Financial services companies are entering challenging times. The industry has seen a catastrophic erosion of consumer trust in their services and integrity. At the same time, rapid advancements in technology and changes in the market and regulatory environment – such as the imminent Open Banking regime – promise to impact long established business models and significantly increase competition.
Financial services companies are facing a crisis, and this crisis requires a response that puts the customer back at the centre of their business.
The need for trust is not unique to financial services; it’s fundamental to being human and underpins all of our social and economic activity. The very concept of trading, of transacting with another person or with a business, is based on trust. The Hayne Royal Commission has put the spotlight on the behaviour of the financial services industry, with each new revelation impacting the trust and brand loyalty of customers.
This has opened the door for new players, and for incumbents that are agile enough to build trust rapidly, to compete not only on trust but also customer experience. It offers the opportunity to disrupt the way financial services are provided. But how does an established, brand rebuild trust with its customers and the wider community?
Trust is lost when a business loses touch with what is important to the customer, when the purpose of the business diverges from the customers’ well-being. With major financial institutions, there have been many causes of this divergence, including the massive complexity of systems and business processes, as well as misaligned profit motive and individual compensation plans at odds with the customers’ best interests. They lost sight of why the customer trusted them with their financial well being in the first place.
Findings from a Salesforce commissioned Deloitte report, Restoring Trust in Financial Services in the Digital Era, found that 32 per cent of customers said their trust in the financial services industry has deteriorated in the last 12 months, while 25 per cent do not trust the financial services industry, with banking and insurance being the least trusted sectors.
The journey back to trust is a journey back to the customer. It’s about understanding the customer and guaranteeing that every interaction is driven by the organisation’s desire to improve the customer’s life and to bring them value. It’s about remembering why you exist as a company.
The trust journey begins with a simple piece of wisdom – what is our purpose? Why did this company come into existence in the first place? These ‘origin stories’ matter, because if you’ve got a culture where everyone in the organisation understands why you exist and believes in it, it’s so much easier to ensure your people are going to act and make decisions in alignment with that purpose.
Walk into a bank and ask them for a record of all of your transactions from the last decade and they’ll be able to deliver it with 100 per cent accuracy. Anything less than that would be completely unacceptable, so of course our institutions in Australia are very good at that.
Walk into a bank and ask them for a record of all of the engagements you’ve had with them – including sales conversations, service interactions, financial advice, marketing contact, across all engagement channels, physical, analogue and digital – and you’ll get a very different result. Most companies have no chance of answering a question like that with any confidence.
Human beings place trust in those who know them best, like family and old friends. This is no less true in business. World class excellence in knowing your customer is what’s needed to compete and be successful today. Airbnb knows every single interaction a customer has ever had on its platform. So does Amazon. The experience your customers are having with companies like these are resetting their expectation of you. Personal or business customers are all trained by the world’s very best in consumer platforms to expect all companies to know them, their complete history, and to anticipate their future needs.
To achieve this, financial services companies must focus on establishing systems of engagement as complete as their world class transaction systems.
The potential for Open Banking to completely change the financial services landscape in Australia is huge. If done right, consumers will be able to use their data to shop for and gain better deals, change institutions more easily and access services from non-traditional financial services companies. An example of a company primed for this is Moneytree, which offers consolidated, single-screen snapshots of a person’s wealth, from savings accounts to mortgages, superannuation, investments and even frequent flyer accounts.
Further, through the use of artificial intelligence, Moneytree offers powerful, individualised financial coaching tips and guidance. It uses data to deliver a richer and more personal value proposition than many Australian financial institutions can currently offer.
The need to fundamentally redesign culture and processes to establish a more transparent and customer focused financial services company has never been greater. With impetuous from the Royal Commission and the looming Open Banking regime, financial institutions need to refocus their cultures, and invest in being the best at understanding their customers and using that knowledge to deliver outstanding service and customer experience.
The competitive landscape will only become more fragmented and difficult to navigate, and customers will become harder to attract and retain. Only the financial services trailblazers that grasp this moment to pivot to the customer will grow and thrive in this brave new world.
Learn more about building a financial services firm of the future amidst an environment of rising customer expectations, technological advancements and new competition. Download Deloitte Digital’s Market Trends Affecting the Financial Services Industry report.