The Financial Services industry has always been tough to break in to for startups. This is because of the clout of a few big companies and because of the amount of investment that needs to go into starting a company in this sector. However, a few trends in recent times suggest that there might be a way that a startup can establish itself and compete with the big boys. And one such trend is Enhanced Customer experience aided by technology.
Customer experience (CX) is defined as the interaction of the customer with the product or the company throughout the journey with that particular brand. Here are a few reasons why startups can disrupt the finserv industry by leveraging CX.
Trends in the big firms
Commoditisation of products in financial services industry coupled with the rapid technological advances and increased customer expectations has made Customer Experience as the only differentiating factor among brands. This means, if financial services brands have to maintain loyalty among their customers and attract new customers, then the focus on CX is a must. A majority of companies in financial services do recognise this fact. However, only 30% of the companies have gone ahead and invested in customer experience initiatives. Most of the investments that are made are also done with an inside-out perspective. That means cost cutting is given more focus than putting customer’s delight higher up in the priority list.
According to research, the trust towards existing brands, especially the big boys, is at an all-time low of 44%.
These observations coupled with the fact that the entire financial services industry is going through a digital overhaul opens space for startups to make their mark.
Silos and Culture of large companies
It is observed that the two major hindrances to improving the customer experience at a big financial services firm are ‘Silos’ and ‘Culture’.
Providing a seamless experience for a customer across the journey requires collaboration between departments. However, the present organisations work in silos to achieve maximum operational efficiency. To overhaul a large organisation such that it provides a seamless experience requires time, money, and effort. This is not the case with startups.
The culture of a financial service firm is typically oriented towards getting its customers to toil to get their work done. The working timings of the companies is a clear reflection of that. For instance, a bank typically works between 9 am and 5 pm and half a day on Saturdays. Now, if we think about it, these are also the hours when a regular bank customer goes to work. So, to get his work done at a bank, he has to take a leave or break from his job, causing inconvenience and a disruption of his schedule.
In stark contrast, new banks such as First Direct operate differently. First Direct is a branchless phone bank that works 24 hours a day, 7 days a week (even on Christmas) to serve its customers. The employees are rewarded for doing good deeds or serving the customers well. Not surprisingly this is one of the fastest growing banks in the UK.
Cultural change is the toughest change of all. And it is really difficult to make that overhaul, especially in large organisations because it requires a change in personnel and attitude of the existing personnel.
Advertising is not influential anymore
Advertising isn’t influencing people like it used to. 90% of the people said that they trust peer references over advertising. Further, reports show that peer references are trusted 7 times more than advertisements.
Also, social media is also being used to complain or report issues. Nearly 44% of the adults use social media to complain and share grievances.
Furthermore, the buying power of Gen Y is increasing. They are not shy about trying out new brands and promoting them when they like it. Gen Y also has very strong opinions (both positive and negative) and they are quick to express it.
The above observations show the importance of word of mouth and customer advocacy in helping a brand grow in today’s era. You need not have lots of advertising dollars to grow anymore. Yes! a good CX can help you achieve revenue gains.
Customers want to interact as per their convenience
Customers want to interact as per their convenience and through a channel they prefer. They don’t want to use the non-preferred channels and effort-taking ones such as customer care numbers that have long waiting periods. Banks have started noticing this and are trying to come up with tools to make it easier for customers. Omni-channel customer service has become a norm. Companies are working hard to reduce waiting times.
ABN AMRO has come up with something very innovative. It recently launched an app called Tikkie. This allows the customer to transfer the funds through their Whatsapp. All the customer needs to do is enter the amount of money that needs to be transferred and the person to whom it has to be transferred from their Whatsapp contacts. As soon as they send the message, the receiver gets a link and with one click he is directed to the payment environment.
This is one of the many innovations that are happening in Financial services space. But the takeaway is that digital overhaul is transforming financial services industry and it is much easier for a startup to adapt to these changes than a large finserv company.
The above points suggest that the startups do have a huge opportunity to make it big in financial services industry by ensuring an effective connect between CX and technology. However, this is not to say that all large financial services are losing the race. There are a few companies that stand out and provide high standards of customer experience despite their size.
(Inspired by ‘Reshaping the retail banking experience for the customer of tomorrow’ by Deloitte.)