Customer Experience: Emerge stronger from structural change

With regards to the mood of the Swiss banking community, the EY Banking Barometer paints a diverse picture. Changes in the financial industry as well as external conditions, which put pressure on earnings in the form of low-interest rates and volatility, are forcing institutions to rethink their business models and strategies. Many see a new focus on clients and customer experience as an opportunity to improve their results in the mid-term.

Almost 90 per cent of those surveyed in EY’s Banking Barometer 2020 report believe that the Swiss financial industry is undergoing fundamental structural change. New banks, the way they work with one another, as well as established institutions and marketplaces are all putting pressure on margins. And to make matters worse, because banking with fintechs and technology groups is not only cheaper but also more fun for bank customers, driving customer loyalty is becoming more expensive for the more established financial brands. “These developments mean that traditional institutions will have to step up investments in their sales channels and introduce more innovative offerings just to meet these rising expectations,” the authors of the study concluded.

Retail customers – satisfied and yet not loyal
Representatives from 100 banks clearly perceive there to be changes in payment services: While only 47 per cent of those surveyed last year identified payment processing as the business most affected by structural change, this figure had risen to 63 per cent by the end of 2019. Although not much money can be earned from payment processing, it is a strategically important function because of the direct interface it affords to customer and transaction data. In fact, banks are no longer so sure about their customers. Almost 80 per cent feel their market position is threatened by companies outside their industry. New offers are gradually driving a wedge between the customer and their primary bank; even when customers are very satisfied with their bank, they continue to use fewer of its services.

EY notes that retail banking relationships have become increasingly fragmented over the years: “Bank customers already use the products and services of a variety of organizations  depending on the offering that best suits their needs for the operation in question. When making payments abroad, they use the services offered by neobanks to save money on foreign currency transaction fees; they maintain their savings account with the bank that pays the highest rate of interest; they take out their mortgage with the provider that offers the best interest rate; and they get their pension advice from a different institution yet again.”

Digital interface is the pivotal point
As attractive as it is to bundle individual service packages from the best offers in each case, there is a catch – it becomes more and more difficult to get a comprehensive view of finances and manage them. This is where the banks’ good relationship with their customers and long-term relationships pay off. With Open Banking, financial institutions can bundle and simplify transactions with different providers. As a consequence, they strengthen their position and tie in customers more or less indirectly. Swiss industry experts understand they have to invest in digitisation. Many now agree that upgrading a front-end system interface will quickly improve a bank’s competitive position, especially as this can be done much faster than rolling out new core banking systems. An open, scalable architecture guarantees a return on investment within a few months. This is how an outstanding customer experience directly translates into good results.