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Enhancing Customer Experience in Financial Services

Posted: Feb 26, 2024
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#financial services
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Understanding Customer Experience in Financial Services

Customer Experience (CX) in Financial Services is a critical aspect that shapes customer satisfaction. It refers to the customer interaction with financial institutions, encompassing all touchpoints from initial contact to the final delivery and consumption of financial products.

It's crucial to understand that Customer Experience in Financial Services transcends excellent customer service. It involves curating a seamless, personalized user experience that meets and surpasses customer expectations at every stage of their customer journey.

In the Financial Services sector, including banking services, insurance, and investment services, digital transformation has significantly influenced customer expectations. Now, customers demand convenience, speed, and personalization more than ever.Financial institutions that can offer superior Customer Experience have a competitive advantage, attracting and retaining customers, which leads to increased profitability.

Financial services customer demands

According to Forrester:For a large multichannel bank, a 1-point improvement in its CX Index score can lead to an incremental $123 million in revenue. For a direct bank, it can lead to an incremental $92 million in revenue.”

Therefore, understanding and enhancing customer experience has become a strategic priority for financial institutions. Despite the challenges, including navigating complex regulations, managing security risks, and integrating legacy systems with new technologies, financial institutions that prioritize Customer Experience can differentiate themselves in a competitive market.

The importance of consumer trust in Financial Services

Consumer trust is a vital component of customer experience in Financial Services. It forms the foundation upon which customer relationships are built and maintained. Without trust, customers are unlikely to engage with a financial institution or become loyal customers. In the Financial Services sector, trust is particularly critical due to the sensitive nature of the services provided.

Customers entrust their money and personal information to financial institutions, expecting them to manage these assets responsibly and securely. Any breach of this trust, such as a data breach or unethical behavior, can lead to severe consequences, including loss of customers and damage to the institution's reputation.

Therefore, financial institutions need to prioritize building and maintaining consumer trust. This involves ensuring the security and privacy of customer data, operating transparently and ethically, and communicating clearly with customers about their products and services.

Common expectations of the omni-channel banking experience

Customers in today's digital age expect their banking experience to be convenient, fast, and personalized. Banks need to offer a range of channels for customers to interact with them, including online and mobile banking, ATMs, and physical branches. 

Financial services omni channel digital

These channels need to be integrated, providing seamless customer interactions, allowing customers to switch between them without disruption (conversational experiences).

According to a Deloitte study: “86% of consumers use branches or ATMs to access their primary bank; 84% use online banking; and 72% use mobile apps to access their primary bank.” Interestingly in the same study, an analysis was made between the emotional connection of a banking customer and the channel they preferred to use, providing further insight for firms of where to prioritize and shift their CX strategy.

The digital banking experience is a critical area that has influenced Customer Experience in the financial sector. The advent of technology has transformed banking services, leading to the rise of digital-only banks. These financial institutions provide a wide range of services, from checking accounts to loans, without the need for physical branches.

Innovative platforms. The functionality and ease-of-use of these digital banking platforms is a key expectation, with features such as mobile deposits, bill payments, and real-time account updates. Furthermore, these platforms need to be accessible 24/7, catering to the customer's convenience and demand for self-service at scale.

Personalization is a significant expectation in the digital banking experience. Customers anticipate that their banking platforms will offer personalized financial products based on their banking history and behavior.

Consistency ensures a seamless user experience, regardless of the platform the customer uses. Customer Experience includes every touchpoint, from using online banking services to interacting with customer service representatives in-branch, on social media or via a call center.
The quality of these interactions can determine the likelihood of a customer recommending the bank to others and their loyalty. In the same Deloitte survey, “70% of consumers consider a consistent experience across channels to be extremely or very important in choosing their primary bank.”

In an era of digital transformation, financial institutions need to balance innovation with security. While customers demand more convenience and personalization, they also expect their data to be protected. Therefore, financial institutions need to invest in robust security measures and educate customers about these measures to build trust.

Current state of Customer Experience in Financial Services

The Customer Experience in Financial Services is dynamic and heavily influenced by evolving customer expectations, technological advancements, and regulatory changes. Digital technologies are integral to this shift towards a customer-centric model. Financial institutions are leveraging data analytics, artificial intelligence, and machine learning to gain insights into customer behavior and deliver personalized services.

However, challenges persist. Many financial institutions struggle to integrate legacy systems with new digital platforms, leading to a disjointed customer journey.

In a study by The Financial Brand 64% of customers report that their mobile banking app does not enable them to solve a customer support inquiry fast—if at all.”

Regulatory requirements often hinder the speed of innovation in the sector. Additionally, the increasing prevalence of cyber threats places financial institutions under pressure to ensure the security and privacy of their customer's data.

The competitive advantage of a Customer Experience framework successfully addresses these challenges.

Insights from outstanding CX-oriented banks

Outstanding CX banks are redefining the traditional banking model by placing the customer at the heart of their operations, focusing on the customer journey and customer interactions, rather than just selling financial products and banking services (product-led).

The shift can be seen as institutions seeing themselves as “fintech” brands rather than a traditional bank.

These financial institutions are building emotional connections with their customers, moving beyond transactional relationships. According to ForresterEmotion — how customers feel about their experience — has a bigger effect on customer loyalty than the ease or effectiveness of the experience.”

These outstanding CX banks are not just reacting to changes in the banking landscape but are proactively shaping the future of the industry. Think Revolut, Monzo and Atom as good examples of this. They are exploring untapped markets and experimenting with new business models, plus products and services design. 

These organizations are also fostering a culture of innovation and agility, which enables them to anticipate and respond to emerging trends, challenges, and opportunities in the banking landscape.

Financial services challenger banks

Take Starling Bank, a “challenger bank” in the UK as an example of success through adopting a CX focus, leading to an Ipsos poll result that “81% of customers would recommend the bank to their friends and family.” This is compared to HSBC results of 53% when asked the same question.

Nubank in Brazil is another successful “neobank”. Its business model works primarily on the customer pain points of accessing banking accounts and mitigating high-interest rates on Financial Services. Now with more than 70 million customers, with NPS scores of above 85, it is on track to achieve $1 billion in profits.

How to improve Customer Experience in banking

The products and services design process must be customer-centric, requiring a deep understanding of customer needs and preferences, and the ability to adapt and innovate in response to changing customer expectations.

This data-driven approach involves understanding the needs and preferences of the customer, which can be achieved through customer segmentation. By dividing the customer base into distinct groups (or personas) based on characteristics such as age, income, and banking behavior, financial institutions can tailor their products and services to meet specific needs.

Understanding and analyzing the banking customer journey is a critical step. Mapping all customer interactions and touchpoints and the customer sentiment along the journey is a continuous improvement cycle; before, during and after consumption of products and services.

The use of data analytics and artificial intelligence is crucial in this process. These technologies can help financial institutions identify patterns and trends in customer behavior and capture feedback, which can be used to develop personalized products and services, enhancing customer interactions and reducing silent attrition.

Cemantica has helped multiple global financial institutions to optimize their CX strategies with the help of our innovative and easy to use Customer Experience Management platform

Contact us to discuss how we can help.

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