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A new dawn for financial services innovation

Updated: Sep 8, 2021

“Matching competitors’ increased offering” was the number one driver for investment in CX amongst financial services companies. As such it was deemed more ‘essential’ than modelling commercial uplifts, prototyping and testing, user research or recommendations from the internal team or agency partners.

This was just one of the surprising findings from our recent study, where we questioned a panel of over 300 digital leaders in FS, in addition to running several qualitative interviews.

This sense of an insular approach, of keeping up with the Joneses, is further evidenced when the audience was asked about how they benchmarked their CX strategy, with ‘Sector averages’ (61%) scoring the highest, whereas ‘Customer expectations’ managed a meager 48%.

This is a potentially limiting approach as we know that customers don’t benchmark businesses against peers in their sector, the benchmark against the best experiences they’ve come across. This is something we term ‘Expectation Inflation’, the situation when, fairly or unfairly, the customer is comparing your offering to Nike’s innovation, Amazon’s fulfilment, Netflix’s personalisation, and Patagonia’s purpose driven experiences.

So, is this a Covid induced blip or a sign of things to come?

The C-suite is getting closer to CX

In many businesses, CX went from a slightly derisory AOB to a key point on board agendas during the pandemic. It became a critical driver of ongoing business operations and pivots to maintain market growth and customer satisfaction, as we found when we explored the key changes in business over the past 12 months. ‘Digitalisation of services' (60%) and ‘Customer support and service’ (49%), led the way, inadvertently levelling up the playing field when it came to the key tenants of CX.

This renewed C-suite focus on CX was also a key factor in perpetuating copycat culture, with many using their competitors as a frame of reference as to what needed to be done to maintain market share. C-suite themselves were quoted as the second most influential factor in determining the focus for CX investment.

It appears, however, that this approach that has led to greater homogenisation of experience, will only be short term. A reaction to a moment in time. A pivot to address immediate customer needs.

The time to zig is now

When asked about the future approach and the appetite for greater risk taking and innovation, 63% responded that they expected to take ‘more risk’, 16% reported no change in the level of risk and only 21% were planning on taking a more cautious approach.

It is our belief that it will be those businesses, more willing to innovate and prototype and test and learn, to enhance their experience, that will thrive over the coming years. A belief backed up by Gartner, Forrester et al, who envisage CX becoming more important than price or product.

In our study, respondents pointed towards some key focus areas, as well as overlooking one that we feel will be critical for their success.

Customer is king

51% of respondents told us that the single biggest driver of budgetary change was ‘Customers demanding more’. This combined with the fact that over 70% of FS leaders stated that “prototyping, testing and learning’ would be ‘essential’ or ‘somewhat important’ in focussing CX investment, points towards a very different future, versus the preceding 12 months.

Going forward, leaders within financial services will be driven by customer needs as opposed to competitor activity, which we expect to lead to greater differentiation of products and service.

Data is the new oil

Adding weight to the shift from being category-led to customer-led is the fact that 65% of respondents stated data and analytics were key to informing and facilitating change, with the second most popular ‘Focus groups’ trailing behind, being selected by just 38% of respondents.

This reflects the level of sophistication that has been achieved by finance businesses across their omnichannel CX programmes. Investment in tech stacks, a shift to the cloud, greater focus on customer services and a big step up in data automation, are seeing many companies, not just having a more complete data picture of their customers but acting on it.

A more purposeful approach

As we’ve witnessed, over the past 18 months, Covid has done more than anything else to accelerate existing trends. Everything from a desire to self-serve and work remotely through large scale digital transformation and a shift towards a cashless society, all achieved in months the traction that was expected to take several years.

Another trend though, the rise of the more conscious customer, appears to have been overlooked by many within financial services, with ‘Development of a more ethic brand’ being the least selected option when asked about key areas of business change.

This is at odds with many other sectors where a greater focus on transparency, sustainability, the circular economy and carbon labelling/reduction have been the drivers of new product and service innovation.

That’s not to say that it’s been entirely neglected by FS businesses, with ESG on the agenda of every asset management company, NatWest launching a partnership with CoGo to help customers understand and address the environmental impact of their purchases and an increasing commitment from pension companies to become carbon neutral in the decades ahead.

With Gartner recently stating that 73% of UK consumers want to be more sustainable in 2021, we believe that there is a huge opportunity for those businesses willing to embrace and support this desire.

One final hurdle

Now more than ever, CX leaders need to take this opportunity to cement their position as business critical and build confidence with the C-suite to take them on the journey from following peers to leading the category.

To do this, a more commercially minded approach needs to be adopted.

Our research found that some of the biggest blockers to CX programmes moving forward were the investment, struggle to fully define ROI and an inability to model the impact of initiatives predictively, robustly and commercially.

To achieve this, we would suggest a methodology that allows for insight gathering, out of category analysis, rapid ideation, validation through a customer panel, normalising data and modelling of commercial impacts of each idea. This approach allows businesses to move ahead with confidence, prioritising the initiatives that will drive the greatest return, before investing in design and development.

To download a copy of the full report click here

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