Is your financial organization ready to preempt the disrupters? The next wave of financial disruption is clear: decentralization of banking services and products driven by consumer choice.
The momentum around Buy Now, Pay Later is just a segment of the larger wave. Consumers are trading known banking relationships for upstarts; trading familiarity for the promise of products with convenience, ease, and transparency. While the threats of these smaller organizations may appear distant, the foundations for rapid change are being laid through the growth of Banking as a Service (BaaS) vendors like BMTX and i2c as well as Open Banking standards being championed by FDX among other organizations.
Banking as we know it is changing fast. These trends are putting more control in the customers’ hands. And the breadth of choices means the landscape is more fractured, and in many cases, more specialized than ever before.
Buy Now, Pay Later Vendors Are An Example Of What’s To Come
Those of us focused on the US market will not see the next disrupters emerge until they are already competing with us in a significant way. And in many cases that will leave traditional players in a state of having to play continuous catch up.
Buy Now, Pay Later vendors Klarna and Afterpay are a great example of this pattern. After establishing themselves in Europe and Australia respectively they burst onto the US stage, shifting the market and maintaining dominance since before the 2019 Holiday season.
And it isn’t just micro-loan providers disrupting the financial services landscape. There's an increasing emergence of Fintechs making inroads into the banking industry as a whole.
Fintechs are Reimagining Banking Products for Superior Customer Experience
The United Kingdom is leading the world with Open Banking regulations and is acting as an incubator for emerging Fintechs. According to Crunchbase, Europe at large saw the emergence of 19 Fintech Unicorns in 2021 alone. And according to Mastercard, 474 companies are registered with a National Competent Authority to provide Open Banking in Europe after a 2x increase since January 2020.
And, European Fintechs aren’t focused only on ecommerce payments. They are creating new models to attack all lines of the financial services business.
· Revolut has wrapped peer-to-peer payments with debit cards and currency exchange.
· Kreditech is going after consumer loans using online activity to gauge credit worthiness.
· OakNorth Bank, Tide, and Billie are tailoring themselves to the needs of small businesses from deposits to lending.
The good news is, emerging Fintechs are not offering consumers significantly better or even different products than local bank branches or credit unions do. However, they are reimagining these products by packaging them with a digital-first mindset and tailoring to the needs of targeted, profitable customer segments. Put simply, they are creating a superior customer experience in the highest margin areas.
When viewed through this lens, the path to successful preemption of the Fintech threat is clear: Align your organizational strategy to targeted customer segments and then enable an optimized Customer Journey.
However, depending on your organization's CX maturity and data capabilities, that “simple” path could be clear as mud.
Take Your Financial Customer Experience to the Next Level with These Four Steps
g2o’s expertise helping financial institutions level up their customer experience knowledge to create strategic clarity is rooted in these four activities focused on uncovering who to target and how to create impactful moments in the financial CX journey.
1. Map the Customer Journey – Before rushing into a new CX strategy, map out and understand the journey consumers are taking through your digital products today. Use this information to identify key pain points, missed opportunities, common patterns, and exceptions to best practices.
2. Understand the Voice of Your Customer – Review NPS Surveys, customer complaints, chat logs, and even your website search data to identify the biggest gaps in your customer experience. Most financial institutions have mountains of data and struggle with sorting it meaningfully. It’s important to leverage analytics expertise to quickly narrow in on your impactful moments and greatest areas of opportunity.
3. Analyze Consumer Data – The goal shouldn’t be to only profile your largest demographic, but to surface hidden, narrow segments with strong profitability and high engagement. Use that data to help you look across your region or the country to size the market.
4. Set Alignment – Undoubtedly the prior three activities will uncover a wealth of information about your consumers and identify a number of potential initiatives to focus on. Which ones you prioritize should be driven by your organization’s strategy, financial goals, and competitive strengths.
Turning Strategy into Action
The last, and most critical step is to take the right action. As outlined above in step four, we at g2o recommend organizations spend time aligning their findings and their strategic priorities to create the necessary clarity to drive action.
Achieving strategic alignment on how to prioritize improvements in the customer journey for your targeted segments is 80% of the journey. But for this work to pay off, your organization need to prioritize execution. And while these new initiatives are critical to your institution’s future, your internal teams may not have the resource capacity to continue ongoing operations AND execute new direction at the same time.
Find the Right CX and Tech Partner for Your Financial Institution
At g2o we focus on using human-centered design to analyze, create and enhance the customer experience for our clients and we have the right teams in place to help you flex capacity so you can execute strategically AND tactically to keep your financial institution moving forward.
Investing the time to identify your gaps and align your business to a strategy rooted in your customer experience will undoubtly prepare you to withstand the wave of disruption. If you want a partner to help build your competitive moat, g2o’s subject matter experts are ready to help. Contact us today for a conversation.
Visit the other two articles in this series, Buy Now, Pay Later: Challenging Traditional Payment Methods and The Increasingly Important Impact of Buy Now, Pay Later for more information on the impact on traditional Financial institutions.