The Evolving Financial Services Landscape: Delivering Data-Driven Customer Experiences

The financial services landscape is increasingly being defined by banks’ attempts to harness new technologies, as well as compete with new financial technology companies. At the same time, it’s being sculpted by changing customer behaviour, whilst also filled with uncertainty about new regulations.

How will these trends play out in 2017? Our research shows that the coming year will be defined by customer experience, to a degree never before seen.

Shifts in the landscape

In my two-part series on the Revised Payment Services Directive (PSD2), I explored just a few of the ways the financial landscape has become more competitive. Most of these transformations point back to the fact that financial products have become ubiquitous. In other words, banks can no longer differentiate themselves solely through their products; rather, they need to stand out through the experiences they provide to their customers.

We’ve also seen a lot of changes in consumer behaviour. Your customers’ time has become more precious, and they’re less inclined to spend it on financial services – especially when a growing number of apps and websites are there to assist. Instead of stopping into brick-and-mortar branches, customers engage with their banks and insurance companies on their mobile devices—a level of convenience that raises the bar in terms of consumer experiences.

In fact, customer behaviour and expectations are being “trained” by other industries in which digital-first companies are already delivering standout customer experiences – see, for example, Uber, AirBnB, and Deliveroo. Within FSI specifically, small, agile fintechs are also raising and sharpening consumer expectations.

It would hopefully be fair to say that, since the recent financial crisis, consumers have lost much of their trust in banks. They still have cognitive trust in banks to be competent in things like transferring money and paying bills, but many customers have lost social, or affective trust in their banks—that is, they no longer believe that their banks hold their best interests at heart.

As high street banks are focused on re-earning this social trust, they find themselves starting with “negative equity,” whereas new start-up fintechs, which were not around during the financial crisis, are starting from zero – a clear advantage in many consumers’ eyes.

This competitive advantage, as well as their ability to deliver on customer experience, is allowing these new fintech companies to step into the landscape, and defining a new competitive age for the financial services industry, in which fintech companies become serious competitors for traditional high-street banks.

One trend that has started recently, and I predict will grow quickly, is banks no longer trying to compete with fintechs but realising their best bet is to partner with them. A good example of this is the new partnership between Santander and Kabbage.

New regulations are also shaping the financial landscape. As PSD2 moves toward implementation, and the General Data Privacy Regulation (GDPR), which spans every industry, also becomes a reality, many financial companies are looking on with uncertainty.

Crucial factors in 2017

Within this landscape, Adobe’s 2017 Digital Trends Report found, “Customer experience is regarded as the primary way for organisations to differentiate themselves from competitors in 2017.” Of course, customer experience was also a key differentiator in 2016 – but over the coming year, it’s going to attract more investment and attention than ever before.

This means the financial services industry needs to adjust its ambitions. How do you deliver against this customer experience? How do you understand each consumer, and leverage real-time data to ensure that every experience is relevant?

Our research finds that this boils down into five crucial factors:

  • Context – understanding what the customer wants and needs, by analysing the customer’s behaviour
  • Experience – deliver a rich and immersive customer experience that’s easy and intuitive to engage with
  • Anticipation – predicting what the customer will want today, tomorrow, and the day after
  • Orchestration – providing a seamless journey across every touchpoint
  • Raising the bar – taking the customer from satisfaction to delight and always looking to improve

Given the desire to be seen to deliver against customer experience, we will see leading financial institutions focus on the following areas to differentiate themselves.

First, they will harness their data intelligently and enhance their predictive capability using artificial intelligence and cognitive computing systems. The first application of this will more than likely be with “robo-advice” customer service systems that will use this new capability to enhance the customer experience. Royal Bank of Scotland (RBS), for example, has just started using IBM Watson technology to automatically answer customer questions and pass requests to the right agents. And that’s just the beginning. The latest research from global market intelligence firm International Data Corporation (IDC) shows that a full 20 percent of banks will integrate artificial intelligence into their customer experience in 2017.

Second, 2017 will see increased adoption of cloud services, as institutions overcome their internal security issues and realise the benefits outweigh the risks. At the same time, banks will need to build modular cloud architectures that support bank-wide shared services, to ensure that they can deliver against customer requirements. IDC research says that by 2020, cloud adoption will reduce infrastructure spend by 20 percent among top-tier European banks.

We’re also going to see major development around personal financial management tools and data management sharing through advanced applications and tools that deliver added value to customers.

As industry-shifting as artificial intelligence and cloud computing will be, their significance pales in comparison to the importance of PSD2 (with its concerns around APIs and IT infrastructure) and GDPR (with its multi-industry changes to data management), as well as the increasing demands in terms of the customer experience.

Data management is central

All of these new, trendy initiatives that banks will be talking about rely on one thing; data management. And very few organisations have made any real strides in eliciting insights from their internal databases of customer information, or have linked that information to desktop and mobile behaviour. While technology vendors offer the necessary capabilities, most banks and investment companies haven’t yet onboarded those solutions. As more financial institutions recognise the need for comprehensive data management tools – and feel the pressure from new regulations and trends at the same time – we’re going to see intensifying activity in this area.

In short, 2017 is going to be about getting the data right. Much more than the longer-term ambitions around robo-chats, cloud computing, personal applications, and mobile wallets, financial services companies are going to spend 2017 building a foundation of data that complies with regulations and delivers against customer experience demands.

This speaks to a significant opportunity for fintech companies that begin to focus on data management right out of the gate. Once you’ve got a sufficient data infrastructure in place, you can begin to focus on delivering that data-driven customer experience that will differentiate you from your competitors.

To find out more about general digital trends over the coming year, download the 2017 Digital Trends Econsultancy Report. We’re also currently completing a review of the customer data specific to the financial services industry, so watch this space for a quantitative analysis of digital trends within financial services, coming soon.

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