The Benefits of Banking Customer Engagement

Many financial institutions confuse customer experience with customer engagement. Customer experience is the perception that your customers have based on everything they see, hear, or learn about your company. Alternatively, customer engagement is the process of interacting with your customers across all channels to strengthen the overall relationship. Both the customer experience and the engagement process begins before an account is opened and continues through the entire customer journey.

To build a more positive experience, banks and credit unions can engage with customers on a per- sonalized basis via direct mail, email, social media, mobile banking platforms, websites, or any other channel where contextual interactions occur. The power of new technologies and digital tools assists in the most important component of customer engagement — listening. From monitoring transactions and customer inquiries, to asking for insights into financial goals, listening builds rapport and enables an organization to provide a personalized solution.

The goal of customer engagement is to offer customers something of value beyond your products and services. While products may attract customers initially, a differentiated contextual engagement is what keeps them around. A study by Gallup discovered that when companies successfully engaged customers, they reported 63% lower customer attrition, 55% higher wallet share, and overall performed 23% better than their competitors.

The relevancy of the engagement process is what makes customers engage with your brand. The level of engagement results in an improved customer experience. According to NTT Data, improved engagement and enhanced experiences provide acquisition and retention benefits as well as uncover cross-sell and up-sell opportunities at a rate that is at least 3x to 10x greater than pure prospecting. And, instead of building a product-based marketing cycle, the customer is being served at the time of need.

Using Technology to Drive Banking Customer Engagement

Technology is the engine that makes customer engagement possible. Customer data is the fuel for that engine. Modern engagement platforms use AI-driven tools as well as internal and external data to automate interactions ... Creating a personalized experience that encourages a prospect to open an account and a customer to expand a relationship.

The beauty of combining data, advanced analytics and modern communication platforms is that you can anticipate needs, create custom responses to inquiries at scale, build new products and services for micro segments, and re-target potential customers in real-time. By building a seamless, streamlined communications cycle, teams can focus on innovation, custom outreach, and learning from previous communication efforts.

A data-driven approach to engagement goes beyond the power of simple incentives and special offers to provide relevant content that customers value. As customers become more familiar with your highly personalized communication process, they will often go to your brand before others for future needs. If your content provides value (from the customer’s perspective), there is a much higher tolerance for increased quantities of communication. This equates to more opportunities.

Strategies for Successful Banking Customer Engagement

Customer engagement strategies in banking will work if they involve all areas of the organization (as opposed to just marketing). Creating an exceptional customer experience using powerful engagement strategies expands across the entire customer journey, using all channels and every department of your organization.

The insights from our research show that many banks are not prepared to create effective customer engagement. Most react to evolving customer expectations with ad-hoc fixes focused on customer experience.

Such peripheral tactics are expedient, but do not deliver the full impact of digital transformation. In fact, they often end up creating problems such as:

•  Channel silos leading to fragmented, inconsistent customer journeys

•  Closed systems that are not open banking friendly

•  Analytical friction preventing banks from anticipating and serving customer needs

•  Application silos that duplicate both technology stacks and costs

Banks need to break these silos with a holistic approach to customer engagement and experience management that puts customers at the center of every interaction, anticipates customer needs, and fulfils needs equally well on all channels and devices.

The key strategies and tactics to include in your digital banking engagement playbook include:

•   Know your destination. As with any initiative, you can’t reach your goal if you haven’t defined your destination. What will customer engagement look and feel like in your organization? What components can be implemented today, and which may have to wait? Will your engagement strategy include proactive recommendations based on data and AI? Will your organization build content that is accessible on demand? How will your employees be involved?

•   Engage your employees. Identify who in your organization will have a role in engaging customers and get their collaborative buy-in. This will help avoid any reservations around the process and help build a comprehensive strategy that engages the customer across channels and throughout the customer journey.

•   Identify your target audiences. Identify who you will be targeting for communication. Will you focus on only a single segment of customers, or your entire base? Once your target audience is selected, you need to understand the preferred engagement styles of sub-segments. For instance, who has shown a preference towards digital communication as opposed to in-branch engagement? Also, identify the financial needs of your target customer and what motivates their decisions.

•   Build content. Create content and a communication flow that is customer-driven. Make the content personal to the target audience and reflective of the insights you know about them. Provide solutions to the specific target audience’s pain points and measure the impact of your communication. Make recommendations based on past purchases or search history. Don’t be afraid to ask for customer insights at the beginning of the experience, using this insight to delight the customer as soon as possible.

•   Utilize modern technology. As soon as possible, leverage the most appropriate automation and communication tools that can allow you to simplify an increasingly complex engagement process and track results.

•   Measure results on a macro and micro basis. Monitor the success of your activities against the original goals and on a campaign basis. Gather feedback from internal teams as well as any third-party providers you have engaged in the process. Also gather feedback from the customers you targeted to determine what worked and what didn’t. Just monitoring sales results is not enough given the longer-term nature of engagement communication.

•   Modify tactics and strategies in real-time. The technology and tools available for a customer engagement process can provide immediate feedback on results. Leverage this feedback as it becomes available as opposed to waiting a month, a quarter, or a year in the future.

The Future of Digital Banking Customer Engagement

To acquire, convert and retain customers — and turn them into advocates — you need to engage them across channels and over time at every opportunity that creates value for your customers. The objective is to connect with your target audience in an appropriate, effective and meaningful way.

Successful banking customer engagement doesn’t eliminate the need for strong branding — it relies on it. While new technology and marketing communication tools can make the customer engagement process easier and scalable, it is also important to create a brand personality that customers will love getting to know and want to engage with. This brand personality must be evident in each communication.

Engaging with customers effectively sometimes means sending timely push notifications that require action and provide value. This very powerful communication tactic requires customers to subscribe for these notifications. By opting-in to receive these messages, they are already choosing to engage with your brand.

