What’s keeping banking and financial services executives up at night in 2019? Take your pick of any number of issues: regulation, technology or new market entrants. One of the most contentious issues for many business leaders is how to create a unique customer experience to retain existing clients and attract new ones.

In fact, a great customer experience is probably the biggest differentiator in an increasingly crowded South African financial services market. Thanks to technology, most players have solid products, but the difficulty is that customers are spoiled for choice when it comes to choosing where to bank.

It has become critical for financial service institutions to design personalised experiences that enable customers to run their lives in an efficient and seamless manner. We anticipate that, as technology advances further and financial services markets become more competitive, customers will expect their financial institutions to offer them constant personalised engagement that educates them on product use and risk mitigation.

Knowing and understanding your customers – and their needs

Today’s customers don’t just value convenience. They want to feel that their financial institution knows them and understands their specific needs, and is able to cater to them. It’s about knowing what your customers want, and what is going on in their lives.

All around the world, financial services organisations are introducing customer-centric programmes, with varying degrees of success. Most, however, are yet to realise the full customer and economic value of these programmes.

By investing in strong platforms, educating personnel and aligning to customer experience objectives, financial services organisations can refocus time and effort to grow the business, while building capabilities to improve customer value. Investing in customer-centric business models to speed up access to under serviced communities makes business sense.

This is a critical point. With Africa retail-banking penetration at 38% of GDP, which is half of the global average, it is ideal for industry players to keep reinventing themselves and come up with strategies that can help with making a breakthrough. They would do well to keep in mind that the new potential customers will likely be bombarded with products and services from multiple providers. It is therefore feasible for industry players to continue focusing and reinventing their customer-centric practices.

Customer-centricity is no longer just a buzz word. The objective is to move away from product silos, create cross-selling opportunities and enhance the client experience. Financial services organisations are looking at technology, better use of data across the organisation as well as partnerships with fintech companies to create eco-systems that maximise the customer experience.

Non-traditional players are also exploring new opportunities, enabling them to challenge incumbents and continually change the state of financial services in South Africa. The evolution of the industry presents opportunities for innovative players entering the space – with agile digital financial services products and services meant to revolutionise the sector as it expands and moves into the future .

Digital solutions, low-cost operating models and supply chain integration have moved to the top of the business agenda, with non-traditional players pursuing various aspects of these trends, enabling them to provide their customers with in-house solutions.

Emergence of fintech and innovative products

Another noteworthy development has been the emergence of fintech companies that utilise a customer-centric approach, agility and technology expertise to make their presence felt in the market. They are perceived to pose a substantial threat to banks, especially as they bring more innovative, efficient and cost-effective solutions. This is an industry expected to have a $3bn market value by 2020, which is significant, especially in light of the negative global economic forecast.

Adopting effective growth strategies and integrating with fintech businesses will be essential for traditional players to go into partnership for innovation. Compatibility between the two can be further supported by the growing emergence of start-up incubators and accelerators set up by the traditional players to explore the spectrum of fintech possibilities.

Traditional banks in South Africa have made strides in making substantial investments in technology and innovative products. This forms part of their strategies to improve risk management, operate more cost-effeciently through reducing and replacing core systems, and enhance client centricity through targeted products and improved on-boarding tools and channels.

Traditional industry players will need to ensure that their efforts are focussed on driving efficiency across the entire enterprise to effectively fund the capabilities being developed across their operations. They need to properly evaluate where they are in this evolving landscape and implement sound, attainable and competitive, client-centric strategies. Although this is a challenging task, they need to respond quickly or risk their market share being squeezed by the new, low-cost, innovative competitors.

In a new report titled: The productivity agenda – moving beyond cost reduction in financial services, PwC sets out the important challenges and opportunities facing the financial services industry and the ways in which senior executives should respond if they wish to move beyond simple cost cutting and improve profitability in the long term.
Survey respondents from some of the leading financial services institutions stated they are rapidly incorporating artificial intelligence (AI) into business functions such as robo-advising, credit scoring and customer support. Leveraging AI has substantially improved client experience, reduced cost and, in some cases, created new products and services.

Being client-centric also entails adhering to the principles that underline the idea of ‘treating customers fairly’. Following the introduction of Solvency II regulations in Europe, which became effective in 2016, South Africa is also introducing Solvency II equivalent risk-based prudential and market conduct regulations across its financial services industry.

The demand for highly personalised reactive engagement is becoming a basic expectation from customers. Consumers want an almost invisible banking service that reduces effort and has well thought-through interactions that aim to build trust, simplify banking and create deep connections between the bank and its customers.

In essence, financial services organisations must get customer-centricity right if they are to bring a meaningful customer experience strategy to life. Get the customer experience right, and the rewards will be abundant – loyal customers, reduced costs, satisfied employees and higher revenues.

Quinton Pienaar is the Lead: Customer Engagement & Salesforce at PwC South Africa.