Financial services organisations need to focus on improving the customer experience if they're going to stave off the challenge from start-ups, but some are struggling to make the necessary changes.
Speaking at the AB+F Annual Retail Financial Services Forum in Sydney yesterday, Experian managing director, John Merakovsky, explained that analysis of customer satisfaction scores highlights why the digital battleground is so important.
While polls such as those carried out by Roy Morgan indicate that personal customer satisfaction within the banking industry is at an all time high, he said that this kind of headline result doesn't tell the full story.
"If it's at an all time high and we also know that the customer complaints through the ombudsman very largely come from the banking sector in particular, something's at odds here," he said. "It's really about how we interpret the metric, and therefore what we take from it."
Citing research from Harvard University into the five-point customer satisfaction scale, he said that there's a clear distinction between satisfaction and true engagement.
Researchers found that individuals that gave a company a satisfaction score of five out of five were six times more likely to repurchase from that organisation as those who gave it a score of four.
What this means, said Merakovsky , is that aim of the game should be to aim for customers who are 'very satisfied' rather than merely 'satisfied'.
"That's really the battleground in terms of being able to stave off the disruptors," he said.
He went on to explain the challenges that so-called 'beginners' are facing in improving their customers' digital experiences.
Experian's research, for example, has identified several key characteristics of these beginners – and they sit in stark contrast to those displayed by the 'progressive' organisations that are pushing ahead with essential reforms.
The research, which took in the views of over 100 chief marketing officers (CMOs), identified several difficulties that organisations are facing with the customer centricity drive.
Highlighting these difficulties, Merakovsky said that one bank's CMO went as far as saying that "we're redesigning the plane as we're flying it".
But it's the beginners who are facing the biggest challenges. These organisations were categorised as those that haven't brought leadership into the drive for customer centricity.
More likely, the champion of this cause would be battling from lower down within the company against the organisational strategy and lack of resources.
Drive towards digitisation
In addition, the beginners lack the data to progress. What they need in today's data driven world, he said, is to develop the ability to bring in data from multiple sources – and act on it.
"One of the barriers stopping that is not just the lack of data but the poor quality of the data that you do have," he said.
Another barrier is poor resourcing that doesn't allow different channels and IT systems to be integrated.
This is a critical issue, said Merakovsky, noting that "the difference between multi-channel and cross-channel is identity resolution between the two".
"You cannot service a customer in an omni-channel environment if you don't do that identity resolution between their social ID, their mobile ID, their email ID and their customer ID," he added. "All of these things must be integrated."
Finally, he said beginners lack measurement frameworks to track their return on investment (ROI) when it comes to the drive towards digitisation and improving the customer experience.
The 'progressives', on the other hand, are those companies that truly engage with the process of becoming customer centric from the top down – and allow this principle inform their strategies.
One of the key characteristics that sets these organisations apart from the pack is their use of agile methodology, Merakovsky explained.
He said that this agile methodology and the ability to move quickly is evident in all areas of the progressive businesses – from IT processes through to management styles – and this methodology allows them to use digital "to deliver quick wins".
Westpac's allowing customers to log in to online banking using their finger prints was a prime example of a quick win, he said.
What else sets the progressives apart from the pack? According to Merakovsky, they also allocate resources to the customer centric drive and take a long-term view, tolerate failure, enrich the process with third-party data, and measure their ROI.