bank vault

The financial service industry finally heard the message in 2015. For the past decade, industry experts have been telling top management they must be involved, and they must lead the digital transformation. 

Part of the problem with lending institutions has been that the executive ranks felt they were engaged, when in reality many leaders did not understand the depth and breadth of the change necessary for digital transformation. Many financial executives talk the talk, but don't walk the walk. They say the right words, but not many are actually pushing their organizations to deliver on a customer-centric organization. 

Until 2015.

This is good news, because customer relationship red flags dot the horizon: 71 percent of US consumers now view their banking relationship as merely transactional. The strong personal relationships with banks are a thing of yesteryears.

The good news is customers are — at least currently — sticking with their banks. So unlike the disruptions experienced in other industries, where customers defected in droves, financial executives have not received a midnight crisis call.

I predict 2016 will be the year banks overcome their consumer financial protection bureau (CFPB) constraints and start delivering what customers expect. Executives certainly realize that the indirect competition and the non-banks (PayPal, Amazon and Apple) are already delivering the experience customers demand.

2016 Will be the Year That ...

1. Banks make significant progress in moving away from their myopic focus on operations and back office systems to become more customer-centric

Conversations at the various financial conferences I attended this year were overwhelmingly focused on compliance and operations, mainly because of the CFPB regulations. Most have been unwilling, and to a degree unable, to create a customer-centric loan origination processes. The rampant myth I repeatedly heard in 2015 was that the government is dictating the form. However, a few lenders do understand how to be customer-centric and satisfy government regulations.

Findings from the J.D. Power 2015 US Primary Mortgage Origination Satisfaction Study revealed that lenders that focus on improving the customer experience of their digital channels are realizing higher customer satisfaction. And satisfied customers mean referrals and repeat business.

2. Banks will restructure and increase outsourcing to move more quickly and improve their customer experience

One of the key challenges for banking is that their current resources are buried in projects. In the past few years, six major banks started investing in fintech startups. I predict outsourcing will be a strong driver in 2016. However, changes will go beyond outsourcing because adding a capability doesn’t help you move faster unless you change the way you work.

Historically, banks have organized their thinking around product lines. This year, customer-savvy banks will organize their thinking around their customers. They will aggressively cross-sell customers on additional products and services. They will shake up the organizational chart so it can move quicker, increase the digital focus and better align with technology partners.

3. More banks will adopt agile processes

In addition to reorganizations, banks will also adjust how IT and marketing work together. Typically, companies create a huge IT department responsible for lots of projects that are prioritized and managed by traditional waterfall project methodologies. Progressive industry experts agree that the waterfall approach fails to deliver at the speed businesses need to move in today’s environment. Banks are realizing that it is more important to get to market fast and evolve to achieve competitive advantage.

When businesses collaborate with IT and adopt an agile approach to transformational digital initiatives, they not only improve their speed-to-market, they also are intimately involved in the process.

4. Banks will do more cross-selling and up-selling

Mobile devices enable a new payment paradigm and offer far more cross- and up-selling opportunities. If a finance company has a portfolio of a million car loans, it creates the perfect opportunity to cross-sell customers on a credit card, deposit account, mortgage or wealth management product. Time-bound contractual situations offer a unique touch point that only financial institutions can leverage. Lenders already have extensive information about the customer and can easily create a truly personal and relevant experience.

The good news is that the technology exists to easily cross- or up-sell customers. The personal microsite is an ideal mechanism. Many customers use a personal microsite from the time they apply to the time they pay off a loan. Delivering information to customers this way increases the relevancy of the message, which is a huge competitive edge for finance providers.

5. Financial institutions will focus on relevant data vs. a quest for big data

I hear very little big data talk around the planning tables. The discussion is about identifying and leveraging relevant data. The 2016 buzzword will continue to be relevancy, for good reason. A relevant experience is what engages customers.

The good news is that small data really holds the majority of the relevant, more personal information that creates a great customer experience. Unlike big data, which requires significant analysis to uncover patterns and insights that may or may not be useful, small data is specific and can be real time. It is also much easier to mine, manage and use.

The fight for the finance customers is on. For the past few years, bankers have been sitting on the sidelines watching the fintech start-ups and nonbanks compete for their customers. This year, I predict the bankers will start throwing some punches.

Title image CC BY 2.0 by  heldermira