Insights

How Banks Can Break Through Growth Plateaus with Customer-Centricity

That means a bank’s technological, cultural and philosophical changes should establish several relationships with the customer for a holistic experience. In other words, banks shouldn’t settle for providing one customer with a single service when totality is possible.

Growth in context

For teams tasked with driving growth, it’s important to gauge where their mission stands in relation to other digital-transformation goals.

Publicis Sapient teamed up with Longitude, a Financial Times company, to create the Global Banking Benchmark Study, which helps financial institutions better understand how digitally transformed they are compared with the rest of the industry and how to compete with digital natives, big tech companies and digital-first rivals.

More than one thousand finance executives across 13 countries participated in the survey. At one point, they were asked which digital transformation goal was most important to their company – revealing the general mindset of the financial services industry.

The plurality of respondents (36 percent) prioritized growing revenue with new products. So decisive was the response that the second most popular option – cost reduction – received roughly half those votes (18 percent). New customer acquisition came in third (16 percent).

These answers support Chakraborty’s stance on the importance of focusing on creating holistic relationships with modern products and services. To help banks get there, Chakraborty created an evocative new model for financial institutions to understand where (and why) they hit growth plateaus.

He said all businesses must go through distinct phases when innovating for the customer. These can be best understood as three different time horizons, also known as planning horizons, which give organizations direction and purpose.

Major Horizons to Customer-Centric Growth

“Right now, programs to drive growth at the largest banks are squarely in Horizon 2. However, they have substantial momentum toward Horizon 3 – as evident in their hiring and technology investments,” Chakraborty said. “Many have found that this model is beginning to saturate and should start making substantial moves toward Horizon 3 in 2021.”

Banks will be able to break through lulls in customer acquisition by identifying their current stage on the pathway to innovation, recognizing when their current directives are not generating the same level of growth and shifting toward the next horizon.

It almost goes without saying that the first place that banks (or any other organization) need to start is building quality products customers can use. After establishing a product line, most banks will start to organize their customer outreach around the product line. But if customer acquisition is driven primarily by mass marketing and customization and doesn’t go beyond broad segments of the population, growth will stall.

Chakraborty said banks at this stage usually still think of rates, offers and prices for specific products – without envisioning how they all fit together. He said digital interactions with the customers are all too often limited and simple.

Without adjusting to focus on the next horizon, rival fintechs will slowly chip away at market share. According to CB Insights, a business analytics company, there are 75 venture capital-backed fintech unicorns, which are valued at $1 billion or more, worth a combined $270 billion. Those numbers are still rising.

For the next phase, banks should strive to develop a sub-brand that simplifies the value proposition by wrapping together multiple products. This has historically improved return-on-investment for marketing.

Most large banks have borne the fruits of this phase but are starting to butt up against its limitations. At a certain point, the market becomes oversaturated with a bank’s sub-brands and customer acquisition will slow down. Offering rewards, special features and pricing deals only takes a bank so far.

Chakraborty pointed out that many banks are primed to move their gaze to the third horizon. They can take steps in this direction by hiring the right people and investing in the right technology. But they will need to architect first-rate solutions – or team up with transformation partners – that can get them into the next phase quickly.

This is where financial institutions can truly thrive. By using data on customer behaviors, financial institutions can create unique end-to-end customer journeys with tailored interactions that enhance the customer experience and expand wallet share.

The Global Banking Benchmark Study found that a growing number of financial firms understand the importance of personalization.

Of the 1,041 senior finance executives across 13 countries surveyed, 83 percent said customer centricity is driving key decisions within their organizations. But digitally sophisticated banks were more likely than others to anticipate greater investment in personalized experiences (e.g., offering personalized journeys, having a single view of customers) in the next three years: 54 percent of digital transformation leaders compared to 25 percent of firms overall.

“In the past year, market testing by the large banks shows that orchestrating intentional journeys at the individual customer level now drives higher ROI than Horizon 2,” Chakraborty said.

“At this horizon, banks can unlock and recapture growth opportunities with customizable tools and experiences,” Chakraborty said. “They can orchestrate individualized customer journeys based on needs, aspirations, prestige and value.”

Horizons of the future: Perpetual transformation

Lessons from what has driven multi-product customer innovation over the past five years inspired Chakraborty to put together this three-horizon template.

He noticed that the largest banks that were excelling at digital transformation were transitioning from product-centric models to customer-centric models. They were able to offer exciting new value propositions. Unsurprisingly, fintechs have blossomed this way and legacy institutions can learn a lot from them.

“Fintechs are experiencing remarkable growth by simplifying traditionally complex customer journeys and using mass personalization to unlock and capture the consumer,” Chakraborty said. “For example, fintech personal lending share has doubled from 25 percent to 50 percent in the past five years.”

Any digitally savvy businessperson will know that they will not stop once they reach the third horizon. Once they reach it, new horizons will appear – with their own assortment of challenges and opportunities. For now and into the near future, Chakraborty’s three horizons can show you how to stay relevant and likely beat the competition. But times change, quickly.