There are more ways than ever to engage with customers today. This means lots of opportunities for your financial institution to capture your customers’ attention and get them engaged. It also means that your competitors have the same opportunities. Whatever engagement strategies you employ, you must be consistent and ongoing through the brand journey.

As shown on the next page, it’s no longer predominately about being fast, efficient, or convenient. The pre-eminent performance metric with the biggest influence on customer satisfaction is ‘supporting customer during challenging times,’ and that means customers are expecting a personalized mix of financial advice, hands-on help with problem resolution and guidance on how to grow their money.

Failing to provide the level of engagement desired (the industry ‘meet rate’) will have a negative impact on trust and retention at a time when the competition for retail banking relationships has never been more intense.

Consumers Want Personalized Help Reaching Goals

Across the seven factors that drive overall satisfaction, J.D. Power found that ‘helping save time or money’ received the lowest score (582 out of 1,000). Even though this component of satisfaction is a lower-weighted factor, when combined with other factors, such as resolving problems and offering personalized solutions, there is an opportunity for banks to differentiate themselves by focusing on consumer needs as opposed to simply selling services.

When consumers were asked how they would like their bank to personalize their banking engagement, the top responses were related to ‘advice’ and ‘alerts,’ including alerts that could help avoid fees. Customer data-driven digital engagement (SMS texts, mobile banking messages and online banking warnings) provides the most common ways to achieve this level of targeted messaging.

As shown below J.D. Power found that different customer segments desire different types of personalized messages, ranging from ways to save money, to contextual offers, to just knowing the customer’s name.

Financial Institutions Understand the Need for Customer Engagement

It is clear that customers expect more from their financial institutions. They want their banks and credit unions to go beyond knowing their name and account number, to actually helping them along their financial wellness journey.

We asked financial institutions globally what they believed the customer desires and the benefits they expect from delivering an improved engagement experience. As can be seen, there is alignment between what customers desire and what financial institutions believe should be delivered.

7 Ways to Create Customer Engagement at Speed and Scale

To deliver the experiences customers expect, financial institutions must do more than just invest in technology upgrades. Increasingly, organizations must improve back-office execution that allows for business efficiency, customer experience improvement, and value creation. In other words, the focus on the customer requires starting from within the organization as opposed to simply providing a sleek app.

When deployed in conjunction with improved back-office automation, the combination of customer data and artificial intelligence (AI) can create new opportunities for personalization at scale. Unfortunately, as financial marketers and customer service teams turn to data-driven systems to gain deeper insights, automate decision-making and personalize brand experiences, there’s often a disconnect between the technology’s potential and what it delivers. This speed to market must improve.

Here are 7 proven ways to improve customer engagement at speed and scale:

1. Start Small.

The best approach to delivering personalized experiences is to start small and stay focused with your data and AI implementation. Collecting and analyzing customer data is only a starting point. You also need to develop content and strategies that match the customer at the key point of their journey in a personal and contextually relevant way.

2. Believe in Bots.

Compared to the chatbots of yesterday, today’s bots use natural language processing to translate requests to intent and AI-enabled knowledge to converse more naturally. This creates better conversations and more powerful conversational intelligence.

3. Move from Transaction to Engagement.

To understand the solution that should be offered is not enough. You need to understand how, when and where a customer prefers to engage. You

need to leverage the desired mix of digital and physical channels that the customer prefers and the communication channels that will reach customers to drive engagement (web, email, mobile, social media, SMS text, etc.).

4. Understand the Customer’s Destination.

To provide the tools needed to help your customer meet their financial goals, you need to understand their desired destination and the path they prefer to take to get there. Similar to a GPS system, you need to help the customer reach their destination with the least amount of detours and friction along the journey.

5. Deploy Insights Across the Organization.

The potential of data and AI is reached when organizations move beyond creating great reports to delivering exceptional experiences. This can only be achieved when the data and insights are shared across the entire organization, assisting all departments with enhanced customer engagement and improved innovation.

6. Deliver Instant Gratification.

More than ever, financial institutions must leverage technology, data and analytics, and cloud solutions to deliver insights with speed and accuracy. This requires the real-time processing of data to deliver instant engagement using the right channel(s) — seamlessly.

7. Illustrate Empathy.

Customers want you to know them, understand them and reward them with solutions that meet their unique needs. This requires that the design and implementation of AI consider empathy across all channels. While some of the listening and understanding skills can be automated, organizations must help agents create empathetic engagements that lead to brand loyalty and share of wallet.

Adding Value Across the Entire Customer Journey

Differentiating based on technological capabilities is becoming more difficult as digital tools increasingly look the same. The key is to find a way to create a unique identity and brand value on the internet.

As shown in the J.D. Power research, financial institutions must go beyond the basics of digital convenience to create increasingly better engagement opportunities. Banks and credit unions must predict customer needs, deliver proactive and personalized solutions, and add value at each step of the customer journey. All this must be achieved with hyper-personalized products and seamless interactions that are supported by a streamlined back-office.

Digital-centric customers should not be ranking financial institutions lower than branch-dependent customers. As stated in an article in the MIT Sloan Management Review, “By mining every touch point; aggregating structured data from customer profiles along with unstructured data from phone and chat logs, emails, and snail mail; and analyzing larger-scale patterns of customer behavior, it’s possible to create a level of personalization that would have been impossible to achieve in the offline world.”

The power of data and insight for delivering personalized engagement has increased exponentially, changing the dynamics of brand advocacy forever.

It is no longer enough to have an easy-to-use mobile banking app or to have friendly customer care professionals to answer questions or handle complaints. Today’s consumer expects their bank or credit union to anticipate their needs, provide intuitive engagement and improve their financial health.
The positive impact of a good customer experience is undisputed. In fact, companies that invest in improving customer experiences outperform those who don’t across multiple metrics. The challenge is that the expectations of consumers have increased exponentially in the past several years. Beyond simply avoiding errors and enabling fast and easy transactions, consumers expect their bank to use data and insights to help them save time and money and improve their financial well-being.

