Managing a customer-experience transformation in banking

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Regulation. Fickle customer loyalties. Nontraditional competitors. As if a decade of razor-thin margins and reputation issues weren’t enough, the mix of challenges facing global banks makes it easy to see why so many now voice a commitment to improved customer experience as a legitimate differentiator in an increasingly competitive environment. Of the 50 largest global banks, three out of four now pledge themselves to some form of customer-experience transformation.

The benefits of such a strategy have been increasingly clear for some time across sectors and geographies. As practitioners like Amazon and Apple have demonstrated, real value resides not only in the products and services a company provides but also in the way that it delivers them. A seamless customer experience can be worth at least as much as a superior product or efficient process — building customer loyalty, reducing costs, making employees happier, and boosting revenues significantly. One bank that undertook a customer-experience transformation concluded that the lifetime profitability of a satisfied customer willing to actively recommend the bank to his or her friends was five to eight times greater than one who had a negative perception.
Many leading banks are pouring tremendous resources into transforming the customer experience, often with mixed results. This is understandable. A customer’s banking relationship includes key journeys that range from onboarding and transacting to maintenance and problem resolution. Effective transformations must not only recognize the complexity of these relationships but must also make a priority of the parts of the experience that matter most — in order to manage the cross-functional, end-to-end nature of customer needs rather than deferring to existing organizational structures.

Depending on a bank’s customer-experience goals, transformations can vary in regard to the time and resources required. In our experience, a handful of elements are necessary to execute any program that will deliver durable impact. These include, among other things, a consistent focus on value, ensuring the customer’s central role in any transformation and the ability to scale a program. This article explores the ways that some banks have implemented these and other critical steps in constructing successful customer-experience transformations.

Failure modes

Customers are central to a wave of new opportunities and challenges facing banking executives, with regulators increasingly expecting banks to deliver on more than just credit-risk management and associated capital requirements. For example, regulators around the world increasingly examine customer complaints for examples of problematic sales practices and inadequate customer service. For the biggest banks, how they treat their customers is becoming more of a political issue, as any CEO who has been called before a congressional or parliamentary inquiry can attest.

Customers’ loyalty is also at risk. Banks face an expanding array of new competitors. The entry of companies like Alipay, Amazon Cash, Facebook Messenger P2P, WeChat and other services skilled at customer ease and experience may, in the longer term, disintermediate traditional banks from customer relationships and reduce banks’ distribution margins. Another consequence is that players outside the traditional financial-services industry are starting to set the benchmarks for customer experience in banking. Internet retailers and other e-commerce players typically sit atop customer-satisfaction rankings. Banks often lumber in the middle of the pack.
As banks pour more effort into improving experience, we find three missteps to be the most likely culprits when efforts fall short of the mark. First, many banks ignore the need to achieve early, quick wins to demonstrate value and build momentum for change. Teams eager to achieve dramatic impact set out to create moments of customer delight and fix pain points across all journeys or processes at the same time and are often overwhelmed by the complexity and costs of redesign.

For example, one bank moved to fix its full mortgage journey in a single, focused effort. Despite a large investment of time and money, however, its gold-plated solution proved too complex to implement all at once. Early impact never materialized. As payback deadlines loomed, the team couldn’t deliver convincingly on redesigning complex systems, processes or risk policies. Senior management balked at committing additional time and energy. The transformation never got off the ground and was ultimately abandoned.

Ironically, another way that customer-experience transformation efforts go awry is by leaving the customer out of a front-and-center focus in propelling a change effort. Despite the growing awareness of the value in superior customer experience, efforts to improve it are rarely held to the same rigor as an effort behind, say, a traditional productivity transformation. The customer’s voice is often left silent as change agents latch onto digitization to leapfrog competitors, self-service improvements, and revamped staffing models.

One payments player sought to improve its process of resolving customer disputes. It was considering a complete reworking of its technology to reduce processing time. However, after collecting customer feedback and conducting additional customer interviews, the company learned that the major pain point was not processing time but the lack of status updates customers received. By better understanding what was disturbing customers, the company was able to solve the problem with much less effort and with a greater likelihood of improving the experience.

Finally, banks often fail to set up transformation programs with scaling in mind. In complex organizations it is easy for change efforts to get stuck in the depths of business silos, even when the objective is to create a cross-functional platform for tracking customer preferences and improving outcomes. Efforts that don’t give customer experience the same top-team and board attention as large-scale productivity-improvement efforts, and that don’t devote the same resources to oversight and measurement, risk lapsing into cursory efforts marked by meaningless bulletin-board slogans such as “customer experience is everyone’s job.”Toward a durable transformation program

In our experience we’ve found banks increasingly finding success with “at scale” transformation efforts. These efforts define the bank as a series of customer journeys that can be reimagined and applied across functions and the organization as a whole. As value is demonstrated, larger and larger parts of the organization are included. In the early stages, such transformations take advantage of cross-functional teams that work within existing roles and in parallel with reporting structures. Over time, by emphasizing this type of agile collaboration, organizational structures can be revamped to deliver the new experiences sustainably over multiple years. The result is a transformation that delivers early impact and momentum and an opportunity to evolve as needs change, without the disruptive shock of tearing up an operating model in the fragile, early stages.

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