This year has taught us a lot about facing adversity and handling the unexpected. The COVID-19 pandemic has dramatically altered the way we interact and transact – and many of those changes are here to stay.
For banks, credit unions, and other lenders, the sudden shift to digital-only interactions has introduced a variety of internal and external challenges, as well as some opportunities. As the end of the year approaches, financial institutions are preparing for 2022 by pivoting their focus towards digital transformation initiatives that add real value for their customers and their bottom line.
After conducting numerous surveys and a great deal of research during the past year, FICO has uncovered several illuminating trends that are emerging in the financial services industry. These five trends have been compiled into the new FICO 2022 Trends Report, which discusses each trend and highlights what organizations should be doing to succeed in the coming year (and beyond).
Playing Digital Catch-Up
According to a report by Deloitte, 80% of consumers who depended on cash and checks as their main forms of payment before to the pandemic said they plan to use more digital payment tools in the future. However, the report also revealed that 90% of banks experience issues related to digital transformation – including lack of enterprise preparedness, inconsistent data regimes, and constraining investor expectations.
It’s clear that banks have been struggling to keep up with the already growing demand for digital solutions that was suddenly accelerated by the pandemic. “Parts of many industries are process-heavy and people-reliant, and are not able to detach themselves from the classical ways of doing things,” says Bart Pietruszka, CDO and Head of Analytics at HSBC.
The digital experience landscape will be different going forward – now it’s the battleground. In fact, the main attrition driver for financial institutions is a poor banking app. Over 50% of customers said that a well-designed banking app is a primary consideration factor when choosing a bank.
The pandemic caused dramatic changes in consumer behavior, and online retailers and FinTechs have heavily contributed to this digital acceleration by raising consumer expectations. Simply offering banking services through digital channels is not enough. It’s about customer experience and engagement. The experiences you create need to be outstanding because the competition (and customer demand) is fiercer than ever.
An exceptional customer experience is consistent, intuitive, unified, and personalized for that particular individual. In order to accomplish this, banks are mapping out the entire customer journey from end-to-end and investing more in infrastructure by adopting robust digital decisioning platforms, embracing new technologies, and hiring the right talent.
Creating an AI Structure
Financial institutions have a wealth of data that has been mostly untapped, but this will change soon. While there’s enormous value in the information that’s being collected, the data is useless unless you know what to do with it. Making the most of data starts with developing the ability to effectively gather, move, and map it within your organization. The most successful enterprises are leveraging their data by implementing decisioning platforms that utilize data-driven decision intelligence technology (e.g., machine learning and AI) to help make the best possible decisions for their customers and their business.
Nearly 75% of enterprises are already adopting centralized AI team structures and using a variety of techniques to ensure they can deliver products/services efficiently.
“There are still challenges with access to data, availability of data, the cleanliness of data, and data rights,” says Scott Zoldi, CAO at FICO. “But as businesses start getting to grips with these things, the next big hurdle is showing people why they should trust that the AIs produced will continue perform well enough to make good decisions.”
Humanizing the Digital Experience
In 2022, more financial institutions will also focus on humanizing their digital experiences. While banks should embrace technology, they’ve realized that digitizing everything drowns out the human element – an important aspect of customer service that consumers do want. In fact, a PwC study found that 82% of U.S. consumers want more human interaction from companies they do business with.
Enterprises are rethinking what it means to be customer-centric, an idea that’s been trending for years (and perhaps overused to the point where it’s almost meaningless). For banks, it should be obvious that your bottom line relies on the financial wellness of your customers. Putting the financial health of your customers at the heart of your organization as a primary strategic goal is both right and smart. Studies from Forrester and Deloitte demonstrate that customer-centric companies bring in 5.7 times more revenue and 60% more profits than their counterparts.
To be customer-focused, you need to understand your customers and their journey, empathize with them, anticipate their needs, and deliver products/services to help them improve their financial wellbeing. It also includes protecting customers from fraud, which can happen at any point throughout the customer journey. According to a 2021 FICO survey, 75% of customers said that they would leave their financial institution if it was involved in a money laundering scandal.
To succeed in the coming years, incumbent banks will have to reconsider the way they do business. Decision-making within your organization must be contextual and connected, which means that departments need to collaborate and work together to reach unified customer strategies. CAO at Banorte, Jose A Murillo, says, “At the end of the day, the biggest barrier is the human barrier, and that’s something that people should be aware of.”
Read the full 2022 Trends Report.