This post will show you why the One-Size-Fits-All approach does not work longer for modern banking clients.
While banks have been at the cutting edge of innovations like online payments and artificial intelligence (AI)–driven services, many have been slow to change how they attract and retain their customers. Thankfully, much progress has been made and most banks are starting to realize that better customization is now key to competitiveness in the present day.
Recently, core banking systems have adapted to take into account contemporary banking client demands, elevating experiences and improving retention. Moving away from the one-size-fits-all approach in customer service to a more personalized one has made retail banks more competitive in the crowded retail finance market.
What Does “One-Size-Fits-All” Mean in Banking?
The one-size-fits-all approach is one where all customers get the same treatment, regardless of their preferences. This is most evident in how many banks, particularly retail banks, used to apply innovations and security measures in the customer journey. Unless a client is particularly important, chances are that virtually all the bank’s customers got the same treatment.
However, this approach is no longer sustainable for most banks. Switching banks is now easier than ever while retaining customers has never been harder. It became clear that an effort had to be made to investigate different customer journeys and readjust approaches accordingly.
Why Is This Approach Outdated?
While a one-size-fits-all approach does simplify planning, management, and service delivery, developments inside and outside of the banking industry have mostly nullified these benefits. Going with a more bespoke approach that takes different customer needs and experiences into consideration is likely the way forward, particularly for retail banks.
Here are three major reasons why banks need to apply a more personalized approach to customer journeys:
1. Captive Banking Markets No Longer Exist
Up until recently, a bank’s ability to maintain multiple branches and ATMs in an area could determine its success in that market. This led to a situation where customers may use a specific bank simply because it was the only one they had access to in their area.
Of course, this meant that customer service often became deprioritized as there were no real penalties for a bank that delivered a bad customer experience. This also meant that larger banks often had a disproportionate advantage over smaller ones, as they could easily set up shop in more locations.
This geography and size advantage is getting less important each day, as more and more clients turn to digital banking for most or all of their transactions. The emergence of completely digital banks and the wider adoption of cashless payments has also done away with the need to even have any brick-and-mortar branches or large numbers of ATMs.
In essence, this means that captive, geographically bound banking markets are less relevant, especially in retail banking. Customers that have a subpar experience online or in the real world can simply open a new account at a different bank through their phone or computer within minutes. Given this, some customization options that make the banking experience better for individuals are now a bare minimum for client retention.
2. Customers Now Expect More
However, the bare minimum is not likely to be enough. Partly thanks to developments in consumer culture outside of banking, most individuals are no longer as tolerant of service that they perceive to be unfriendly or unsatisfactory. These higher customer service expectations have also become commonplace in banking.
Having a system that is rigid and highly tuned for a one-size-fits-all approach means that a financial institution will only be able to deliver high quality service to a few clients. Given the level of service modern banking clients expect these days, such an approach almost guarantees that a bank will develop high customer attrition rates over time.
3. Current Technology Makes Mass Customization Possible
Traditionally, only a bank’s most important clients could expect any kind of personalized service. Thankfully, modern core banking solutions make it possible to deliver bespoke financial services to a wider market.
Advances in artificial intelligence, machine learning, and process automation have empowered human finance workers, allowing them to focus more on delivering better customer service without compromising security.
Thanks to AI and machine learning innovations, security procedures could be applied dynamically and unobtrusively during different transactions, elevating the customer experience immensely. Different automation settings could also be applied to online banking processes to make the experience less tedious for customers.
Even customer engagement can be partially automated, allowing bank representatives to concentrate on things that are more important for customer retention.
It’s Time to Make Banking Personal
Being able to meet and exceed customer expectations is a cornerstone of good business. If a bank is not able to meet minimum expectations, then chances are, clients will switch to one that they believe can deliver.
Fortunately, innovations in core banking systems can remove much of the tedious work involved in day-to-day banking, benefiting bank employees and clients alike. These same innovations also make it possible to deliver smart customization options for bank clients, improving their overall experience and keeping retention rates high.
If and when a bank does decide to do away with its one-size-fits-all approach, having these tools and knowing how to use them will be key to its success.