experience dividend. Many banks already create excellent experiences .... will create a financial and social benefit. By
Banking the customer experience dividend
Adele Wallace Associate Director – Advisory KPMG
Dylan Marsh Associated Director – Advisory KPMG
Adele is an Associate Director in KPMG’s Auckland practice specialising in conduct risk. Adele brings valuable insight and a rich range of experience in approaches to conduct risk across banking and general insurance through her extensive work in the regulatory practice at KPMG UK and her previous roles in the industry.
Dylan is an Associate Director in KPMG’s Auckland practice specialising in customer service, where he assists companies to serve their customers more profitably. Dylan’s work has centred on providing large Financial Services firms with greater insights into the profitability of customers, products and channels.
Many banks already create excellent experiences for their customers, but performance across the sector is inconsistent. Our financial institutions often struggle to embrace customer best practice in the areas that are important to their customers and in a consistent way. Working out how to delight customers would deliver a new injection of growth, but will require bold reinvention and steadfast leadership. The evolution of banking is continuing at a rapid pace. Growing customer expectations, new technologies, inefficient legacy businesses and the changing regulatory environment that emphasises the delivery of good customer outcomes have opened the door to competition from both within and outside of the sector. The evolution of banking is continuing at a rapid pace.
Responding to this is not a task that can be deferred. Today’s management teams cannot leave the banking leaders of tomorrow with a legacy of disenchanted customers, untrusted brands and outdated business models.
For those that embrace customer transformation today, the rewards will be immediate and profound. Those who act quickly to place the customer at the heart of their business and good conduct as the driver of culture will not only mitigate future exposures, but unlock a growth accelerator that creates a sustainable business model, delivers shareholder returns and a firm platform for future business development We are now at a turning point for our sector. The rewards for delivering customer experience excellence are not just economic, but a better way of banking and a way to elevate customer trust and engagement in the sector. To achieve this, we need to build a distinctive customer transformation mindset within the heart of retail banking culture, one that affects thinking from the boardroom, to the branch. We need to take lessons from the brands and sectors around the world that have learned how to delight customers, eliminate wasted expenditure and turn that experience into better businesses, and we need to act soon.
Customer experience leadership leads to financial returns KPMG’s Nunwood’s Customer Experience Excellence Centre has interviewed over 115,000 customers to measure 1,500 brands against the six pillars of customer experience. Their analysis of the Financial Services companies in the UK revealed a strong link between experience leadership and financial profit. For example, Nunwood suggests that a Big 4 UK bank could realise an average of £3.7bn of additional profit over the next three years, if they were to increase their experience ranking to the level of the top 100 companies.
Clearly this may not be a causal relationship; multiple sources of revenue growth interact in complex ways. However, Nunwood believe that there is a clear link between brands that achieve customer experience excellence and more rapid financial growth. In principle, we believe that this translates to the New Zealand market, with significant value potential from experienced leadership. Further, we believe that experience excellence would assist incumbents to retain their customers from increased competition. Critical success factors How does a bank improve the experience that it delivers to customers? To date firms have focused on tuning their operations. Survey any large bank and you will find process improvement, automation and internet banking development in each. Improving product level processes, account openings and on-boarding are largely the way in which banks have sought to fine-tune customer interactions. What if we learnt from those companies that rate highly in customer experience? Instead of focusing on optimising or automating processes alone we would start with the customer and design products, services and interactions to meet their defined day to day and emotional needs. Customer insights, journey mapping and design thinking provide tools to achieve this, but alone these will not be enough. A future focused bank will need to think strategically about how it is organised and commit to change to shift the bank towards customer centricity and a more personalised experience.