Unfortunately, financial institutions are not meeting these increased expectations. As the demand for digital engagement continues to increase, most banks and credit unions are missing opportunities to build deeper relationships because of slow deployment of automation and modern technology, and the lack of leveraging customer insights to partner with customers for a better financial future.

Bottom line, customers want financial services that are easy, transparent, intuitive, and empathic to their personalized needs ... Across the entire customer journey. Missing this opportunity will negatively impact customer interactions and will open the door to alternative financial providers.

People: Augmenting the Workforce for Better Engagements

Talent is among a bank’s strongest competitive advantages. Banks need to continually refresh the skills of their workforce to maintain the talent pipeline and differentiate their organization in the market. A contemporary skillset can be built by developing multidisciplinary skills, providing on-demand contextual learning and creating an agile workforce model.

The first calls for setting up a strong multidisciplinary skilling program, mapping competency across functions to identify skill gaps, and closing those gaps with the help of tools, technological enablers and learning platforms. On-demand contextual learning will keep the workforce up to date with new knowledge. Along with enabling the workforce with multidisciplinary skills and providing contextual on-demand learning platforms, banks must also pursue an agile workforce model to address both under-staffing and over-staffing challenges, and restrict the use of expensive temporary workers to cases of genuine need.

Technology for a Blended Workforce

The future of banking operations envisages technology as a major component of the workforce. So far, most banks have augmented their human capital with technology enablers in piecemeal fashion. To capitalize on the new opportunities of human-technology coexistence and amplify the outcomes, banks should prioritize workplace and work digitization at scale, empowerment of employees with insights, and creation of business process synergies between humans and machines.

The disruptive technologies will drive multiple use cases — improve the workforce productivity, foster human creativity, amplify human expertise, aid problem solving & logical reasoning, reduce the human biases, create self-help avenues for both business users as well as customers, draw insights into key busi- ness processes and customer behavior, drive agility into business processes with real-time information.

As operations staff, client relationship managers move away from “non-core” administrative, repetitive, and automatable tasks, they will don a more modern role — one of a specialist and sometimes that of a strategic advisor. Analytics and insights will equip them to derive better insights about clients, and predict their unique needs and desires, preferred engagement channels, affinity to specific services. It will help redefine operations, and better serve the client needs. Analytics will also enable operations managers to know more about the processes, its performance, and redefine the KPIs of staff who execute them.

Business processes will need to be calibrated for the new order, where humans and machines will co-exist ... Where a symbiotic relationship is established between the two. Goals and purposes will define the right interfacing between the humans and machines, and jobs and roles will need to be re-examined. The digital maturity path of the organization will determine the right balance between customer experiences, and workforce needs. And as regulatory frameworks continually evolve ... It will reinforce the ‘responsible use of technology’ and banks will need to respond appropriately.

Culture Reset for New Propositions

Unless banks have a culture that supports their new business models, they will likely produce disappointing results. What’s more, cultural change should be continuous and ongoing. This reset will become central to banking operations when the banks’ top managements lead with purpose and vision and there is a strong focus on open, collaborative innovation.

Leaders should be proactive in shaping and measuring culture, approaching it with the same rigor and discipline with which they tackle business transformations. Their vision must include both inside-out and outside-in views to identify the key themes in the culture transformation matrix and maintain focus on both external and internal stakeholders.

Knowing that a culture reset entails risks, leaders must encourage experimentation and clarify how much deviation in outcomes is acceptable. They should also set up a governance framework to monitor and control the situation. Leaders must lead by example, encourage the sharing of best practices for making cultural change a matter of identity and participation, and inspire adoption.

Successful culture change programs put people at the center. When the reset aims at creating an innovation-focused culture, the participation, commitment and understanding of all stakeholders becomes paramount. As job roles change, and shared services models emerge, the culture must become more open, collaborative, and cross-functional to be truly effective. This requires creating the flexibility within functional units to drive sustainability and cross-pollination of cultural tenets.

Here, the banks’ innovation leaders should focus on making collaboration central to team effort and on driving home the message that when small efforts are pooled together, they can produce big outcomes. They must also ensure there is a common access platform for all the stakeholders to understand the new code of conduct, and the behavioral shifts required for adhering to common minimum standards amid new cultural alignments. Last but not least, they should institute a review and feedback mechanism as well as a system to recognize employees who embrace and advocate the culture change.

Building Brand Advocacy

The power of personalization and contextual engagement creates relationship and referral value over time. If a financial institution creates alerts, recommendations, and content that the customer finds valuable in improving their financial wellness, the overall relationship will be enhanced.

In addition, the more customers that consume (or potentially subscribe to) an organization’s content, the more likely the content will be shared with others. This not only creates the potential for new referral business, but current customers will be less likely to switch to a competitor’s platform, where they will need to rebuild relationship influence.

The goal of personalized engagement (vs. a transactional relationship) is to create a process where a financial institution uses empathetic communication to increase influence over customers as they increase interactions.

Relationships Beyond Transactions

Over the past several years, competition has emerged from fintech firms to big tech organizations, as well as non-financial institutions that offer financial services. Consumers have many more choices of financial institution partners than ever and have become more likely to diversify their relationships across a wide variety of providers.

To build stronger relationships beyond the transaction, financial institutions must ensure that customers have a reason to keep engaging repeatedly over extended periods of time. In a digital world this can be achieved by adding higher levels of personalization, contextualization, and proactive recommen- dations on top of the traditional transaction and product-focused model.

Process: Moving Towards a Holistic Model of Engagement

Similar to digital banking transformation, the foundation of a holistic model of engagement involves people, processes, and technology. More importantly, top management must embrace the changes in legacy business models that are necessary to achieve success.

