What Does Banking Need More: Customer Experience or Product Innovation?

If retail banking products are a commodity then product innovation would seem to have the clear edge. Don't be too quick to decide, however. Four retail banking and marketing experts debate the merits and roles of CX and product innovation in shaping banking's future.

Service is in banking’s soul. It’s a core part of driving growth. In fact service could be called banking’s most differentiating offering, because banking is largely the same everywhere. Industry standouts focus on how they treat people.

However, recent history in banking, especially fintech innovation, raises an important question: With fintechs winning so many new customers, does product innovation mean banking organizations can no longer depend on service to compensate for a commoditized product offering?

In a Forbes blog, Cornerstone Advisor’s Ron Shevlin answers that question in the affirmative. “Conventional wisdom… holds that [fintechs] win customers because they provide a superior customer experience (CX),” Shevlin suggests. “That’s not it. They’re winning customers because their products address the unique needs of the communities they serve.”

Over the past 20 years, financial institutions have convinced themselves — and let themselves be told — that their products are commodities, Shevlin said. “It’s not true. The allocation of resources is insufficient for product quality. Financial institutions can get more bang for their next buck of investment from improving products versus improving the customer experience.”

Has service — or “customer experience,” its modern corollary — fallen to the backburner? Should product innovation dominate banking’s budget? We asked three thought leaders to weigh in on the future of the customer experience in banking. I then added some thoughts of my own.

Poor Product Spills Over into Poor Experience

Hunter Young, Founder and President, HIFI Agency, a full-service marketing firm serving the financial sector.

Customer experience never was a winning proposition for financial institutions due to the reliance on fragmented vendor technologies and lack of consistent control over various customer-facing experiences.

“The age of product innovation in financial services is long overdue.”

— Hunter Young, HIFI Agency

The age of product innovation in financial services is long overdue. There will be clear winners in the various lines of business within financial services over the coming years. Many new banking features — examples include Buy Now, Pay Later and Get Paid Early — will become table stakes in the eyes of consumers.

Financial institutions and fintechs need to examine “share of wallet” through a new, more complex lens in the coming years as the battle for deposits and loans spreads farther outside the traditional financial institution.

Read More: Why Most Banks Struggle to Deliver a Killer Customer Experience

Customer Experience Isn’t Cookie Cutter

Brittany Hodak, Chief Experience Officer, Experience.com, a customer experience management platform.

As Ron Shevlin wrote, “Customers have many different experiences. Different customers want different kinds of experiences.” His question, “How can there be ‘the’ customer experience?” is on the right track.

Each customer wants and has different experiences. I wouldn’t conflate “customer experience” with the idea that there is one cookie-cutter customer experience that every customer shares. CX is not a singular experience replicated again and again and again; it’s a standard that the entire organization knows and strives to uphold in every interaction.

CX for financial institutions means a measured commitment to customer-centricity. Banks and credit unions need to ask:

  • Does the customer feel like their business matters and is valued?
  • What are the moments that matter?
  • How are they being measured?
  • How is the organization ensuring the customer feels the way we want them to feel?

I think we’d agree that technological innovations are a huge part of the customer experience. For example, one of the things I appreciated most during Covid-19 was when my bank raised the daily limit for mobile check deposits so I wouldn’t have to visit the bank.

“For an executive to decide that a financial institution should not focus on CX is both short-sighted and dangerous.”

— Brittany Hodak, Experience.com

But that’s not all. The way your lobby is designed is customer experience. So is the hold time on the phone. Everything is CX, and details are everything when it comes to a cohesive CX strategy for a financial brand.

For an executive to decide that a financial institution should not focus on CX is both short-sighted and dangerous. Customers are more influential today than they’ve ever been before. When given a chance to give your business to a company that cares about you or one that does not, the choice is clear.

Figure out how you want customers to feel about your brand and work backward from there to build a cohesive CX strategy everyone on your team can stand behind.

Read More: Two Big Trends That Will Change Banking Forever

Always Place Customers at the Center

James Robert Lay, Founder and CEO, Digital Growth Institute, and author of “Banking on Digital Growth: The Strategic Marketing Manifesto to Transform Financial Brands.”

Customer experience and product innovation are both about putting people at the center of their thinking and doing. The danger for institutions going down a path of product innovation, historically, is that they tend to develop or optimize products internally, in a vacuum, without talking to those who use the product.

“The danger of a going down a path of product innovation is that financial institutions tend to develop products in a vacuum.”

— James Robert Lay, Digital Growth Institute

This peril was recently shared by a banking chief marketing officer at a recent consortium of financial brands. The CMO, who worked for a global financial brand, had developed products without market research. By neglecting to put people at the center of their thinking, new products still lead to a poor experience, and therefore to missed growth opportunities.

Read More: The 6 Process Pain Points that Kill Banking CX

Product and CX Combined Through Customer Centrism

Now, my two cents.

The customer touches all things: staff, products, website, or mobile app, which suggests financial institutions should not seek a silver-bullet like product innovation to grow.

Take, for example, cryptocurrency leader, Coinbase. It now offers banking services to 73 million customers. Consumers download the Coinbase app because they want to invest in cryptocurrency and cannot do so from their primary bank. They grow customer use of Coinbase because the company is great at CX.

Download their app, and you’ll see a strong education platform that allows consumers to choose which cryptocurrencies they learn about. The company also incentivizes education by giving cryptocurrency to customers who complete courses. They achieve education, adoption and usage all in one.

Will fintechs like Coinbase retain customers once crypto investment has become table stakes in banking? Banks and credit unions need to be customer-centric, which can mean launching new products, but technology tends to become ubiquitous over time.

“A new product can provide growth in the short term, but financial institutions need a strategy that retains customers for their lifetime.”

— Joe Welu, Total Expert

A new product, properly targeted at customer pain points, can provide growth in the short term. Financial institutions, though, need a strategy that both wins and retains customers for their lifetime.

The customer experience industry has also seen its own explosion in innovation. In fact, technology has so melded experience with financial products that product innovation is available simply by improving CX.

Here’s what I mean: For financial products, time is money — both for the consumer and the financial institution. If a bank or credit union uses data to communicate a refinance opportunity at an advantageous time, that communication — i.e., the customer experience — has enhanced the value of the loan for the customer.

CX, especially with the right technology, allows financial institutions to dust off their time-tested offerings by thinking about the customer’s best interest. Product innovation and CX should combine to the benefit of both the consumer and the bank.

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