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The COVID-19 pandemic impacted two distinct areas in banking – digitalization and trust – in two very different ways. Even before the pandemic hit, the brewing tussle between traditional banks and tech-savvy newcomers had emphasized the importance of digitalization of banking and other financial services. The pandemic simply catalyzed the digital race, by several years.
The most obvious shift was the sudden, rapid, and effective move to integrate digital channels and online models of customer interactions. This transition was further driven by the shifting consumer expectations which had by then pivoted almost completely towards the instant and personalized services that had become the norm for the fintech-enabled newcomers.
But that wasn’t the only way customer preferences seemed to entangle with the digitalization of banking operations.
The move to capitalize digital channels was foundational in the fight to survive amidst the pandemic’s uncertainty. But as more interactions moved to digital channels, banks faced an unforeseen issue – a drop in consumers’ trust in banks. According to a survey by Accenture, only about 29% of consumers trust their banks completely to take care of their financial well-being. Three years ago, this number stood at 43%.
This has posed a new riddle for banks to solve:
In an industry where consumer expectations are driving digitalization, how can banks ensure a human connect with their customers?
The Commoditization Conundrum
In the general sense of the word, “commoditization” is a good thing. The standardized, almost indiscernible, characteristics of commodities are what allow them to be traded. The microeconomics sense of the word, however, is not as comforting for businesses. In this context, commoditization indicates a market in which competing products can barely be differentiated – a state of perfect competition. This is quite the opposite of what businesses want to achieve: a monopoly, or as close to it as they can get.
Let’s focus our lenses back on the banking industry and the financial services market as a whole. The advent of fintech made financial service providing capabilities accessible to anyone willing to pay for it. Soon the industry was witnessing the rise of numerous innovative financial service models such as neo-banks, commission-free brokers, and buy-now-pay-later (BNPL). However, the commoditization conundrum soon became apparent. Most of the products offering these services had evolved to become near exact replicas of each other. And technology is only good till it helps your competitors replicate your product.
One of the consequences of such a commoditized, intensely competitive market is the drop in profitability. Take the instance of UK fintech, Revolut, which reported its losses to have doubled to reach north of GBP 207 million. And other players showed a similar pattern of declining profits. The other consequence is a lack of relatability and subsequent loss of trust from consumers. And traditional banks that have adapted to compete in the newly emerged space are vulnerable to this disruption.
Empathy: Nurturing the Human Touch
Banks can leverage technology automatically match service responses to any given customer based on their economic profile. But so can everyone else. So, it’s no longer enough for banks to operate on a model of quasi-personalized products and services. That’s not to say that it is an obsolete approach. But banks do need to acknowledge the fact that accounting for a customer’s financial profile can only be used to enhance engagement through more personalized, empathetic responses.
To do this, banks must revisit their traditional banking channels with an objective to incorporate a human touch. This is especially applicable at sensitive digital interaction touchpoints, such as the zero moment of truth – when decisions are made by the consumer.
The current confluence of customers’ preference for digital channels and the evolution of digital banking solutions presents the perfect opportunity. By gathering large volumes of reliable data, banks can anticipate a customer’s intent. And that can go a long way in delivering more personalized services and experiences. Moreover, with the effects of the pandemic subsiding, governments have begun gradually pulling back financial relief measures. This has left many customers looking to their banks to empathize with their unique financial circumstances. In fact, 65% of consumers would like to receive saving tips based on their spend patterns. And 61% would like to gain access to budget information based on monthly expenditure.
Banks that offer empathetic, personalized services can differentiate themselves by gathering the right data and insights to enable more meaningful customer interactions. Incorporating empathy into the digital skillset can help banks view digital channels as simply a means to improve efficiency. Technologies like voice recognition along with speech and text analytics can be instrumental in better understanding customer emotions.
Technology plays, without a doubt, an indispensable role in introducing empathy in banking products and services. Xebia helps banks achieve the necessary digital maturity to help them leverage the latest technology to their full extent. To know more about how Xebia can help you be more empathetic in your customer interactions, reach out to us at connect@xebia.com.