Beyond investing in modern technology, financial institutions must provide the back-office automation and organization-wide deployment of insights to move from a product-focus to customer-focus mindset. Sharing insights across the organization can help provide employees the ability to recognize customers and cater to their interactions based on preference and prior behavior.

With people, processes, and technology at the center of the engagement model, the ability to sell, on- board, converse, and serve will be greatly enhanced. This is because of the shift from a product-push to a solution-pull communications plan. This plan leverages real-time insights and recommendations as well as easily accessible content to drive interactions.

Finally, to support the improvement of interactions across all current and future product lines, there needs to be the seamless integration of engagement across all channels and platforms. As competition increases, the financial institutions that focus on more than transactions and active usage – strengthening the impact of engagement – will win.

Elevating Customer Engagement — At Each Step of the Journey

A seamless onboarding process that is in sync with customer comfort and convenience (in terms of pace, channel, and device) is key for a happy customer.

Since each customer comes with their own expectations and understanding, the process of account origination must be as flexible and adaptive as possible. In addition to being highly customer centric it must be digital-first with self-service options, it must facilitate the end-customer understanding of products, and it must offer genuine assistance when required.

There are three key aspects to ensuring a flawless onboarding process, according to Finacle.

1. Empower customers to choose wisely with an extensive set of financial tools.

2. Simplify customer-led product design combined with user-centric journeys.

3. Provide frictionless digital customer onboarding process.

The ability to converse effectively is defined by the contextual and personalized interactions across the entire customer relationship lifecycle right from marketing to customer acquisition, to servicing to up-selling. So — banks need to learn deeply from all the unique customer attributes across touch-points.

Advanced technologies like deep analytics and machine learning can enable banks to know customers intimately, understand their priorities, ascertain their preferences, and achieve customization at scale. Adaptive solutions can help learn from subsequent customer actions and transactions and ease the banking process for customers to manage their finances better.

According to Finacle, the journey to ‘Converse better at population scale’ involves three steps.

1. Genuinely knowing your customer, including demographics and relationships to life-stage events and preferences.

2. Analyze the customer in real-time, to effectively create personalized and human-centric interactions.

3. Map customer intent to recommended products and provide smart educational nudges.

Customers expect banking services to be available at their fingertips at any time of the day or night, on a channel of their choice. Superior service is ensuring a comprehensive range of consistent and personalized banking experiences which are delivered at speed across digital and physical channels.

Customers seek a large bouquet of services whether delivered through in-house or through ecosystem partners. Given the rapidly changing nature of customer channel preferences, banks need to constantly assess the various ways customers interact with a bank to create a cost-effective combination that is adapted to the bank’s customer base and market strategies.

According to Finacle, there are three steps to ensure banks can drive meaningful empowerment of banking services across channels with convenience, access, and speed.

1. Convenient, anytime, anywhere, any channel banking availability.

2. Continuous non-stop access to bank account for better engagement.

3. Delivery of contextual engagement at speed.

Leveraging the existing relationship to send relevant offers at the right time and through the right channel is key to strengthening the customer relationship and drive greater sales. At the same time, badly timed or irrelevant offers, result in alienated customers and poor conversion.

Therefore, the ability to sell smartly is of utmost importance. The role of technology at the interface between the bank and its customers has emerged as being even more important today... With the sales and marketing engine playing a key role in cross-sell and up-sell with remote banking.

Customers want to be treated as unique individuals, expecting banks to know their context, preferences, and purchase history.

The information data overload in the outside world, demands that every communication be personalized and contextualized for the segment of one. Using various decision points and creating the right journey, automated nudges through a good marketing automation system can prompt customers to take the right actions at the right time, for their financial well-being.

The three steps to enable banks to help customers discover products and offers include:

1. Target customers better, at the right time, per their buyer-persona and behavior to create a ‘segment of one’.

2. Personalize products, services, content, and engagement across the customer journey.

3. Allow customers to discover, sign-up and consume products and offers across the channels of their choice.

Technology: Automation and Modern Technology Required

More than ever, automation and the use of modern technology will differentiate the winners from the also rans. Automation and modern technologies can improve both the speed and accuracy of back-office processes and transactions as well as provide the easy and transparent digital experiences that customers want. The focus should be on the customer experience (as opposed to simply cost-reduction efficiencies) and should be approached from an incremental basis.

With automation, financial institutions can also benefit from the ability to create reports that can drive data-driven decisions to avoid inefficiencies in the customer experience.

The Power of Partnerships

The cross-generational shift to digital has reset expectations around the type and depth of engagement that financial institutions must provide to customers. This highlights the importance of collecting the right data, at the right moments — to gain insights into customers across the entire customer journey. The move to digital also has greatly increased the amount and type of data available to address these enhanced expectations and the ability to deliver services more efficiently.

Organizations must be able to pinpoint when a customer is satisfied or disappointed ... When they move part of their relationship to an alternative provider, and when a customer has challenges with a process they want to perform. This requires tracking of all types of interactions, including logins, website engagement, human and chatbot sessions, content views, and competitive engagements. This goes beyond the transactional and relationship tracking that is the foundational component of personalized engagement.

To achieve this level of data collection, analysis, and engagement enhancement at speed and scale requires partnerships with third-party solution providers. These outside partners can assist with the organization of data, the democratization of insights across an organization, the building of an effective customer engagement process, and leveraging previous partner engagements for generating ROI faster than if an organization was to ‘go it alone’.

Likewise, creating contextual engagements and continuously fine-tuning the priorities and processes usually requires partnering with specialized third-party providers. This is especially required during a time of economic uncertainty, when the allocation of resources must focus on opportunities with the greatest chances of success.

