The pandemic has accelerated a tech-first approach to finance, and with Banking-as-a-Service and Embedded Finance gathering speed, the near future looks exciting for both consumers and businesses.
A lot is being made of the ‘digital transformation’ in banking and financial services - and for good reason. The pandemic has accelerated a tech-first approach to finance, and with Banking-as-a-Service (BaaS) and Embedded Finance gathering speed, the near future looks exciting for both consumers and businesses.
However, most of the conversation around digital transformation hasn’t gone any further than back office processes. Yes, making improvements to what is happening below the water-line is important, but the bigger opportunity is to enhance the customer experience.
Multi-currency accounts, cross border payments, frictionless transactions and virtual IBANs have huge potential, but we need to make sure improvements aren’t just made behind the scenes. In other words, if you fix what’s under the hood but the car still isn’t enjoyable to drive - who’s going to buy it?
Customer experience plays a huge role in whether a potential customer buys your product or service. A survey conducted by PwC found 73% of people point to customer experience as an important factor in their purchasing decisions. Customers vote with their feet, and those decisions are shaped by their experiences.
For financial services, this problem is particularly acute. The PwC survey found there is a 20% gap between the experience financial services offer today and where consumers expect them to be. This ‘expectancy gap’ is one of the largest of any industry. This is the battleground where financial services companies will win or lose in the coming years.
Focusing on the customer presents a clear opportunity to businesses currently deliberating how to transform themselves digitally, but considering how crucial it is to get right, where do you begin?
When making changes to customer experience, you have to start with the context in which a service is being used. The design, UI and functionality of the product or service becomes less relevant if the way customers use it has changed.
This idea is particularly relevant in the post-pandemic era. A customer experience report from KPMG found consumers around the world believe they will be living their lives very differently for the foreseeable future. They feel more vulnerable, less secure and less in control. Both physical restrictions and emotional/mental changes need to be considered when making adjustments to customer experience. This is an ever changing dynamic that you should constantly monitor and understand in order to improve your customer experience.
One of the most effective ways of doing this is through customer journey mapping. This is an explorative process in which you fully focus on the customer’s needs and preferences instead of your own. You should seek to understand what your customers do regularly, how they spend their time, what their habits and schedules are, and what pain points and joys they encounter along the way. Only once you understand this should you start to think about how your customer experience can best be improved.
This approach ensures that customer experience is driving innovation, instead of being considered as an afterthought to innovation. As such, it is also likely to set you on the path for digital transformation.
Embedded finance is the inclusion of financial and banking services within another product ecosystem, often delivered via API. So seamless is this approach, many have commented that within the next 5 years ‘everyone will be a fintech’.
This is, ultimately, fantastic news for the customer. The KPMG study found ‘personalization’ was the leading driver of customer loyalty across 19 of the 27 markets it surveyed and ‘integrity’ was the leading driver across six others. You can’t get much more personal than services being directly within a product you use for personal reasons (shopping, transport, social media) anyway.
This approach also benefits financial service providers. PwC’s report found that customers expect technology to always work. By embedding services within another ecosystem they do not need to worry about building out new, easy-to-use interfaces with guaranteed uptime - they’ve already been built for the end user.
Finally, this new level of access to financial services benefits the industry as a whole as companies with global ambitions will find it easier to expand into new markets. While regulatory challenges will still exist, deeper collaboration and integration will facilitate businesses providing financial services in a customer-centric way, wherever they operate.
In summary, taking a focused, thoughtful view on customer experience isn’t just good for consumers, it aids digital transformation and brings the whole industry forwards. The more businesses are able to realise that the more success they are likely to experience.
If you’d like to hear more about the financial services OpenPayd, get in touch today.
We’re sure you’ll understand embedded finance by the end of this article.