The most interesting things happening in financial services are not happening in financial services. Thanks to a slew of new and older digital apps and websites, such as Apple Pay, Venmo, Square, Mint, and PayPal, kids can borrow money from their parents via text message or sign for a pizza delivery (including tip) on their phones. Families can use analytic tools to drill down through their own financial data to see where their money goes and how to cut spending. These tools have made every aspect of financial management—including transfers, payments—incredibly intuitive and easy.

Unfortunately, the financial services sector got left behind when the digital revolution hit. Now they need to catch up.

Since automatic teller machines were first rolled out in the 1960s, followed by internet banking in the 1990s and mobile banking in the late 2000s, consumers have come to expect 24-hour access to their checking or savings accounts no matter where they are. Certainly, these inventions have helped meet this demand but they were mainly created to process transactions, often omitting a focus on the customer experience. Still, the most useful and powerful cross-channel, digital tools rolled out in recent years were not introduced by banks, but by tech companies that understood how to use the Internet, data analytics, and mobile technologies to solve consumers’ day-to-day problems.

Where Do Banks Stand in the Digital World?

Right now, banks are among the least popular consumer businesses. They aren’t in a position to provide significant interest on savings accounts, and they’ve become increasingly reliant on fees to keep consumer banking profitable. In the meantime, they haven’t done enough to improve or enhance the banking experience. The customer hasn’t come first in the eyes of financial institutions for a very long time, partly because retail banking is often the least profitable part of a financial services firm, and partly because the industry is reluctant to let go of legacy business practices or face the challenge of modernizing. With banks and credit card companies seeking to leverage third party services like Apple Pay, they may be looking to change this, but it’s too early to gauge whether customers will respond.

Account holders can’t access very much of their own data (in many cases they can only see the most recent year’s statements online) and are limited to viewing account balances, rather than sorting raw data to see, for example, how much money was spent on groceries over 63 days’ time. Also, the fees for the most basic of services are widely considered excessive. (By one account, the average monthly fee is between $12.50 and $14.63, and overdraft fees are typically upwards of $30.) It’s no surprise that startups from Silicon Valley and around the world are lustfully eyeing the space—known as fintech—under the belief that they can provide better financial services with lower fees than the big banks that dominate the sector today.

The key challenge for financial institutions is to figure out how to use a cross-channel approach that includes mobile to reshape the customer experience by embedding the experience into the customers’ life with budgeting, paying, planning, etc. This is especially key as a whopping 91 percent of mobile users keep their phones or tablets within reach 100 percent of the time and over 400 million users rely on mobile banking worldwide. Financial services firms need to connect with their customers wherever they are—often on the go. Banks could roll out, for example, budgeting apps or websites that would send periodic status updates so consumers could see how close they are to meeting their financial goals. Or, if they fail to meet their goals, they could receive spending summaries detailing which transactions threw them off course.

Unique Opportunities to Approaching New Technologies

Unfortunately, banks also have a complex problem: Many of their practices and much of their data is heavily regulated. In recent years, most efforts to change have been focused on complying with federal regulations rather than on improving services or streamlining basic operations. Financial institutions that are serious about evolving across multiple channels in the shortest possible time must develop them separately from back-end systems as much possible.

Mobile is an incredibly important first step in a purely digital transformation, but organizations need to think outside of channels to really put the customer first. Financial institutions have a plethora of customer data that other industries don’t necessarily have access to, which, by using analytics, could give them insight into user behaviors and preferences that has previously been unavailable. This insight from analytics could help banks transform the customer experience with personalization.

Data analytics has allowed a wide range of industries to offer unprecedented levels of customization

Often, design is considered a creative process. While still rooted in user research, it’s becoming more and more a data-driven process that uses analytics and customer insight to ultimately create better hyper-personalized user experiences. In the traditional banking world, the roadblock is that most of the data isn’t shared across the organization or can’t be used for certain reasons. If banks could leverage this data across the institution and use analytics to harness valuable insights, they could improve the effectiveness of their channels while enhancing the overall customer engagement and experience across them. Traditional financial services institutions need to realize this new role of data in their user experience design while also becoming more flexible, nimble organizations to keep up with fintech.

