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Innovating the customer experience in our decade of disruption

The triple challenge of new technology, more demanding customers and new regulatory rules is set to bring a decade of disruption to the Financial Services sector.  A key part of the success of companies in this era will be their ability to rethink the way they engage with their customers. To retain their position and market share, they will need to be relentlessly focused on making their customers' experience easy, personal, seamless and enjoyable.

Addressing the challenge of new entrants

New entrants now represent a credible and tangible threat to the incumbent players across the banking and insurance sectors. These new players come with a retail mind set, and an intuitive understanding of customer's expectations for more personalised, easy-to-use services. Free from the burden of legacy systems, these organisations are more agile, and therefore able to create attractive customer offers. Added to this, their brands are  untarnished by the scandals of recent years. Compared to traditional financial services organisations, they offer a radically different and more innovative customer experience, and exploit all the power of digital to bring these to market.

Metro Bank, ATOM and Starling, and a growing number of supermarket banking propositions, are signs that these competitors can no longer be ignored. Indeed, the context for new entrants is only going to get more attractive, with 50% of people in a recent banking survey, saying they would be likely to take up banking services if they were offered by the likes of Amazon, Google, Apple or Square.

Ambition does not match reality

The good news is that financial services firms have recognised the need to respond. In recent PA research, product innovation and customer service were cited as the two top priorities for senior leaders seeking to achieve growth within financial services. The bad news is that, to date, they have been slow to make the changes that will create a truly great customer experience. Whilst 90% of senior leaders felt that that customer focus was embedded across their organisation, only 40% indicated that they were satisfied with the current results.

In a separate study, responses to PA's digital barometer survey show very clearly the nature of the problem. Senior leaders across IT, marketing and operations in over 600 firms showed there is no shortage of ambition to improve customer experience, but huge frustration with the speed and nature of change. So 62% of the respondents said they wanted to be digital businesses, but only 8% felt they were well on track to achieving that ambition.

The replies to the detailed questions about digital readiness were even more discouraging. Only 13 % of organisations felt they were able to deliver a customer experience which was seamless and consistent across different channels and only 16% felt they were providing a tailored experience. The reasons organisations are not achieving their customer service ambitions reflect real cultural challenges. Respondents cited problems around people working in silos, and difficulties in developing processes and approaches which drive higher customer satisfaction. Another critical issue was a shortage of skills, with only 7% saying their organisation had the right skills to drive innovation in customer experience.

All this means that while the sector has many passionate and enthusiastic people with great ideas and real ambition, they have limited opportunities to make them a reality. So what does the Financial Services sector need to do to pick up the pace and achieve a digital transformation in customer experience?

Five key lessons

In many cases, the answer lies in changing established mind-sets and behaviours within the organisation rather than a complete and immediate overhaul of the entire business model and all the underlying structure which goes with it. The first lesson is that they need to stop thinking about products and think about people and what they really want. For example, we should think more about the full home buying process and all that entails rather than only focusing on the mechanics of the mortgage application process. 

The second lesson is to treat customers as an extension of the brand and positively encourage them to talk to each other. A stronger connection to the customers helps to define and refine the service offering and generate real interest that encourages customer loyalty.

The next critical feature is for financial services providers to think about data as source of competitive advantage. At the moment there is plenty of rich data gathered as part of many aspects of the FS cycle,  but at times it can be very hard to turn this into genuine customer insight which can give a firm an advantage. . It tends to be locked away rather than treated like a valuable asset that can provide the more personalised services that drive business growth.

The next focus needs to be on connecting experiences across the channels and making it easy for customers to toggle between them. Our experience shows that while digital channels will become dominant, the branch, contact centre, and other intermediaries will retain a key role in delivering the service to the customer.  The term Omni Channel is now ubiquitous, but we feel it is a genuine area where firms should invest.

Finally, companies should not be afraid of letting parts of the experience be delivered by others. The FinTech revolution has spawned a range of innovative and radical companies who are not worried about owning every part of the value chain. Firms should embrace these organisations and not see them as a threat but a way to inject much needed innovation and entrpeneurial spirit into parts of the customer lifecycle. We have started to see some of this with activity from the likes RBS, who recently announced the creation of an Accelerator Hub for up to 80 entrepreneurs within its Edinburgh headquarters.

So how do companies make this happen?

Our research shows that leadership is key, and there are many elements that need to be driven in the right way for innovative customer experience to become the norm.  Business leaders need to take an agile and courageous approach in order to make a lasting impact. Organisations such as First Direct or Direct Line would not have managed to change the market without their visionary leadership and this next customer experience revolution will require equally bold leaders. They will then need the structure and skills to put the vision in place through using centres of excellence and employing talent from outside the industry. They also need to facilitate a culture that supports experimentation and innovation.

Then there is the perennial problem of technology and the particular issues around legacy IT. In PA's digital barometer 71% of respondents said their technology and legacy systems were holding them back. The work we have done suggests the solution lies the development of different operating models for the technology function. This should allow nimble and agile developments in some areas but ensure the back office is underpinned by the solid IT infrastructure.

It is easy not to do this. All firms are struggling with competing priorities and are often tempted to put off work to develop the customer experience. Yet this is a recipe for failure. There is growing evidence that organisations that have adapted and embraced new approaches to customer experience have seen share price growth, improved market share and an improvement in their customer satisfaction or net promoter scores.

In this decade of disruption, the winners will be those who think and act differently to drive real innovation in how they meet their customers' needs.

To learn how we help financial services organisations become customer centric organisations, visit

PAnorama Solvency II Financial Services


Contact the pa consulting group in Scotland

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