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Building customer-centric financial products for next-gen financial services users
In its “The State of Digital Banking, 2022” report, leading analyst firm, Forrester laid down the importance of customer-centricity in next-gen banking in a few simple words.
Here’s what the report stated, “The economics of the next decade will challenge banks to adopt a future fit technology strategy — rooted in customer obsession and enabling an unprecedented level of adaptivity, creativity, and resilience — or fail. Banks must capitalize on the pace of change and innovation and set their course for the next decade.”
The pandemic has fast-tracked digital behaviors, putting 3.6 billion digital banking users on the map by 2024. Moreover, financial institutions, particularly NBFCs, and fintechs, have become full-service platforms, providing products in areas including commerce, healthcare, mobility, and e-government.
In October 2021, the Wall Street Journal also came out with a straightforward yet effective statement that sums up how financial product modeling should develop in the future. It said, “Modern banks must provide the customer service and functionality required for the digital age, with a customer-first approach.”
So, what are the essentials of customer-centricity? How can financial services institutions, fintechs and NBFCs, build customer centric-financial products?
How to build customer-centric financial products?
1. Leverage Big Data to create customer personas that enable customer-centricity
Next-gen financial services cannot be transactional like traditional banking. It’s not enough to ask customers what they want. While gathering customer feedback is necessary, financial product planning should involve knowing the customer’s needs, values, and desires. And at the heart of all this lies infinite customer data collected at different stages of the customer journey — onboarding, customer support, etc.
A customer-centric model takes a 360-degree view of the customer to understand their needs and wants and make them feel valued. To build customer-centric financial products, it’s essential to leverage Big Data and build customer profiles segmented initially by demographics and then augmented by information such as attitudes, preferences, transaction history, credit rating, household relationships, technological preferences, and milestones.
For example, a milestone event such as marriage may bring the opportunity to build customer-centric products such as personalized home loan schemes with low-interest rates.
2. Predictive and proactive analytics to reveal customer behaviors and develop products that meet their needs
While playing with already available data to understand what customers need is a good strategy for NBFCs and fintechs, it is crucial to remember the power of data accumulated over time in the CRM systems in making predictive decisions.
Identifying customer behavioral patterns through predictive analytics can help financial institutions make proactive decisions about building new customer-centric financial products and services.
For example, based on the pattern of frequently asked questions that usually hit the customer call center, banks and financial institutions can design an online resource center that answers all such queries. This will reduce the overall burden on contact center agents.
Another example is if the customer’s transaction history shows a pattern of frequently eating out at different restaurants. In this scenario, the financial institution can offer him a personalized card that guarantees discounts and offers, for example, HDFC’s Diners Club credit card.
3. Designing product MVP, testing it, and collecting user feedback
Creating customer-centric financial products is easy when financial institutions develop a working prototype, a minimum viable product (MVP), to gather user feedback before launching the product or service at scale.
After the MVP is developed, it is launched as a pilot to understand if it works among customers. Users’ adoption behaviors are studied, including key performance indicators such as error rate, new customers acquired, turnaround time, etc. Consequently, one can use validated learnings from MVPs to refine the next set of MVPs before the actual product launch.
No matter what steps you take, product development should always revolve around customer value streams!
While the above steps are essential to developing customer-centric financial products, taking a broad eagle-eye view of the customer journey is vital.
Most financial institutions focus on the end journey, i.e., getting customers to meet their needs. They need to consider organizations and operating models that support this journey, often known as the customer value streams.
This includes front-end customer-facing interactions and back-end processes like operations, legal, risk, and compliance. The front-to-back value stream approach involves assigning agile teams responsible for project development, management, and change, including product delivery, build, and revenue.
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