To this point we believe that the following success factors are critical to beginning on a journey towards experience leadership. 1. Strong and clear direction. Often observed is a lack of clarity around firm priorities which can stem from not having the insights required to support effective decision making and strategy formation. To drive change you will need a clear vision and strategy that the organisation can get behind and work with. To develop clarity you will need the right insights to lead you to a compelling yet pragmatic strategy. Then you will need the support of the entire leadership team. This last point is critical as too often we see leadership teams that don’t agree on cross-firm priorities. It is no coincidence that these tend to be the companies that lag the market. Strong leadership is key to innovate, improve and compete and drive the culture that puts customer delivery rather product sales at top of mind in every activity. 2. A mandate to invest. Future competition is likely to come from growth oriented technology companies that aren’t constrained by legacy systems, vehicle fleets or a property portfolio. These companies’ staff join their ranks to innovate and their shareholders invest for future growth. It is increasingly likely that a bank’s ability to compete will depend on it retaining customers with more innovative products and services and it will need to do this at a significantly lower cost to serve.
3. Focus on personalisation. Banks currently tend to offer customers a reasonably uniform experience. High income customers may be assigned a dedicated banker, but personalisation is generally a long way off leading practice where technology and customer data is used to personalise experiences. This is surprising given the high level of contact that banks have with their customers: when you buy a house, when you get married, what you buy, what you’re saving for, etc. This rich data is an opportunity to increase the relevancy of your offering and interactions. Uniformity is also a risk that leaves profitable customers and products to more targeted competitors. The voice of the customer must be at the core of personalisation, find out what matters to your customer, how they want you to service their needs and through what method. 4. Customer culture. There are a number of challenges inherent within the traditional channel centric banking model that will require addressing. The first and highest impact relates to the incentivisation of staff. Spend a week in a branch and you will soon see the impact of incentive schemes on staff behaviour. While motivating, incentive schemes often create a conflict in delivering what is best for the customer and aren’t designed to deliver an omnichannel experience. Incentives are one aspect of a broader change to company culture needed in order to refocus staff on customer outcomes and addressing their needs.
First steps Where does transformation begin? Each bank’s situation is unique, but they can draw on the following to describe a sequence of refining their strategy and executing transformation. The key however, is to accompany these steps with a mature, best-inclass customer experience capability. 1. Vision and strategy A clear articulation of a controlling idea is needed to usher the entire organisation towards improvement. Where organisations often fall short is in defining not just a vision, but a clear strategy that can be practically implemented. This requires insights and a compelling business case. It requires clarity around what the future will look like for customers, channels, products and services and how to move there. A financial model and customer insights can assist you to form a feasible strategy that is well evidenced. 2. Financial Decision Model A financial decision model can help you to understand the links between customers, growth and reduced costs. It can assist you to prioritise your future customer, channel and product investment. Combining financial and operational data, these models can simulate the different returns from a number of potential business models, and together with risk and regulatory considerations, provide your business with confidence in the chosen direction.
3. Journey Design Capability Ideally you would have in-house capability that is tied to an omnichannel permanent group with clear governance. Many banks already have an improvement team that has a similar mandate. Their responsibilities and capability can easily be extended to balance customer journey mapping design (emotional needs), process improvement (rational fulfilment) as well as cost and employee factors. An agile implementation capability that deploys rapid testing, deployment and rollout ensures continuous and incremental improvement. The key however, is to accompany these steps with a mature, bestin-class customer experience capability.
These three steps provide the starting point for a successful customer transformation. Unfortunately, there are no magic bullets: simplistic solutions, while seductive, will only yield simplistic results. However, the targets, goals and outcomes can be clearly laid out. These three steps provide the starting point for a successful customer transformation.
A mature team dedicated to the customer experience will play a critical role in delivering change. While such a team should not directly manage each activity, at the same time it must be more than an advisory function. Its key role is guiding, facilitating and evaluating the transformational work of thousands of colleagues. To facilitate this, large banks will need to place a different emphasis on their customer experience teams, giving them the mission and mandate to organise new ways of working. This requires a firm commitment from the CEO, the Board and shareholders. For those banks seeking to solidify their position, incremental change will not be enough. Building new capabilities and targeting a clear view of customer experience best practice will create a financial and social benefit. By embracing this challenge, the CEOs of tomorrow will not only unlock a generation of accelerated growth for their banks, but also define a better future for banking.
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