Banks need a strong holistic foundation underpinning their digital engagement strategy. One that will allow for a seamless alignment of people, process, and technology to maximize digital engagements across the customer relationship lifecycle to ... Onboard, converse, serve and sell better, driving purposeful growth.

Aligning people, process and technology will enable banks to drive financial well-being and empower customers to save, borrow, pay, insure, and invest better. Your customers today expect the very best from you and better engagement is at the very heart of a superior and differentiated experience.

The relationship between you and your customers extends beyond the point of purchase. Your customers expect you to keep them engaged consistently and contextually. They want a ‘GPS of financial services’ that will help them reach their financial goals as easily as possible.

More than ever, financial institutions must use data, AI, machine learning, and every communication channel available to find, listen to, and interact with customers. This must be done from the beginning of the shopping experience throughout the entire customer journey. The goal is to provide value beyond just products and services, displaying empathy for their needs that will strengthen the overall relationship.

More than a good customer experience, digital banking engagement involves personalized two-way interactions, using data, analytics, and real-time communication at scale. To build and grow loyalty, banks and credit unions must do much more than process transactions … Keeping customers engaged with the brand regularly.

According to Gallup, retail banking customers who are fully engaged bring 37% more annual revenue to their primary bank than do customers who are actively disengaged. Fully engaged banking customers also have more products with their bank, from checking and savings accounts to mortgages and auto loans. Finally, they also have higher deposit balances in their accounts than less engaged customers with the same products.

According to one research study, using data and analytics to understand customer needs and expectations is a tactic that 81% of executives say is critical for growing profits — but fewer than 25% believe their company uses it effectively.

In addition, according to the Zendesk Customer Experience Trends Report 2020, 70% of businesses are not meeting customer expectations — and over 80% of customers will churn after a bad customer experience — so there is a ton of pressure to succeed … And right away. To succeed, customer engagement must be focused on value for the customer first and the business second. This can be achieved with the following strategies:

• Listen to your customers. More than ever, there is a need to not only listen, but to provide solutions that bring value that is timely, relevant, and easy to act on.

• Use your customers’ channel(s) of choice. You must provide the opportunity for your customer to have a seamless conversation with you on the channel(s) they are most comfortable with. That may go beyond channels like email, phone, chat, and text, to include social media.

• Empower customers to self-serve. Customers often prefer to help themselves with digital assistance. This is both faster for your customers and more efficient for your service agents.

• Leverage AI integration. Engagement, supplemented by AI, allows financial institutions to automate some interactions, augment others with a human, and leverage insights to contextualize communication.

• Be authentic and empathetic. How does your organization avoid sounding inauthentic? Outstanding service and engagement must be centered on the customers’ need for financial wellness as opposed to a bank’s or credit union’s desire for product sales.

• Create a cadence of consistency. Keep the dialogue with your customers ongoing and the message consistent ... Inspiring customers to be evangelists of your brand.

• Build on small victories ... Now. It is often better to create small, repeatable wins for the customer today, than to spend years developing much larger initiatives that may miss the mark. Take action now and build on early wins.

• Seek scalability. Personalization can only work if it is scalable. Consider customer engagement software that can manage, analyze, and optimize the customer journey across multiple devices and platforms.

According to Zendesk, “Customers want to be treated as individuals, meaning they expect companies to know their preferences and purchase history. To do that, companies need to be able to harness their customer interactions across platforms and turn that data into actionable insights. Better digital customer engagement leads to more customer data and better customer experiences, which can lead to higher profits.”

Current State of Customer Engagement in Banking

Most financial institutions are playing a game of catch up, trying to meet current and future customer needs using yesterday’s technology. As customers have changed their expectation of service and engagement, banks and credit unions must find ways to deliver unique, personalized, and contextual journeys.

This requires a shift from a traditional product-centric approach to a customer-centric approach that focuses on intelligent customer engagement. Done well, the result will be the ability to capture new growth opportunities by delivering greater value for customers now and in the future.

Despite good intentions, however, most financial institutions fall short of engagement success beyond the basic customer service interaction level. Key areas of concern include easy relationship opening and onboarding, the offering of financial wellness tools, proactively providing advice and offers, and the empowerment of employees with analytics to help customers.

These challenges are reflected in the self-reported ratings financial institutions provided relative to their customer engagement maturity. Except for offering some level of personal financial management (PFM) tools, and account aggregation capabilities, the engagement maturity level of financial institutions across all asset sizes and regions is extraordinarily low.

In fact, less than 10% of all organizations can provide personalized financial recommendations, automated actions based on transactions, or lifestyle-related offerings using open API technology.

Banking Must Increase use of Engagement Strategies

Despite the self-reported lack of maturity around customer engagement, financial institutions of all sizes are testing all forms of customer interactions. The challenge for most organizations is doing the type of engagement required at scale. To deliver this level of engagement, most financial institutions need to invest in updating existing technology and architecture.

In other research conducted by the Digital Banking Report, we find that when personalization, multichannel communication, and marketing automation are done, it is often rudimentary at best. More advanced applications (proactive recommendations and human augmented engagement) are often impossible to deploy.

Building a Future-Ready Engagement Strategy

To move beyond delivering positive experiences, to engaging with customers in real-time on a value-added basis, will require an investment in modern technology, a data-driven analytical culture, and a focus on serving customer needs with proactive solutions.

Personalization and contextual engagement are the starting points. Viewing customer relationships in an empathetic way with a focus on financial wellness must be the ultimate mission. Done well, loyalty will increase and relationships will expand.

At a time when consumers expect more personalized engagement, the banking industry is failing to leverage data-driven analytics to attract customers, support engagement, and build loyalty.

To become future-ready, financial institutions must move from a transactional focus to creating contextual engagement across the entire customer journey.

