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A road map for reclaiming the digital customer experience

The rapid pace of upheaval in banking and payments today is leading to many innovative nonbanking customer experience ecosystems, with banks largely serving a utility function.

Through these innovations, nonbank players enjoy a role that is front and center, gaining customer mindshare. They have built the customer interaction layer that conveniently integrates financial services into the background. The common examples are payment apps or retail apps — or hybrids of both — that process transactions linked to a customer’s bank-issued credit or debit card. Increasingly, third-party apps are also moving into the financial wellness sphere, trying to become a customer’s financial adviser — with messages linked to purchases and bank-account status — to provide insights on financial health.

The payments process is increasingly a minor, hidden step in the chain. With ongoing digital innovations, nonbanks could take over more of the payments space, too, as well as other financial services. But more importantly, banks stand to lose the all-important customer engagement layer entirely unless they reinsert themselves into the customer experience.

But the path to relevance is still open. True, nonbank fintechs are improving experiences by serving as conduits that link various aspects of a customer’s retail and financial profiles. But these convenient experiences are still fragmented, particularly when we expand the concept of financial wellness from the banks’ perspective.

Banks are in a position to greatly improve upon the model, if they gear up to provide integrated customer experiences. This will help them reclaim their relevance in a digital age.

Not only can banks easily orchestrate and field transactions across various industries that the customer interacts with, but banks are best-positioned to provide insights that help customers move closer to their overall goal of financial wellness. For example, in addition to offering card-linked retail promotions, banks can help customers control or channel their spending in the context of their financial status and goals.

True, we haven’t historically considered financial health and wellness as a prime lever of customer experience ecosystems. However, the changing digital landscape is very different compared to just a few years ago.

In effect, digitally competitive financial services providers today must be able to create transactions from experiences as well as provide great experiences during transactions. True, financial services firms are not new to this model. In fact, many traditional payments firms have been providing customized front ends for many industries for several decades already.

But the opportunity exists for banks to up the ante. Customer experiences pertaining to payments, retail and financial health still operate to a large degree independently of each other. Each interaction in these ecosystems builds on a distinct silo from the customer’s overall financial profile. A fragmented customer experience means that our financial goals are fragmented, our shopping wish lists are fragmented and our planning is fragmented. As a result, customers have unmet needs in terms of maximizing their financial well-being, and must regularly look for reinforcement from external sources to validate the personal finance recommendations of walled-off ecosystems.

Hence, banks are in a position to make financial wellness a more seamless part of an integrated shopping experience. Banks’ more sophisticated revenue and community model arguably allows them to offer a distinct benefit in this area — they do not have to rely on customer responses to specific external offers to make money, unlike other non-bank competitors. Furthermore, as underlying financial products become undifferentiated, banks can positively influence customer lifetime value by transforming into hubs of contextual activities that tie the customers’ overall goals with the gratification value that commerce offers.

Technology capabilities to support these goals exist in many forms — from traditional products to emerging fintechs that would love nothing more than to build joint business value models with banks. Here are three steps to getting the road map right:

Establish a customer financial hub

The notion of the bank maintaining a complete financial picture of a customer is not new, and the concept has almost been written off by many. But if the concept is applied correctly, it will be the foundational capability for banks to reinsert themselves into their customers’ daily lives.

Today, banks and nonbanks offer capabilities that let consumers view all of their account balances together, facilitate goal-based progress on saving and spending, view predictions based on bill and transaction amounts, and so on. But customers haven’t readily adopted such services because banks have failed to make these features front-and-center in the customer communications strategy. Instead, banks have offered them as isolated services that have required too much user data entry.

Activate cross-industry experiences

A financial hub seems like a passive concept. But it enables the final frontier of banks helping customers originate non-banking transactions intelligently.

Maximizing financial well-being should be considered as an act of aligning cross-industry activity in context of the broad, overall financial picture. An interindustry experience can touch a wide array of transactions in a customer’s daily life, while linking them to financial advice and well-being. These could include maximizing the value of retail promotions, planning a vacation, organizing warranties on purchases, having the right insurance coverage policies, managing debt and planning recreational spending, among others. Partnerships with single-purpose fintech startups are an option to kick this strategy off.

Use channels strategically

New digital channels are opportunities for added distribution, but they can also be prime sources of disintermediation depending on which company provides the channel. For example, new channels such as Amazon’s Alexa and Apple Pay are also aspiring to become customer experience hubs. Therefore, it is necessary to mitigate risks by setting up two-way data exchanges and a range of complimentary services that avoid the fragmentation of a customer’s financial wellness and health.

Furthermore, banks must provide additional context to customers interacting on such channels and draw customers into related activities that are not possible on the channel. For example, a voice command to buy an expensive item that affects savings goals can be confirmed by a text to the customer’s mobile phone with additional options provided (new timeline, alternate marketplaces, alternate products, etc.). The cross-industry experiences capability will provide a platform to create these activities.

The rapid pace of digital innovation means that the mantle of being a custodian of customers’ financial health may be broadly shared among bank and nonbanks alike.

Banks today can still claim key territory that nonbanks cannot: being the rails on which many payments and retail innovations ride. But the question is: How long will that advantage remain, and will operating as utility providers be enough for banks in the future?

In my view, the future of banking is to become the hub of financial wellness-related cross-industry experiences for customers through both external and internal services.

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