Brett King coined an idea that banking is no longer somewhere you go but something you do. Indeed, over the past decade or so, the banking industry made a tremendous shift from financial services as services to financial services as experiences. In banking, as probably in everything else, the modern customer constantly seeks for a better experience. But what is a better experience in the financial services industry? Is it the best UI/UX? The best/most transparent terms and conditions? The best customer service or maybe something else?
Some professionals believe that the best experience in banking comes with an institution that is able to connect with the customer in a meaningful way, demonstrating that personal aspirations and goals are of a great importance to the bank. It is more than tailoring the personal loan to customer’s situation; it's a desire to understand towards what goal the loan will be applied and the ability to assist in reaching that goal.
The British Bankers’ Association (BBA) calls the idea ‘banking beyond banking’ in the latest report in collaboration with EY, ‘The Way We Bank Now’. In order to be able to compete in the ever-transforming environment, modern banks will have to function in a radically different way, move past banking for the sake of banking.
“One important difference is that they’ll need to look ‘beyond banking’. This begins with recognising that the people buying their products or services have wider considerations in mind than the purchase itself. <...> To be truly customer-centric, banks must look further and wider than the immediate transaction to understand a customer’s surrounding journey, needs and aspirations,” the BBA report stated.
At the core, the idea is quite simple – the customer needs to be nurtured starting from the very beginning of his life journey, not bombed with offers only at the moment when they are needed. “...rather than selling a mortgage when a customer asks for it, banks could provide an ongoing lifestyle solution that helps them plan for their first home in the years before the purchase.”
To be able to sell a mortgage product to the customer in his 30s, the bank needs to invest in building relationships with that customer since he/she enters the age of opening a bank account. At that time, it will not about profits, but it is the beginning of a long-term trustful relationship in which the financial institution will be able to guide the customer, help in understanding his/her needs and fulfil them.
Certainly, a teenage account holder is not as profitable as a wealth management services client, but over the course of his life, that account holder will become a primary target audience for a range of financial products. Banks that will start investing in relationships with clients earlier rather than later will have an upper hand in maintaining strong ties with those clients.
To be able to reshape relationships with customers at the first place, banks need to adopt a different vision of them – each customer is different, he/she has a unique life journey, unique goals and aspirations. But those goals are not prerequisites, they are being shaped during one's lifetime, and banks can play a vital role in helping individuals to understand, plan and excel in their achievements.
“Successful banks will see each customer as a unique individual whom they advise, guide and influence to help them realise their life goals, and whose interests and values overlap with their own.”
Banks have advantages over newcomers to forge deeper connection with customers
While it may look like FinTech startups are stealing the show in the financial services industry, traditional financial institutions have several aces up the sleeve that they should heavily use. BBA brought up the following assets that large financial institutions with legacies possess:
- Established distribution infrastructure – both physical and digital.
- Strong and trusted brands – underlined by their customers’ willingness to entrust banks with caring for their most valued financial and information assets.
- Long-standing relationships – often going back through customers’ lives or even into previous generations.
- Banks’ proven and long-established distribution infrastructure – brand and relationships are now supplemented by a newer and fast-growing asset: their wealth of data. The vast pool of customer data that can be derived from such interactions means banks can understand more accurately what customers are trying to achieve, and use digital to interact with them in a more meaningful and relevant way to help them make good financial decisions.