For too long, banks and other financial institution (FI) organizations have struggled to keep up with the consumer marketing and versatility of loyalty enablement relative to other industries. This year, however, will see a massive shift in how banks build out their customer growth and retention strategies through personalized customer journeys and experiences. Here are the top 6 trends we see happening in the financial services industry, and how they’ll impact the loyalty landscape.
Generation Z will become mainstream customers of banks. This emerging generation of consumers expect to be treated as individuals and not as segments, which means banks need to incorporated a much stronger form of personalization – what we term hyper-personalization. This personalization might take the form of allowing the customer to design their own suite of banking products based on their circumstance, needs and preferences to selecting which specific benefits they wish to receive from a broad selection of banking features and benefits. This is the opposite a one-size-fits-all approach.
#2 “Whole-of-Bank” Loyalty
Banks are facing the challenge of treating customer loyalty as part of an overall relationship with the bank and not as part of a single product feature (e.g. credit cards). This relationship extends well beyond a credit card and should include all products and services that a customer consumes, whether from the retail bank, the business bank or a wealth product such as insurance or investment products. Think of this in the context of Apple, which has been able to cement brand loyalty by offering excellent products and customer service across the entire relationship. Consumers will demand similar experiences from banks.
#3 Digital Transformation
The financial services industry is witnessing a continued and aggressive focus on digitization and the adoption of new and emerging technologies to bring in operational efficiencies, enhance speed-to-market and deliver superior customer experiences. Banks are cutting down spending on branches to invest in self-service digital channels as mobile and online banking become more popular among customers. Digital wearable devices, which pack the power of smartphones, are making it increasingly feasible for banks to offer targeted services to customers.
#4 Collaboration with Fintechs
Banks’ legacy systems are their biggest barrier to growth and technological innovation. As a result, many banks are partnering with FinTech companies to build out their digital experience. Initially, Fintechs were seen as competitors taking advantage of the void that was created by the financial services industry’s inability to keep up with technological breakthroughs. Today, however, bank/Fintech partnerships are increasingly the norm, with the latter providing marketing, administration, loan servicing or other services enabling banks to offer tech-enabled banking products, features and benefits. As a result, these partnerships are beginning to re-shape the financial services landscape.
#5 Robotics and AI
While customer needs and competitive forces demand that banks adopt full-fledged digitization, performance pressures compel lenders to reduce costs and keep operating margins healthy. As new regulatory requirements and data protection laws put additional strains on already-stretched resources, emerging technologies such as AI and robotics are helping banks address these constraints efficiently. In fact, many pioneering companies in the FS industry are already experimenting with multiple use cases of AI in their operations. From using AI to power chatbots and providing round-the-clock agile customer service, to utilizing the technology for critical functions such as anti-fraud and regulatory compliance, banks are realizing the double benefits of optimizing costs while improving operations. These technologies are also triggering innovations in the industry, such as biometric-based authentications, voice commerce and robo-advisors.
#6 Focus on User Experience (UXP)
Human-centered design has gained a strong following in technology and product designs over the last decade. Importantly, the emergence of challenger/neo-banks with human-centered UX design is forcing banks to focus on the adoption of design-thinking methodologies. Banks are now more aware that it’s not enough to create usable interfaces to ensure user-centered approaches in their banking service delivery. Banks are beginning to understand what kind of experience they want customers to experience at every touch point of digital interaction with their users.
These trends combined are re-building the financial services industry. In the past, it was plagued with rich acquisition offers, which left loyalty customers feeling alienated at best, jumping to a new company at worst. By building out personalized experiences for their customers, banks and other financial industry brands will stand to grow their market share and build retention through a loyal customer base.