Financial institutions have continuously evolved in response to the ever-changing business needs and customer expectations. However, many financial firms struggle with the declining customer loyalty. Expectations have risen tremendously and now these institutions are required to balance their traditional, profit-driven approach with a humanitarian perspective.
As a result, a philosophy called “purpose-driven banking” is gaining popularity. This approach places value on people over profit, taking a holistic view on customers’ financial health and helping them manage their finances effectively.
What are Financial Institutions Missing?
While 45% of wealth managers believe their clients perceive them as trusted advisors, only 28% of clients actually consider them so, says a study.
The banking industry is widely perceived as commoditized, transactional, and lacking a client-driven approach, largely due to an increased focus on internal targets and sales figures at the expense of customer experience.
Be it wealth management, corporate banking, or retail banking, employees are under immense pressure to drive sales. Financial metrics end up taking precedence over building customer relationships. Even innovation takes a hit, and those frustrated employees and customers inevitably result in a declining reputation.
How to Turn the Situation Around?
A survey conducted by McKinsey revealed that about two-thirds of respondents are influenced to buy a brand or product based on the broader actions and beliefs of the company. This supports the philosophies behind purpose-driven banking—encouraging financial institutions to focus on customers, who actually drive business.
Let’s have a look at what banks can do differently:
- Act as financial advisors
Financial institutions, like you, must expand their service offerings to cover financial advice, even if it doesn’t generate revenue in the short-term. For example, offering personal loans, with a heavy emphasis on advice and budgeting, will go a long way in strengthening your customer relationships
- Regain trust and loyalty
This is easier said than done, but in order to become trustworthy, you must invest in prioritizing customers’ financial well-being over your internal sales targets. Instead of just penalizing your customers when they slip into overdraft or manage their money unwisely, offer them assistance and guidance in times of crisis.
- Adopt digital
The need of the hour is to adopt the latest technologies to win your customers’ hearts and leverage customer data and insights to deliver superior and personalized service. With automation, you can optimize your operational costs and pass the benefit to customers by reducing transaction fees. This can help you to not only gain customers’ trust, but also to ensure long-term success.
- Invest in employees
Treating your employees well is also crucial. You must consider that your employees are balancing the demands of their personal and professional lives. Make sure they stay motivated and support your employees as they execute your purpose-driven banking initiatives
The Window of Opportunity is Open
Financial institutions who put their customers first will always stand out! You need to revisit your strategy and goals to align them with your customers’ financial well-being.
To stay ahead of your competitors, you must accelerate your digital initiatives and reclaim your position in customers’ minds by elevating their experience.
(The author is a seasoned banking professional and is presently heading the Newgen centre of excellence and the views expressed in this article are his own)