Bankers have long paid lip service to the importance of customer experience. More recently, they have been putting their money where their mouths are.
KeyCorp invested in a new
This pushback illustrates a fundamental challenge facing banks: How do you balance the need to invest in long-term improvements in customer experience with the need to continually return short-term value to investors? A possible answer can be found in the operating strategy of the company that has inspired banks’ increasingly frenetic focus on customer experience: Amazon.
Amazon’s maniacal focus on customer experience is well known.
A key component of Amazon’s success is its ability to anchor every decision it makes on the impact that decision will have on the company’s lifetime relationships with its customers. Put simply, Amazon measures ROI in decades not quarters.
While it has historically been a source of frustration for shareholders, this long-term perspective gives Amazon the comfort to make investments that would seem, to most companies, preposterous. Take for example the company’s
This type of long-term, customer-centric strategic planning has proven effective for Amazon in numerous industries. There are signs that it would prove effective in financial services as well. In a recent
Indeed, the financial services industry is littered with examples of how a longer-term view of the customer relationship could disrupt the status quo. Take, for example, premium credit cards. Arguably the closest thing that banks offer to Amazon Prime, these cards offer rewards and other benefits in exchange for an annual fee. The difference is that a majority of the benefits offered by these cards — extended warranty protection, auto rental damage waivers, lost-luggage reimbursement — are practically invisible to cardholders, while Amazon goes to great lengths to ensure every member is aware of and uses as many Prime perks as possible.
At the same time, a vast majority of auto loans originated by banks come indirectly through the dealerships. Customers have no prior relationship with these banks, and yet too often, these new accounts are serviced in silos rather than nurtured into long-term, multiproduct relationships.
Or think about the mortgage industry, which is largely transactional. Origination fees, servicing fees, asset-backed securities — no one in the value chain treats mortgages as the key to locking in a lifetime relationship with a new customer, even though mortgages have a 15- to 30-year life span and can be bundled with a slew of value-added services.
Disrupting the status quo in these product areas won’t be easy. The sheer number of different options available for helping homebuyers over a 30-year period — from move-in services to utilities price comparisons to smart home payment integrations — is staggering. Investing in these types of ancillary services will be an incredibly difficult (and likely unpopular) decision, but it will be necessary for banks that are serious about countering the competitive threat posed by Amazon. The first step is recognizing that Amazon — with its single-minded obsession with locking customers in for life — is playing the long game.