Customer expectations constantly evolve across all industries, and financial services are no different. Customers today demand more than secure and efficient access to their funds via reliable technology. They also want to trust their banking provider and receive personalized financial advice tailored to their unique needs.
Providing an exceptional customer experience (CX) in the financial sector is no longer optional – it’s essential. Meeting these high expectations is critical for fostering satisfaction, boosting retention, and building loyalty. With 91% of consumers identifying digital banking features as a key factor when choosing a bank, the role of CX technology has never been more vital. It’s about meeting demands and exceeding them to create lasting customer relationships.
Why Prioritize Customer Experience in Financial Services?
Customers demand fast, secure, and seamless payment solutions. However, outdated legacy systems and fragmented customer journeys often prevent banks from meeting these expectations, putting them at risk of losing business.
Many legacy core banking systems remain decades old, relying on mainframes for essential functions like account setup, deposits, and loan processing. In addition, disconnected communication channels and poor data visibility lead to inconsistent and inefficient customer journeys that frustrate users at critical touchpoints.
With 73% of customers considering customer experience a key factor in their purchasing decisions, creating smooth and effective payment platforms is essential. This need is further intensified by the fierce competition in the financial industry, where traditional banks face growing pressure from tech giants and FinTechs.
FinTechs are raising the bar by offering user-friendly, personalized, and efficient banking options, often supported by competitive interest rates and advanced technology. To keep pace, banking executives are allocating an average of 29% of their digital customer experience investments to machine learning and AI, recognizing these tools as essential for staying competitive and meeting modern customer demands.
Three Essentials for Digital Transformation in Banking
Modernizing Core Infrastructure
While customer-facing innovation is crucial, it relies on the foundation of a modern core infrastructure. Many banking institutions have traditionally prioritized compliance, security, and infrastructure over customer-centric enhancements. It has often resulted in outdated payment systems, inefficient authentication processes, and disjointed customer experiences. However, a growing focus on digital transformation and customer experience is beginning to address these challenges.
For instance, banks' legacy payment technologies often lack the flexibility and security to meet modern demands. While some systems feature password authentication on the front end and fraud detection at the bank’s end, they often lack integrated tools like risk monitoring to ensure the person using the password is legitimate.
The solution lies in transitioning to cloud-native, API-driven banking architectures. These modern frameworks support flexible, user-focused experiences and enable seamless integration of third-party products, offering more personalized and comprehensive customer services.
APIs foster ongoing innovation by allowing banks to scale capacity to meet fluctuating demands and deploy advanced tools like generative AI and automation. Furthermore, they provide a pathway to strategically replace outdated systems, reduce friction in customer journeys, and ensure smoother, more secure interactions. Banks can enhance customer experiences while staying competitive in an ever-evolving financial landscape by investing in this interconnected infrastructure.
Leveraging Data and AI
Data is now at the heart of almost every operation within financial firms, yet many continue to face challenges with fragmented customer data stored in siloed legacy systems. Research highlights that 66% of banks experience data quality issues, gaps in critical customer information, and incomplete transaction data spread across systems. Additionally, 57% of executives lack a unified view of their customers due to these siloed data structures and outdated technologies.
Artificial intelligence offers a solution by consolidating large datasets and providing advanced insights and analysis. AI enables banking firms to deliver highly personalized customer experiences while achieving clearer, deeper visibility into customer needs and behaviors. However, using AI in banking is under increasing regulatory scrutiny due to concerns over biased credit decisions and risks related to handling sensitive personal data.
Adopting responsible AI practices is essential for financial services. Partnering with experts in responsible AI ensures compliance with regulations, addresses concerns around explainability and bias, and enables the generation of actionable insights. By combining user research, data engineering, and responsible AI, financial firms can enhance customer experiences and ensure equitable service delivery. This approach allows banks to meet customer expectations and regulatory requirements, positioning themselves for long-term success in a competitive industry.
Integrating Experience Engineering for a Strategic Edge
Both approaches can converge within a broader strategy for enhancing customer experience in digital banking centered around Experience Engineering. This framework uses cutting-edge technology to address complex business challenges while focusing on the end-user experience.
Experience Engineering allows firms to adopt a structured, customer-first process to identify pain points and uncover unmet needs in the financial sector. Banks can integrate customer-centric solutions into every touchpoint by taking a comprehensive approach to customer experience design. This ensures that customer experience is not an afterthought but a seamless and personalized journey that stands out in a competitive market.
Modernizing legacy banking infrastructure plays a pivotal role in this strategy, as it helps eliminate friction points and facilitates the rapid delivery of innovative customer experiences. With user research, data expertise, and responsible AI, financial firms can leverage actionable insights to understand better and meet customer expectations.
In an era where customers are increasingly willing to switch providers if their expectations aren’t met, adopting Experience Engineering offers a robust way to retain existing clients and attract new ones. By embedding these principles, financial institutions can build a resilient foundation to deliver exceptional customer experiences that foster loyalty and drive growth.