Building and maintaining trust – on an upward curve?

Donald Cameron Caroline Wayman

By Claudia Pellegrino, Donald Cameron, Caroline Wayman

Customers rely on banks for vital financial support in their day-to-day lives – and banks rely on customer trust to function. Our 2023 Vision for Banking report demonstrated the vital importance of trust – and the relative advantage that banks enjoy over potential rivals like technology firms and retailers when it comes to safeguarding money. In a time of cost of living crisis, trust is more important than ever.

The challenge for banks now is to nurture their customer relationships through a period of economic pressure. Despite a temporary boost to net interest margins from higher interest rates, banking profitability is likely to be threatened by heightened competition, weak economic growth, and higher costs of default.

Pressure is growing on incumbent banks to prioritise cost savings, and this challenges their ability to focus on customer satisfaction and good customer outcomes. Efficiency is clearly vital, but banks that cut too hard run the risk of harming customer service and attracting regulatory censure. Damaging customer trust would be a major own goal for incumbents and give up a crucial advantage over technology-led rivals.

So how can incumbent banks trim costs while improving customer experiences – building trust, instead of eroding it?

The answer lies in putting customers at the heart of streamlined, simplified operating models, fuelled by AI and empowered employees – this will help build trust by supporting customers to grapple with the heightened costs and uncertainty they currently face. Based on our experience of helping clients overcome these challenges, we see three key areas of action where banks can make smart investments that drive both efficiency and customer trust.

1. Invest in customer centric models

Developing customer-centric models that deliver positive outcomes is central to fulfilling banks’ purpose at a time of economic difficulty. It’s also key to complying with the FCA’s Consumer Duty, and to competing with experience-focused entrants from other industries. A customer centric operating model requires alignment of long-standing teams to specific customer outcomes. We see many banks adopting a Value Stream or Platform Model to achieve this – to be effective this model needs to factor in back-office functions (risk, operations, infrastructure), so that they can also be directly aligned to a customer need – this will be essential to foster a customer first culture.

Shifting to a customer centric model requires a deep understanding of customers’ goals and preferences. As banks implemented Consumer Duty, they found that up-to-date customer insights were essential to refresh approaches and in overcoming the limitations of existing product journeys. To gather new insights, industry leaders need to invest in areas like demand segmentation, concept testing, and iterative testing to better define customer segments and their specific requirements. Ethnographic studies can also help observe customer behaviours in their natural context (for example at an ATM, or branch, or when they pay for something) to better understand their feeling and their unspoken needs, as well as avoiding any behavioural bias.

By orientating their operating model around customers, organisations will be able to remove hand-offs and duplications creating considerable cost benefits – additionally, the increased customer focus will lead to better and more tailored products, leading to a likely increase in the size of their customer base.

2. Invest in AI to optimise customer contact operations

At a time when many customers are under financial pressure, incumbent banks’ handling of queries and complaints is attracting additional scrutiny. On the upside, customers who feel fairly treated, especially after voicing a complaint, can become strong brand advocates.

There is growing scope for incumbents to leverage AI to improve customer experiences and satisfaction rates to build greater trust, while also boosting efficiency. This could include:

  • Leveraging natural language processing to quickly triage customer interactions and speed up and route queries to appropriate teams
  • Using voice recognition to flag potentially vulnerable customers and pre-empt situations that could lead to complaints
  • Using AI to provide rapid answers to customer queries, through different channels, not just generic text responses but also videos resulting in greater inclusivity
  • Using predictive analytics to help the workforce reach better decisions and validate agents’ choices.

Investments in AI must also be accompanied by redesigning operating models so that people, technology, and processes are aligned around customer journeys. This will ensure that the root-cause of the most common complaints are fed-back and used to influence investing and prioritisation decisions for new initiatives. We need to stop seeing complaints as a burden and recognise that it’s a crucial (and free!) source of insight.

3. Invest in frontline people, making them great brand advocates

With many customers looking to banks for advice and support, human capabilities need to be blended with digital ones so that both elements work in harmony. Banks need to ensure that staff deliver a consistent tone of personal empathy, and that people’s capacity is re-directed to focus on the most sensitive customer issues. Investing in frontline teams capability also helps to drive greater efficiency through having a greater breadth and depth of expertise that reduces the time of each client interaction.

Empowering frontline staff with the tools and support to understand and assist customers is vital. Key areas of investment might include:

  • AI-powered decision tools that help complaint handlers to identify next best actions
  • Training staff to ask better questions, anticipate customer needs, and personalise interactions – empowering the frontline to resolve issues and minimise escalations
  • Reorienting rewards, promotions, and staff development around a balanced set of metrics that celebrate exemplary customer service.

Building collaboration between frontline staff and those in back-office support functions is critical to ensuring that product developers and experience designers capture the wants and needs of customers and customer-facing colleagues alike.

The bottom line is this: banks need to avoid choosing between efficiency and customer experience. By balancing investment between customer-first models, AI adoption, and most importantly their people, they can emerge as trusted allies and gain competitive advantage in today’s challenging financial landscape.

About the authors

Claudia Pellegrino PA business design expert
Donald Cameron
Donald Cameron PA financial services expert
Caroline Wayman
Caroline Wayman PA risk and regulation expert

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