Massive changes in consumer behavior occurred during the pandemic and we are not likely to revert to the old ‘normal’. This includes a major reduction in branch visits and a greater reliance on digital interactions across the entire customer journey. In response to these changes, financial institutions must move beyond making banking faster and easier, to building new ways to engage with customers experientially.

Humanizing the digital experience requires the combination of data, analytics, and modern technologies to offer a level of personalized engagement that can exceed what was previously possible in a branch.

From real-time customer support to proactive recommendations that enhance the potential for financial wellness, this level of engagement will separate the winning financial institutions from those who are simply meeting basic transactional needs.

Banks must combine data, analytics and modern technologies to understand the customer journey and achieve optimal engagement.

At a time when in-person experiences can be inconsistent at best, and disappointing to the customer far too often, well supported digital engagement can provide a high level of consistency as well as humanized support.

Customers Demanding Greater Engagement

Financial institutions can no longer depend on traditional customer satisfaction surveys as the way to gauge whether a customer will remain loyal. Most satisfaction surveys use outdated metrics, giving banks and credit unions a false sense of success and security. Customers want financial institutions to invest in their relationship, not just their transactions.

Rather than asking about branch experiences or transactional ease, organizations must ask whether a customer’s personalized needs are being fulfilled and whether their financial institution has their best interests in mind. This includes engaging post-purchase and offering personalized content that the cus- tomer can access at their convenience.

To achieve this level of engagement, financial institutions must combine data, analytics, and technologies to understand the customer journey and deliver the type of interaction that will drive trust, loyalty, and growth.

More than ever, consumers don’t just want personalization, they are demanding it.

Customers want their financial institutions to provide personalized experiences that are rewarding, emotionally connected, and integrated with their lifestyle. Unfortunately, most customers say their banking relationships are neither emotionally connected nor well-integrated into their lifestyles.

Many customers complain that they are not receiving seamless experiences across all channels, value for the money, or innovation that keeps pace with other digital relationships.

Banks Must Leverage Power of Personalization and Engagement

McKinsey found that companies that excel at personalization generate 40% more revenue from those activities than average players — across all industries. Organizations that are leaders in personalization differentiate by creating customized recommendations, reaching the right individual at the right time, with the right engagement communication.

Seventy-two percent of consumers expect the businesses they buy from to recognize them as individuals and know their interests. Transactions and ongoing engagement have a significant positive impact. “Recurring interactions create more data, allowing for even more relevant engagement over time — creating a flywheel effect that generates strong, long-term customer lifetime value and loyalty,” states McKinsey.

Personalization Must Extend Beyond Marketing

Rather than focus solely on short-term marketing wins, financial institutions must look for long-term drivers of growth and emphasize customer lifetime value. Unfortunately, most financial institutions are challenged to build a strong engagement model across the entire customer lifecycle.

The overwhelming majority of organizations are negatively impacted by outdated legacy systems and core banking platforms. Similarly, the lack of data maturity hinders customer lifecycle process improvements. According to our research, the result is an inability to deploy data insights across the organization for the benefit of the customer.

Less than 30% of organizations surveyed consider themselves successful in delivering ‘prescriptive’, ‘predictive’, or ‘descriptive’ customer support. Roughly one-third of organizations are working towards these goals but have not yet determined the success of initiatives undertaken. Roughly a quarter of institutions globally do not have the delivery of insight-driven personalization and engagement even in their plans.

To meet the expectations of customers, financial institutions must leverage data and analytics to identify, convert and engage the customer. Without application of insights across the customer lifecycle, financial institutions will be relegated to a secondary position compared to new fintech and emerging big tech competitors.

Invest in Future-Ready Data Infrastructure

Banks and credit unions have vast amounts of internal and external data at their disposal, from transaction and demographic data to locational, behavioral, lifestyle and social data. Despite this abundance, most financial institutions struggle to turn data into useful insights. The good news is that more organizations are aware of the importance of using data and insights for improving the customer experience, decision making, personalization and engagement.

Unfortunately, banks still have concerns around data reliability, and most say they also lack the resources required to process, analyze and distribute data and insights across the organization. As incumbent banks race to keep pace with nimble fintech organizations, financial institutions of all sizes must consider leveraging third-party solution providers to convert raw data into valuable insights that can support personalization and engagement initiatives.

Third party partnerships can also help to create new offerings that combine traditional bank offerings with non-financial lifestyle products and services. Further, partners can help to create embedded banking solutions with non-financial third parties. These new platform models go beyond collecting data for enhanced personalization, by creating new revenue opportunities outside fees and spread.

Responsibility for Customer Engagement Goes Beyond Marketing

While research would lend to the belief that marketing is expected to own the customer lifecycle and manage each facet of customer engagement, the reality is that building an engagement model across the customer lifecycle requires a cross-organizational commitment. Data and insights must be shared to empower all employees to assist with the innovation, product development and customer engagement process. Obviously, this requires the commitment and support from the C-suite.

Businesses that succeed in scaling personalization and engagement must create teams that cut across marketing, product, analytics, and technology, using a hub-and-spoke approach to reach the customer at the point of interaction. These teams can run hundreds of tests per year, enabled by advanced data analytics and test-and-learn techniques.

As can be expected, most financial institutions and, more specifically CMOs, are still not adequately prepared to move from a product-centric organization to a customer-centric financial institution. There needs to be a cultural shift at most organizations that will support the customer journey — from the customer’s perspective — helping the customer improve their financial wellness.

Looking across the customer lifecycle, leaders must build a granular view of where there is the most value. They must leverage customer segments and micro segments, and factor in behavioral, transactional, and engagement trends. They must use these insights to define and quantify their personalization and engagement objectives and ground their efforts in customer-centric key performance indicators (KPIs).

Financial institutions that can build a strong personalization and engagement model at scale will be rewarded with increased sales, improved loyalty, enhanced revenue growth, and a flywheel impact that will position the organization on an enhanced trajectory.

