The financial services market has undergone an unprecedented structural change over the past decade. Financial firms now face a number of challenges in a post-crash market, including more stringent regulations, a more demanding consumer, competition exploiting disruptive business models and how best to integrate new technologies internally.
Responding to 21st century problems in an industry still heavily reliant on 20th century processes is a daily challenge for financial marketers.
Here are some of the problems facing marketing departments within the financial services industry and what can be done to help overcome them.
Regaining customer trust
After the reputational battering the industry has taken over the past few years and with only 32% of people saying that they have confidence in banks, financial marketers have the tough challenge of improving the way that their brands are perceived by customers.
With threats from disruptive, agile new business models and declining brand loyalty among customers, the industry is beginning to place increased importance on the customer.
There are a number of short-term measures that marketing departments can undertake to assist in the acquisition and retention of customers:
- Invest in data analytic tools - Using analytics to understand how customers interact with your brand digitally can help identify frictions and inform marketing strategies going forward to create a more personalized user journey.
- Take steps to become more transparent - Traditional financial services must learn from challenger brands, who provide a certain level of transparency by using data they collect to improve their service offerings - customer charters may feel like a gimmick, but if the intent is genuine to enact change, consumers will be more receptive.
- Don't forget about existing customers - Marketers often dedicate a large portion of their resources to the acquisition of new customers, but this shouldn't be the sole focus. It is important to create clear values and meet promises, even providing discounts and offers to existing customers.
- Deliver an experience - The dynamic between customers and banks is changing. Customers no longer want their banking relationship to be solely transactional; they want advice-driven banking that is personalized to their needs.
Challenging the challengers
In decades gone by, customers would be loyal to financial institutions from childhood to retirement. But as the market continues to change and new technologies are introduced, customer satisfaction and loyalty is steadily declining.
New entrants to the market are preying on weaknesses that customers in traditional financial institutions face, namely user experience and fees. Not only do Square, Apple Pay, and Google have the flexibility to bring new and improved products to the market in days, they also add convenience to increasingly tech-savvy millennial consumers who are twice as more likely to switch banks as other consumers.
The main threat to traditional institutions who have been slow to innovate is if customers get comfortable using these new technologies to transfer money, they may one day feel confident to use them to store and borrow money.
Financial institutions cannot respond to the threats generated by the new market entrants by turning digital overnight. But they still have a number advantages over the new upstarts, in particular the vast amount of data and advanced infrastructures to keep customer data safe.
If traditional firms can begin to utilize their data to identify key customer behaviors and insights to provide a more personalized customer journey, they will start to regain a competitive advantage over the disruptors.
Identifying how best to embrace digital
Digital creates a number of opportunities for the financial services industry in terms of customer acquisition and retention. However, the relationship between large financial institutions and digital is often fraught with difficulties, due to the amount of planning, compliance and internal factors to consider.
This makes it difficult for financial marketers to modernize and be agile in an ever-changing marketplace. It took Barclaycard a year of building a social media strategy and to reassure teams internally before they even sent out their first tweet.
Consumers now expect seamless real-time social and mobile experiences from brands, but the channels often provided by financial institutions are primitive and uninspiring; struggling to combine security and compliance with better functionality.
The basis of any digital transformation project needs to be customer-centric, going beyond conventional encounters to decide which mix of digital channels that institutions should focus resources on.
Financial institutions must ensure that their digital transformation strategies improve:
- Customer experiences - Data analytics allows institutions to understand how customers interact with their services - providing the basis for a more personalized journey and continued improvements that reflect changing behaviors.
- Distribution of services - With the changing role of brick-and-mortar branches and the growing importance of digital, the service mix should be informed by data to make the most of changing patterns in channel usage.
- Brand loyalty - By becoming more reliant on data analytics that digital affords, financial institutions can tailor advice, develop products and provide offers relevant to individuals across their product range, that new market challengers will struggle to compete with.
No longer loyal to financial institutions, today's consumer now has the option to move fluidly and independently between different providers, which poses a real threat to the financial services market. The new entrants to the market have built agile, convenient digital experiences that customers now expect. If traditional institutions do not adapt, they face being left behind.
This post originally appeared on Decibel Insight's blog