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Customer Insight Is the Financial Services Industry’s New Best Friend

Feature Article | September 12, 2016 by Jane Disney

Across all industries customer insight is becoming ever more important for generating new and innovative offerings as well as driving flexibility in existing products, to improve customer experience.

In financial services, the importance of insight serves a far greater need. Organizations are under greater scrutiny from regulatory bodies to ensure customers are treated fairly and that they are being offered products that they fully understand, can afford and really need.

This tighter scrutiny is leftover from the 2008 economic crisis and the various mis-selling campaigns that saw banks at fault for irresponsible business practice. The ability to use customer data via predictive analytics tools will enable FS organizations to ensure the right product offers and associated pricing falls within their customers’ means.

Such customer insight has a huge role to play in driving brand loyalty and protecting customers and businesses. Like all companies in this information era, understanding what your customer wants and what your competitors are offering is key to success. A new generation of digitally savvy consumers, is demanding more from financial service providers based on their experience of other industries – especially retail.

Fintechs appear to be pushing banks to a crucial tipping point, with the “ingenuity and creativity” they bring to product development appearing to eat in to banks market share. What sets fintechs apart from banks is their ability to cater to the needs of customers in a format that not only improves the service offered, but better engages customers.

A recent study found that two-thirds of global customers are using services and products provided by fintechs. The reason for this sudden increase and for 15.9% of customers admitting they won’t purchase additional products from their banks is trust. Customers are putting more trust in fintechs as a result of the success of products and services they offer, which comes down to customer insight analysis. These organizations have a growing understanding of customers and can present them with digital solutions that offer them a personalized experience at the tip of their fingers.

Evidently, customer expectations have been raised in terms of excellent customer experience and a personalized, relevant service. But this doesn’t necessarily mean banks must create an entire portfolio of new products. Instead they should look to provide more flexibility, based on insight, for packaging and pricing existing offerings to better meet the needs of customers.

Banks should provide more flexibility, based on insight, to better meet customer needs

Driving forward increased flexibility and personalization could be the key to enabling firms to achieve the balance of providing customers with what they want, while ensuring it’s what they need and can afford, yet still push forward their own business growth agenda.

Building up layers of insight into a customer’s lifestyle and decision making is crucial in constructing a picture of their financial viability, life stage, and spending and investment behavior. In this way they are more equipped to avoid compliance concerns and develop greater trust from their customers.

Predictive analytics tools provide the means to map the journey of a customer and assess the best course of action fiscally. Only with such tools and digital data solutions do firms have the ability to rapidly analyse a range of data points (internal and external) for thousands or millions of customers in a timely fashion, to compare their individual behavior. This competency could be the key to accurately forecasting the triggers to key financial life stages such as starting a family or moving home. Empowered with this insight, businesses can offer tailor-made financial plans for their customers’ current and long term security.

Even more important than knowing what a customer’s ‘normal’ financial behavior is, is understanding how a customer will react in unusual situations. This granularity of insight gives firms the opportunity to engage with their customers ahead of big decisions. For instance, securing data such as monthly income and seasonal expenses, could enable financial service providers to more proactively interact with customers during periods of significant financial insecurity.

Coupling critical data analytics with a user friendly platform can provide personalized guidance to customers, including recommended spending or suggested products, to help them stretch and grow their money further. This is in contrast to the standard overdraft fee practice, which delivers a more negative and punitive experience to the customer.

Ultimately insight is key and this can be gained from understanding even the basic data available. However, becoming more sophisticated and differentiated, in what is a very competitive and increasingly diverse market, requires the ability to combine multiple sources and types of information into the insight analysis. In this way the customer experience becomes relevant, positive and productive.

This is the panacea for FS firms: supporting the industry’s need to do the right thing and satisfying customers’ needs while also generating new revenue streams.

Jane Disney is industry principle and value engineer for the financial services industry in the UK at SAP

Image via Shutterstock

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