Should a financial institution transform their current organization into a more agile, responsive institution with a completely new digital foundation, or should banks and credit unions build an entirely new entity outside the parent company? Either option will require a new perspective on the role of digital as part of superior customer engagement.

The ability to compete in the future will require new systems, new processes, and a new culture. Banks and credit unions may determine that transforming the entire existing organization to ‘become digital’ is the way to proceed. Another option is to build a separate organization that would be a network of only a few branches or a completely branchless offering … Separate from the legacy organization.

Even if a bank or credit union decides to stay the course, the future will require differentiation defined by customer experience and innovative offerings like what are being provided by fintech and big tech organizations. The focus can’t be on cost savings alone since digital options have focused on improving the consumer experience and delivering solutions proactively and in real time.

Whichever structure is decided upon, financial institutions must make it far more efficient to acquire new customers, leveraging new consumer insights and modern digital technologies. This will result in an improvement in return on marketing investment, with stronger loyalty based on experience and improved digital delivery post-sale.

Digital channel bank transformation is necessary regardless of the economic environment. When the economy is good, banks have more time to make the transition. The current landscape of falling rates, the threat of recession and customer adoption of digital banking, are forcing banks to address the issue now.

Becoming a Digital Bank in an Uneasy Economic Environment

We’re at an inflection point in terms of consumers, where the network scale and network density, which used to be a competitive advantage for most banks, is becoming a bit of an albatross. The challenge is that legacy financial institutions are competing against neobanks and other fintech players who are built and deliver services on digital foundations.

This is pushing financial institutions to make radical decisions about how they think about their highest cost infrastructure … Which is their distribution networks. It also makes organizations rethink delivery from a customer engagement perspective.

Structural transformation is going to be needed whether margins improve or whether margins decline. We’re dealing with essentially a secular change in the industry where the relevance of the core of the bank depends entirely on an organization’s ability to get customers to want to do business with you. No matter what happens, the way in which consumers are going to make decisions and how they’re going to choose their banks is changing dramatically.

The biggest shift for most banks is that the utility play of banking is dying. The model of being ‘all things to all people’, where you build a branch and whoever happens to live in the area will bank with them no longer works. As things become digital, knowing who you want to serve, and then determining what is the right way to serve them — is the right answer for your bank.

There are different models ... If you want to make a challenger bank play because you want to serve young, affluent customers who don’t care about branches anymore versus if you’re a community bank with a strong local franchise. If you want to stay local, maybe spending all your money on digital is a bad idea … Because your most important customers are all near you in your local community footprint and you need to focus on them.

Banks and credit unions need to know who their customers are and what they’re trying to do for those customers. Then, based on that, they can then make a whole series of decisions around what sort of strategy makes the most sense to their organization.

Building a Better Digital Banking Model

The operating model for financial institutions, especially regarding distribution, must change to serve digitally empowered consumers. Financial institutions must transform their current operating model in four ways to add significant value for their customers and add significant value for their brands:

1. Create a high-touch, fully integrated consumer experience supporting physical and digital sales and service. Enable consumers to use whatever physical channel or digital device they prefer to transact with you whenever and wherever they please is the key to an omnichannel experience.

2. Empower consumers with digital tools and content to make a personalized product and service selection and sales fulfilment possible … Thus enabling consumers to take control of their financial decisions.

3. Empower front-line employees with cross-channel, real-time customer insight and intelligence to support both sales and service needs … Dramatically increasing employees’ productivity.

4. Garner commitment and mandate from upper management and boards in support of the above changes, both financially and emotionally, which must extend throughout the entire organization.

Creating Engagement Success

Building a digital-first consumer delivery model that establishes an intuitive sales and service experience map for all core products and services (including well-defined service-level agreements and performance metrics) is the foundation for tomorrow’s future-ready bank. The process of mapping out the customer experience will capture the required variations in sales and service delivery by customer segments and by channel.

Once customers’ qualitative and quantitative intra-and cross-channel experiences are mapped by segments and needs and validated, then begins the development of a detailed integration and alignment plan addressing:

•  Cross-channel technology platforms

•  Sales and service processes

•  Employee goal setting and incentives

•  Training and education

•  Real-time MIS and advanced analytics

Empowering Customers and Employees

Consumers, by nature, like to be in control of their financial transactions. Financial institutions can reinforce consumers’ feeling of control by empowering them through ubiquitous access to multiple channels and access to an effective set of tools, calculators, and personalized content.

Depending on the complexity and nature of the transaction, sales agents at restructured branches or call centers can assist in the educating, advising, and supporting of consumers in real time enabling better financial decisions.

Empowering front-line employees with digital tools will also significantly affect productivity. When front-line employees are empowered with consumer insight and intelligence through digital devices in a physical location, they can be incredibly effective and productive in serving customers who often start, stop, reactivate, and complete sales or service transactions using multiple channels.

Digital tools and access to insight also allows customer-facing branch employees, regardless of their physical location, a real-time, ubiquitous access to customers’ sales or service journey across all channels, helping employees to educate, advice and support customers to a successful, complete transaction.

Leadership Commitment to Improved Channel Experiences

Transforming the current operating model requires an unequivocal commitment and mandate from key business leaders throughout the organization. There are two components to this transformation: cultural and operational. It requires a complete change in employees’ mindset and the way employees interact with customers, and the way front-line employees interact with other front-line employees across all channels. It also requires an adjustment in how front-line employees interact with back-end employees to support the new operating environment.

This is a journey and not a single event. There will be significant ups and downs as front-line and back-line employees learn how to serve customers through multiple channels in real time. Organizational agility, adaptability, and speed to change are prerequisite for long-term success.

