THE BANKING INDUSTRY IS CUSTOMER EXPERIENCE THE GAME CHANGER?
In UAE, the banking sector focus has relied historically on ‘cost leadership’, where there’s aggressive competition to provide the lowest rates for loans, the best credit card benefits and the highest rates for savings.
There is a machinery working at full steam, which is only designed for acquiring new customers – and not to retain them. Relationship managers and branches are strongly focused on acquisition, fighting for the best rates to make sure customers join the bank. As a consequence, customers keep jumping from one bank to the other, looking for better rates year after year.
And this scenario goes on and on and on… It is almost a cycle where every time there’s a new discount or a new reduced rate… every season of the year is a good excuse for a new discount… but is a pure red-ocean strategy where the only way to compete is on reducing price and this will only drive the industry to keep shrinking – as it is becoming less profitable – and this will drive ‘big players’ market success, as they are the only ones able to sustain such an aggressive pricing playground.
The question is: is this sustainable? Is a low rate the only thing your customers want?
Typically, when the cost is reduced then the customer experience is sacrificed… you can’t get everything, or that’s what the P&L says! This means, when you play the cost reduction war, you become good at acquiring customers, but you won’t retain them if you don’t invest in making their experience easy, trustworthy and personalized.
But let’s think about the people that are the ‘face’ of your organization… The front-line staff. If their reward is based on new customers acquired and new products sold, then the anti-CX cycle is fully activated!: Their commissions get paid on new customers, which will drive their effort and attention to sell, not to retain… because no one measures – or rewards upon – the amount of customers that stayed in the bank after a few years and give a good feedback to others about their experience.
Recent research demonstrates that Millennials – which are the dominant spending power since 2020 – invest their money in brands that genuinely care about them, care about the society, make their experience easy, listen and acts to their concerns and personalize the services to their needs, even if the price is higher.
And the day came, where a Gold customer called the bank and said:
[Customer] “I would like to cancel my loan; I’m moving to another bank”
[Bank] “Have you found a better rate in another bank? Because I’m sure we have the best in the market”
[Customer] “No, I’m actually paying more, I’m moving because I’ll have a better experience, it’s the best rated bank on dealing with customers”
[Bank] “Excuse me, I don’t understand, we have the best rate… I might be able to find you a lower rate”
[Customer] “I’m sorry, but I don’t understand how you don’t know what I have been through – I have opened more than 10 complaints in this bank, to which you have done nothing about, I have received no response to any of them, I have been trying to speak to someone that can help me, but no one seems to care. You broke my trust, there’s nothing else to do… and I don’t mind paying more for a better service”
[Bank] “I’m still confused, but ok, we will initiate the process for your loan transfer”
This is a clear example of the lack of focus to listen to customer feedback and action on it – this is a very good definition of a non-customer-centric organization.
And this story is starting to become the new reality. The challenge lies in quantifying problem, to define if it’s a priority for the organisation. The key is in measuring how many customers are leaving and the reason why they are leaving (the good old churn rate…. Yes! It’s critical to measure churn!). The majority of the banks can’t really put a finger on this, because that’s not their priority, and for this reason they don’t measure it, letting the problem get bigger, and bigger.
You get what you measure, or even more important, as I always say to everyone: KPI’s drive behaviours.
If you measure and reward your employees by acquisition, then that’s what you will get, nobody will care about retention, because they are not measured by keeping customers, their bonus and their salary doesn’t depend on that, nor their career in the company.
Even if you have a great strategy that says “customer first” – or any of those ‘promises’ that none of your employees understand – it will stay right there in the clouds, in beautiful presentations, it will never get to your operations and even worse, it will never get to your customers. If you want to know more about this topic, read my article: transforming strategy to action… the magic formula.
The good news is, that thanks to recent advances introduced by some of the leaders in the banking industry, there is a new customer-centric trend taking place, and this is driving a key change of focus: providing a seamless experience, which is personalized and easy to engage with.
In simple words, the strategy is changing to ‘differentiation by experience’ and drifting away from the old cost-leadership focus.
This change brings as a consequence a game change, the introduction of CX as a ‘basic need’ and not a ‘nice to have’ required to survive in the market and preserve your competitive advantage. Where trust is the ultimate goal you want to achieve with your customers, and where trust is only built by consistently delivering the same experience, by delivering what you have promised, by being fair to your customers and by making them feel that they are getting true value for their money in every single interaction they have with you – and when I say you, I mean all your front facing staff, because they are all the face and ears of your company and the key for your success.
In order to make this possible, it is critical to put in place a structured approach that combines processes, people and technology operating in harmony and where scientific-based insights are the base to keep your business adapting to the now changing needs of your customers.
Learn more in my articles: ‘The 3 pillars to drive your strategy’ and ‘How AI is changing the way you interact with your customers’.