Post 1 on digital transformation: Why Customer Experience is NOT the proposition for Digital Banks


For many years, banks have been advised to focus on customer experience and it has become very much a C level issue, with some banks going as far as appointing a Chief Experience Officer. Wikipedia defines Customer Experience as:

“Customer experience (CX) is the product of an interaction between an organization and a customer over the duration of their relationship. This interaction includes a customer’s attraction, awareness, discovery, cultivation, advocacy and purchase and use of a service.”

However, for many of us not from a marketing background, we couldn’t see the fuss. Surely every bank makes their website as attractive as possible, or their online banking as easy to use as possible? Can banks really compete solely on this kind of “experience”?

Of course, as a technologist, I am not meant to understand; this is the domain of the creative marketing teams. However, even speaking to bank marketing managers I found many lacked clarity about their customer experience strategy, sometimes not even understanding that a strategy was required.

Yet if you swap the word “experience” for “proposition” and start talking about “customer value propositions” things start to make much more sense. Indeed banks that shifted their focus like this even publish their customer value propositions online. For example, OCBC in Singapore make clear it is the solid credit rating, best in class products and expertise that provide a compelling proposition of leadership for their customers.

Charryse Scapignato of Macquarie in Australia, provides a useful six point checklist of how to create a strong value proposition.

  1. Does it resonate with your target market?
  2. Is it clear, simple and succinct?
  3. Does it really set you apart?
  4. Does it sound good when you say it out loud?
  5. Could it trigger a conversation?
  6. Is it true?

For digital banks, creating a highly targeted offering for finer segments will allow them to successfully differentiate and provide value to customers. After all, many banks will claim to have fantastic customer service, market leading products or easy access through any channel.For example, in the UK looking at the student segment identifies over 2.3 million students in higher education, of which 1.5 million are first time degree students. Or if you take micro-business, and consider those with less than 9 employees, there are over 5 million. The point is that “niche” segments can be large opportunities and high street banks are still treating these like generic banking customers.

For digital banks, without the legacy of requiring “physical presence” and traditional marketing like printed brochures, there is a huge opportunity to leverage their cost advantage with targeted offerings for these segments. However, whilst the vehicle might be banking, the destination has to be a clear differentiated proposition specific to that market.

For students, it might be “the most rewarding bank” – a bank that seeks to understand all your preferences, hobbies and habits, and turn those into rewards and freebie promotions. After all, how many students would turn down a discount to see their favourite band or get a cheap meal? For micro businesses, it might be “the bank that works for you” – a bank that helps them easily keep track of business expenses, helps them with tax returns or offers to find the best P2P funding.

Whilst customer experience is important, banks wondering how to beat challengers should look to define a clear customer proposition by leveraging the benefits of going digital. As Bill Gates poignantly said, “Banking is necessary. Banks are not”. A focus on customer experience for banks only improves an existing bank; a focus on customer proposition can help redefine banking services. The former is cosmetic; the latter is transformational!

On the same basis, a bank’s approach to big data and API’s can also enhance or limit transformational banking… More to follow in my next post.

 

 

 

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