What FIs Don’t Know They Don’t Know About Their Customers

When it comes to long-term consumer relationships, few businesses can top banks. They tend to keep ties with consumers over decades — and, sometimes, those ties can last generations for families. At the same time, financial institutions (FIs) typically know much less about their customers than do social media platforms, streaming content providers and other big players in digital payments and commerce.

That’s one of the ironic choke points of the digital economy, a situation that takes on more importance and stakes with the rise of financial services startups and FinTech providers all over the world. That includes Canada, where — as discussed by Karen Webster and Christian Ali, country manager of Canada at authentication services provider Entersekt, in a new PYMNTS discussion — some 47 percent of consumers consider themselves digital-centric when it comes to banking, with about a third saying they are digital-only.

However, the complication there is that those digital-only banking customers tend to be significantly less satisfied with their banking experiences. Ali and Webster dug deep into the reasons why, as well as how to update and, in some cases perhaps, even reinvent banking services to fix that problem before it becomes serious — something that could mean the difference between survival and failure in this expanding world of digital financial services, payments and retail.

Customer Experiences

“Consumer experiences have changed,” Ali said, explaining those low satisfaction rates. People who basically live in the digital realm — who tend to interact with FIs via online and mobile channels instead of via physical branches and human tellers — are used to web platforms knowing more about them than they might know about themselves. Product recommendations stand as one example of that digital intimacy, as do the dialogues and conversations that digital operators have with their customers.

Banks, meanwhile, are often stuck in a transactional state of mind, focused on a relatively narrow part of consumer life and not the holistic view that younger consumers especially are increasingly demanding.

In short, when it comes to consumer habits and our daily lives, digital is basically enabling what Ali called a “revolution,” allowing digital commerce and payment operations to employ data in an effort to gain intimacy with their customers. FIs are way behind, though, even though they have that long history with their customers. As Ali told Webster, FIs don’t easily know about their customers’ life changes (as other platforms do), and don’t easily know when “you have kids or change jobs, or get married.” That’s a serious lack of intimacy, and contrary to rising consumer expectations and demands.

Simply put, “digitally focused consumers have higher expectations,” Ali said. FIs that don’t step up their game and meet those demands “will have challenges,” while those banks that succeed will stand a greater chance of “having long-lasting relationships with clients.”

A few caveats before we go further.

Ali’s experience, as least related during the PYMNTS discussion, comes from a country that is ahead of the U.S. in payment card technology, as virtually all such cards in Canada are dual interface. The country also adopted EMV about a decade ago, before the U.S. In addition, the banking landscape in Canada is dominated by fewer FIs than in the U.S., where many banks and credit unions of all types are in operation, competing fiercely for customers. Still, the lessons gained from those experiences in Canada can, in one way or another, be applied to not only the U.S., but other countries and markets, too.

Omnichannel Push

Perhaps one of the main lessons — or insights — offered by Ali is what “omnichannel” should really mean when it comes to financial services and banks.

Right now, FI customers have multiple ways to access their accounts, depending on the channel. However, those points of access are not often consistent, and can, therefore, provide different customer experiences — some better than others. “But a true omnichannel experience,” he told Webster, “normalizes [those inconsistent experiences] into one consistent channel across all different channels.” In large part, “that means leveraging the mobile device,” the tool of choice among younger consumers and many others.

That also means finding that ideal balance between seamless, friction-free transactions and security, as well as knowing when to apply what Ali called “friendly friction.” Some types of transactions require more security and authentication checks, after all —  checks that most consumers would not only welcome, but would expect, assuming they have the right level of information and transparency.

Mindset is important, and that goes back to moving past the old, but enduring, mindset of transactions, instead of offering a fuller customer experience. During the PYMNTS discussion, Ali asked Webster to imagine the retail and branding experience of a generation or more ago, when it was enough to chase the loyalties that consumers attached to particular products — for instance, Coke versus Pepsi, or one particular restaurant over another.

“You would choose a product based on them being in the same category,” Ali said, “and one would be better than the other.”

Uber Influence

Those days have passed. Now, such determinations are based on the level of customer experience — the deeper and real meaning, Ali said, behind all those sayings that one service is an “Uber-like experience.”

FIs are certainly not immune to this general trend. In fact, as Ali noted, their survival and profitability in the years to come depend on them adopting that mindset, as well as collaborating with all those startups, FinTech firms, governments and other organizations to find new ways to innovate, and win over and retain customers.

That will require more than a bit of work — along with finding ways to move past legacy systems, old thinking and other sources of, ultimately, destructive inertia that will do more to doom FIs to the dustbin of history than to secure them spaces in the digital future.

“We are still in the infancy stage,” Ali said, but, in this digital world, things have a way of growing up fast. FIs that find the path to success amid all these changes and challenges can not only take advantage of their long-standing relationships with customers and communities, but use new data analysis techniques to learn from virtually instant customer feedback and consumer behavior patterns. FIs need to follow the path of social media and providers of online streamed content, as odd as that might sound to some ears, Ali acknowledged.

“Change is imminent,” Ali said, underscoring the immensity of the job ahead for FIs. However, it can be done, and a new mindset is a good starting point.