Three Reasons Financial Institutions Fail at Digital CX

Offering digital services is not the same as executing an effective digital strategy. Using a test-and-learn discipline can help create a more agile approach, if several common roadblocks can be overcome.

Digital disruption is a significant concern for financial institutions and has become increasingly so during the pandemic. Many banking leaders recognize that while digital customer experience is critical to being competitive, it is often not prioritized internally.

Test-and-learn approaches have proven effective to meet customer demands and compete in card marketing and other use cases, but can be difficult to implement successfully.

Test and learn is a data-driven method used to quickly test hypotheses that can then be applied across a business unit or an entire business, according to Accenture. Quickly measuring and understanding the KPIs around these hypotheses drives decision making.

Today’s successful retail bankers don’t use their gut instincts to attract customers and grow their businesses. They also don’t rely on the highest paid person’s opinion (HIPPO) to define their strategy. They have people, processes and tools deployed to keep a constant pulse on what consumers want. Not surprisingly, a primary expectation among consumers — especially during this time of social distancing — is for financial services to be available digitally. From accessing financial information on the web to completing transactions on a mobile device, banks and credit unions must provide a seamless, always-on digital customer experience.

“An iterative approach with smaller launches decreases business risk by ensuring only tested, positively-received changes are introduced broadly.”
— Jo Ann Sanders, Optimizely

Offering digital services, however, isn’t the same as executing an effective digital strategy that retains customers and attracts new ones. Simply checking the box on digital experience can prove costly especially if it doesn’t deliver business impact. Banks and credit unions don’t have the time, resources or margins to guess which digital experiences will delight customers, and are turning to digital experimentation, or a test-and-learn strategy, to drive business results.

One survey finds that nine out of ten financial services organizations see a test-and-learn strategy as critical to keeping their businesses competitive. And more than half of financial services firms using experimentation-led strategies are reaping revenue gains of 10% or more.

For the rest, however, the road to eliminating digital guesswork is paved with challenges. Read on to understand common obstacles — and solutions — that banks and credit unions should be prepared to overcome to improve their digital customer experience and be more competitive.

Roadblocks to Adopting a Test-and-Learn Strategy

Slow, risk-averse culture. Even as fintech competition has exploded in recent years and more banks and credit unions adopt digital strategies, the financial services industry is still not inherently agile. Customer trust is priority number one, which has fueled an industry culture that launches new products and services cautiously and infrequently.

Changes to the customer experience and related services have tended to be fewer and more significant, and therefore, riskier. However, an iterative approach with smaller launches decreases business risk by ensuring only tested, positively-received changes are introduced broadly to all customers.

Aging infrastructure. Just over a third (34%) of financial services leaders say the biggest difficulty they face to enhance their digital customer experience is integrating new technology into a legacy infrastructure. In fact, more than half (57%) of all financial brands indicate that most of their products and services were developed in the pre-internet era!

Not all financial institutions can invest heavily in new technology to improve digital experience, and those that can will still require time to implement it. A good starting point for all financial brands is to assess what tools exist and can be utilized with greater reach and ROI across the business. Doing so is also key to breaking down organizational silos to establish a shared, holistic approach to customer experience.

Skills gap. Even if a financial institution chooses to adopt an iterative process and even deploy new technology tools, there is no guarantee the customer experience will actually improve. Test-and-learn approaches are still likely to fail if not staffed appropriately. Unsurprisingly 83% of financial services companies have identified the need to re-skill employees to better enable experimentation best practices. Having a team to oversee the use of test and learn throughout the institution and to cascade related learnings is a must-have.

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The Road to Becoming More Agile

Despite inherent challenges, retail banking providers can begin the process to adopt a test-and-learn culture starting immediately and without additional resource investments. At its core, a successful transformation is built on a commitment to deliver a holistic customer experience and facilitate cross-team information sharing. In other words, it’s as much about people and process as it is about technology.

Establish a “north star”. The first step to improve the digital customer experience is to prioritize it by establishing a customer experience “north star” that is shared across teams. A north star provides direction and alignment, helps teams track their progress and measure impact, and establishes shared accountability. While a north star may evolve, aligning the organization against a holistic direction helps coalesce employees to share their ideas, questions, insights and learnings — the fuel that powers an iterative, agile business.

Create a center of excellence. Banks and credit unions that successfully adopt a test-and-learn strategy assign accountability to ensure progress towards achieving their north star. Central ownership through a center of excellence or similar cross-functional team, with participation and accountability across the organization, greatly improves the ability to maximize people, processes and technology investments.

The good news is that banking providers have not abandoned experimentation in the face of these common, significant challenges. Once established, a successful test-and-learn culture will itself continue to evolve, and in doing so, enable banks and credit unions to effectively keep pace with changing customer demands and industry conditions to uncover more opportunities to increase competitiveness.

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