation friction in the fraud customer journey
Along with these fallbacks, the financial services industry faces transformation barriers in many existing processes. Take fraud, for example. Identifying and verifying a genuine fraud case can often be lengthy and complex due to the numerous necessary steps required to manage risk and protect the customer. On one level, this friction is intentional and designed to identify potential fraudsters. But, on the other hand, it results in a fragmented process that adds to customer frustration and anxiety.
In some of these cases, we’ve seen clients with up to 16 different security checks in one fraud customer journey. We’ve also seen dramatic differences in the language used by firms across their various communication channels, which can be confusing for customers and prevent fast and effortless resolutions. In both examples, the end-to-end journey was inefficient, and customers poorly rated the experience, despite the firms’ heavy investment into transformation.
So how can firms approach a holistic transformation process that covers the entire customer journey, end-to-end, and functions successfully with a deep understanding of customer needs?
Implementing end-to-end customer journey transformation
In our experience, there are four core elements to a successful customer-led transformation.
Visualise the journey from the customer’s point of view
Take into account various customer personas, and focus on effort, failure points, actions, and emotions. Managing the customer journey is about creating insight and monitoring changes in customer behaviour to drive continuous data-led improvement, high performance, and positive customer experiences.
Bring all parties together
All departments should play a part in the transformation and collaborate to create a customer-centric culture that harnesses the value of human capability. It’s all about ensuring that teams can complement one another’s abilities and employees are equipped with the skills, knowledge, and empowerment to do the right thing.
Challenge the real need of the customer
When thinking of a mortgage, where does the customer journey start? Likely from the moment they consider moving house, not only when searching for financing. Recognising this means potentially including other actors outside of the organisation and then involving everyone in supporting that customer journey internally.
Leverage data, insight, and supportive technology
Supportive technology can enable firms to harness new capabilities, create a seamless transition between solutions, optimise adoption through behavioural science, better predict consumer behaviour changes, and drive continuous improvement. In addition, the valuable data and insight gained from the right technology can allow proactive actions in response to customer behaviour and needs.
Quality is free
In 1979, author and management theory contributor Phillip Crosby explored the concept that “quality is free”, surmising an investment in the right place to get things right first time, is always preferable to being exposed to the higher costs of fixing issues as they arise.
In making the business case for customer journey-led transformation, financial services firms can develop great customer experiences while unlocking a wide range of benefits across the organisation – in other words, by applying the idea that “quality is free”, you could say that “great customer experience is free”.
How’s that for a business case?
Hervé Mazenod is Gobeyond Partners’ Managing Director, Financial Services, and has over 20 years of consulting experience, 17 of which he spent in FS. An engaging leader, Hervé has managed multiple global transformation programmes, helping banking, pensions, and insurance organisations solve complex customer journey problems with innovative solutions.
Find out more about Hervé here.