Changing to an integrated, sales and service model requires significant organizational, operational, and financial investment. But the ROI can also be significant. The positive impacts include:

•  Increase in multi-channel digital sales

•  Increase in second product sales

•  Increase in sales through real-time smart lead management

•  Reduction in call volume to call centers

Consumers are changing their behavior, aggressively adapting digital technology, and making greater use of multiple channels, which requires a new, integrated way to interact with customers and employees. Evolving the current branch-focused operating model into a new omnichannel model will reinvigorate the way financial institutions and their branches serve consumers and grow business.

Measuring customer satisfaction and engagement success is integral to determining the impact of initiatives undertaken. These metrics can drive future priorities and create new opportunities.

Customer satisfaction can also result in new leads and stronger loyalty at a time when many customers are fragmenting their banking relationships.

The measurement of customer satisfaction and engagement success provides a correlation between marketing strategies and customer experiences. As referenced throughout this research report, you need to keep your customers engaged as much as possible, providing a value exchange that is viewed positively.

Engaged customers are more likely to overlook minor negative experiences as the trust in your company increases. A customer who believes that you have their best interest in mind is also more likely to pay for your products and services instead of moving business to a competitor, and are more open to your recommendations, offers and marketing messages.

According to Gallup, different industries have different ways to determine the success of their engagement efforts. For a financial institution, it could be new customers acquired or revenue generated. Gallup found that a highly engaged customer generated as much as 37% more annual revenue than a disengaged customer.

Alternative Engagement Metrics

There are many ways to measure customer satisfaction and engagement success. Here is a non-exhaustive assortment of measurement options that you can use to determine if your engagement efforts are bringing value. Each organization may use one or a combination of these measurement tools or use others not referenced.

•  Net Promoter Score (NPS)

NPS is used to measure your customers’ trust in your products/services and their consequent willingness to recommend them to others.

•  Churn Rate

The churn rate is the number of customers lost during a given period divided by the number of customers at the beginning multiplied by 100%. (Caution: More than ever, customers are less likely to close an account and more likely to open a new account elsewhere. This can provide a false sense of security around churn rate, even though a customer may have diversified their financial relationship.)

•  Customer Satisfaction Score (CSAT)

The Customer Satisfaction score is measured based on customer satisfaction and overall experience. It indicates the potential to retain customers and their probability of repurchasing products. (Caution: It is important that this measure reflect both digital and in-person satisfaction. ‘Friendliness’ has less of an impact today than in the past.)

•  Customer Effort Score (CES).

With this measure, customers rate your ability to support a transaction easily and your ability to resolve issues that may occur.

•  Engagement Frequency

This metric measures how often your customer interacts with your channels (website, mobile device, call center, SMS text, social media, etc.). How many customers engage with your channels helps you understand the kind of engagement you are receiving beyond transactions.

•  Engagement Duration

Engagement duration measures the amount of time customers spend engaging with content. The better your content is and the more your customers consume content, the greater the engagement and your chances of referral business.

•  Customer Journey Mapping

This measures users’ actions on your website and when interacting with content. This includes the amount of time your customers spend on a particular site, clicking and viewing links. (Note: This measure is especially important when measuring prospect researching, new account opening and loan application processes.)

•  Voice of Customer

Organizations should get regular feedback regarding products, services, brand positioning, etc. Most customers do not complain before they leave or institution of move to a competitor.

•  Conversion Rate

This measures the percentage of customers involved in completing some actions tied to your company.

•  Abandonment Rate

The abandonment rate is the percentage of visitors to your website who exit your site after viewing only one page or without completing an action. (Note: This is a very important measure to deter- mine the success of new account opening and loan application processes.)

Use of Engagement Measurement Tools in Banking

The metrics mentioned can assist in measuring customer engagement. Involving your customers and front-facing employees, asking for their reviews, and addressing their concerns are essential steps to building engagement.

Historically, the financial services industry has been transaction oriented — placing a premium on cost efficiency and moving customers towards purchasing more products and services. Today, this focus on products and transactions is at odds with creating engagement and loyalty.

As more consumers move to digital channels, the ability to meet face-to-face diminishes. This not only changes the dynamics of customer experiences and engagement, but also the dependence of alternative channels and the ability to create an in-person selling opportunity. In response, more financial institutions are investing in creating engagement beyond simple transactions.

In a digital world, banks and credit unions can improve engagement and retention by personalizing the customer experience. Since most customers will only spend a limited time on their mobile banking app, banking website or other traditional channel, it is more important than ever to deliver personalized and contextual opportunities that will increase the time of engagement across all channels.

Creating engagement based on a customer’s past transactions, current financial relationship, stated goals, financial wellness, or other behavioral activity will lead to higher levels of interaction, more purchases, greater loyalty, and enhanced lifetime value. In addition, engagement data as well as intended purchase data can create additional insights that can enable the customizing of subsequent interactions based on past engagement

Building Brand Advocacy

The power of personalization and contextual engagement creates relationship and referral value over time. If a financial institution creates alerts, recommendations, and content that the customer finds valuable in improving their financial wellness, the overall relationship will be enhanced.

In addition, the more customers that consume (or potentially subscribe to) an organization’s content, the more likely the content will be shared with others. This not only creates the potential for new referral business, but the current customers will be less likely to switch to a competitor’s platform, where they will need to rebuild relationship influence.

The goal of personalized engagement (vs. a transactional relationship) is to create a process where a financial institution uses empathetic communication to increase influence over customers as they increase interactions.

Relationships Beyond Transactions

Over the past several years, competition has emerged from fintech firms to big tech organizations, as well as non-financial institutions that offer financial services. Consumers have many more choices of financial institution partners than ever before and have become more likely to diversify their relationships across a wide variety of providers.

To build stronger relationships beyond the transaction, financial institutions must ensure that customers have a reason to keep engaging repeatedly over extended periods of time. In a digital world this can be achieved by adding higher levels of personalization, contextualization, and proactive recommendations on top of the traditional transaction and product-focused model.