Rethinking the User Experience

Optimizing customer experience requires a holistic understanding of the user and a willingness to change. In some ways, this is where banks fall short. They already have more than enough information about their customers, they just need to figure out where the data is and how to use it effectively, which is easier said than done but also a necessity. The roll out of new mobile apps and other cross-channel experiences will exponentially increase data generation as more people use their phones, watches and more to interact with insurers, retailers, airlines, mortgage brokers, and so on. The better banks understand their customers—and can build models based on rich user research, analytics and evolved “personas”—the better they’ll be able to improve services to meet today and future customer demands.

Banks don’t have to open offices in Silicon Valley and hire an expensive army of developers in order to make this happen. They do have to draw up a strategy, though; and more importantly, they need to listen to their customers, who will determine the look and feel of the user experience. A recent IBM survey of C-suite officers found that customers only come second to the C-suite in terms of how much influence they have over the strategic direction of a company. Data analytics has allowed a wide range of industries—from entertainment to healthcare—to offer unprecedented levels of customization for customers. Banking will not be left untouched.

In some ways, changing the user experience requires a cultural shift within the organization, too. Most divisions within a bank work independent of one another—even though they may have many of the same customers—and they seldom share data. One account holder could have three or four different relationships with the same bank. That’s obviously redundant. It’s up to businesses to tightly integrate operations behind the scenes so that every interaction with a customer is thoughtful and meaningful.

Conclusion

Certainly, a redesign of the user experience in the banking sector isn’t something that can ever be completely finished. It’s an ongoing process focused on user centricity. If it’s done right, customers drive the changes, which are backed up by data analytics and incorporated into a corporate strategy. Banks that have a detailed and accurate understanding of their customers can provide the best possible service for each and every individual—the segment of one. Banks that don’t, could find their businesses getting eaten alive by the disruptions of startups.

 

Image of miniature people on coinscourtesy Shutterstock.

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Comments

There are some interesting things happening in personal savings. I wrote an article on three services - Betterment, Acorns (and my favorite), Digit. Each allow you to save and manage money in a different way, and have very intersting takes on what the user is looking for from their savings experience. 

 

http://blog.gfk.com/2015/02/user-experience-is-disrupting-the-financial-industry/

An interesting enough article but you forgot to preface it with one HUGE caviat, you're talking about banks in the US. In the UK, while it's not entirely different from a legal/regulatory perspective, a whole lot is different about the experience of online banking as a retail customer. I can export as much data as I want and import into spreadsheets, or into programs like 'Money' in order to run analytics myself. I can then work out for myself how much I spent on groceries, or clothing or petrol or whatever. Okay, so it can't tell me how much I spent on (for example) cookies, I need to break that down myself, but I don't want my bank to have that level of granularity on my spending or the power to offer me health insurance if they think I eat too many cakes; that's where the data/privacy rubber hits the road. There's always room for improvement, sure, but it's a fine line and banks have to weary how they tread in their efforts to improve.

Thanks for your comment Nerd Stalker, while I do mention the regulation complexities that banks have to deal with in the article, it is an area that could certainly be expanded upon. So you are correct - there are many pressures and it will continue to be a focus, but the over-rotation on it has cost banks from a UX and customer engagement/experience standpoint. That said, the need to deeply understand the user, leverage analytic insight available and enhance the customer experience needs greater attention, which we are starting to see amongst financial institutions. Otherwise, they run the risk of regulating themselves out of business. Generally, what is needed most is sponsorship from the top down to move toward a design led approach and culture shift. 

Banking services span significant client bases. This refers to consumer banking, which is only a portion of the industry. Consideration for complex business rules, global regulations, data complexity and the span of usage of products such as reporting, data analysis, transactional services, high-level and low-level entitlements challenge those of us in the UX world designing in this segment.

I don't contend with Mr. Berkman's observations having already independently advocated for greater collaboration, data mining, implementation of predicitive analytics, etc. within my organization. I'd like to ensure readers appreciate it's a very complex challenge to solve that will take time and we are very aware of the changing landscape.

A glaring gap in this article is the complete omission of the effect of the current stringent regulatory climate on banks. They are flooded with security, risk and audit concerns it borders on paranoia, this shift focus away and opens a potential huge opportunity for startups.