The Weekly Extract: September 21, 2020

  • Alex Jimenez
  • September 22, 2020

The Weekly Extract from Extractable is a condensed roundup of digital experience news for financial services institutions, and our take from San Francisco.

This week we discuss COVID consumer trends that are impacting our future. We examine customer experience design beyond User Experience (UX), and finally, we touch on how a lack of strategy results in real waste.


Understanding Changing Consumer Behavior

In a blog entry in the Andreessen Horowitz website by Anish Acharya, Seema Amble, Rex Salisbury, Matthieu Hafemeister, and Lauren Murrow write about the effects of COVID on Fintech.

Andreessen Horowitz partnered with Glimpse, a “software company that culls millions of online signals to identify surging trends.”

The result is a dizzying list of trends and “insights across liquidity and lending, trading, small business impact, and consumer banking.” The trends go beyond those that we have covered here in the past few months.

Trends in digital banking for both consumers and businesses, are covered along with insight into their current surge in popularity. For instance, the combination of lower mortgage rates and people spending much more time at home, has resulted in a spike in HELOCs and home improvement projects, “as has foot traffic at Lowes and Home Depot.” Also, it has driven an interest in return policies, as people worry about the economy and may realize they have overbought.

On the business side, there’s an uptick in digital business account opening. The writers theorize that it may be due to the PPP program, as businesses open an additional bank account to track how the proceeds of PPP loans are used to apply for forgiveness more easily.

“This phenomenon presents an interesting opportunity for SMB-focused fintech companies like Azlo, which offer deposit accounts to attract new customers, as well as a number of SMB software companies like Intuit and Shopify, which recently embedded bank accounts into their software.”

While the Andreessen Horowitz article focuses on the recent past, Forrester Research had an article in Forbes looking at changes consumer behaviors that are likely to last beyond the pandemic.  Through their research, Forrester has “discovered that three specific shifts among empowered consumers will seed the most powerful forces that shape the future of consumption.”

  1. “Consumers will buy from — or avoid — brands because of perceived company values.”

Surveys continue to show that Americans are more likely to purchase from brands that are aligned with their personal values.

  1. “Product and service experimentation will proliferate.”

Ten years ago, only 39% of consumers were willing to be the first ones to purchase something new. That number has grown to 53% now.

  1. “Consumers will demand both traditional and new buying and delivery methods.”

Consumers are demanding new and better experiences, from curbside delivery to subscription services.

Forrester notes, “The future of consumer buying is not a shift from traditional to digital, nor is it an abandonment of self-service in favor of delivery. It’s all of the above. Consumers want values-based experiences, experimentation, price and convenience, and they don’t want to make the trade-off.”

New buying behaviors drive new ways of financing and payment. The new expectations will also manifest in a desire for better experiences from financial institutions. As detailed by Andreessen Horowitz, fintech firms like Varo, Square, and Robinhood are seeing increased consumer use due to offering better experiences in response to changing behaviors.


Customer Experience Design: More Than UX

Today, more FIs are understand that consumer behaviors are changing, and were changing even before the pandemic — underscoring the importance of user experience (UX) in digital banking. Alex Kreger, UX Strategist & Founder of UX design agency UXDA, notes in an article in Forbes that FIs aren’t approaching UX appropriately. He details 10 mistakes made when FIs apply experience design to digital banking.

As we recommend, a company’s overall strategy must define digital transformation. UX design on its own isn’t digital transformation. Kreger writes:

“it’s faulty to assume that outstanding UX is the only element FIs need to gain success.” He adds:

“Behind every digital transformation success, there are a number of unique factors that impact the customer experience. User interface design is only one of those.”

Another common mistake that Kreger, and Extractable, see regularly is cognitive bias. Kreger writes:

“finance professionals create a digital service that they believe is easy and pleasant to use, while customers are confused by its complexity.”

Just applying beautiful design without understanding the customer’s viewpoint is missing the point of UX. This is exacerbated when we apply our conscious and subconscious assumptions.

On the other hand UX cannot be outsourced entirely to UX designers that lack financial expertise. Kreger asserts:

“the success of a financial app depends not only on the designer’s skills but also, most importantly, on an in-depth understanding of the specifics of financial products, business strategy, marketing, psychology, human behavior and digital technology.”

Recently we spoke to a banking customer who compared a community-based FI’s digital banking experience to Wells Fargo. Her take was that Wells’ digital banking was vastly easier to use because it was simpler with less functionality. The reality is the reverse. Wells’ digital banking has significant more functionality than the community-based FI in question.

The problem is one of “over-featuring.” On this topic, Kreger says that FIs have the misconception that:

“the more functions we provide, the better the user satisfaction. Actually, it’s quite the opposite. When customers are faced with confusing options, this leads to decision paralysis, causing the customer to quit without taking action.”

To address these and the other errors Kreger details, he recommends FIs focus on customer emotions. He writes,

“For years, banking has been perceived as a very serious institution. The world is changing, and people seek an emotional and personal connection to their services. Banking is no exception. Humans are emotional beings by nature and will demand products that evoke positive emotions.”

Bill Streeter, Editor at The Financial Brand, tackles the role of emotion in customer experience. Streeter examines Forrester’s US Banking Customer Experience Index published last week. Streeter quotes Forrester’s Gina Bhawalkar, “Emotion is an aspect of customer experience that most financial brands just are not getting right yet. More important than making experiences easy is making sure that customers feel good about the experience they have with the brand.”

Last year, I recall exchanging stories with Duena Blomstrom CEO of People Not Tech about discussing emotions and empathy with bankers.  After she published her book “Emotional Banking: Fixing Culture, Leveraging FinTech and Transfortming Retail Bank into Brands,” Blomstrom has expanded her focus beyond financial services because banking executives have such a hard time wrapping their heads around the role of emotion in serving their customers and employees.

Bhalwalkar echoes the same noting, “when I talk with bankers about evoking a feeling of respect in other channels — a mobile app for example — it’s hard for them to get their head around that.”

Similar to Kreger, Bhalwakar suggests that FIs focus on emotions and apply the empathetic principle — part of design thinking — to address experience design. For example, she recommends that more financial institutions should invest in design systems:

“a set of standards, guidelines and best practices for how you design your digital experience. USAA, Navy Federal and Ally Bank are getting this right. When you go to their website and when you open an email from them, they’re talking to you in the same language. It sounds like the same company. With other institutions it’s clear their emails were written by the marketing team and the mobile app was developed by the product team and they didn’t talk to each other.”

Forrester’s study finds that FIs are not doing a good job in what many consumers note as their second most important factor for customer experience, being respected. Streeter writes: “simply making people ‘happy’ isn’t particularly effective, the report states. Making them feel appreciated, valued and respective is.”

If you have questions on how to apply design thinking and empathy to digital strategy and customer experience let’s talk.


Why Digital Transformation Fails

On our continuing examination of digital transformation in financial services, we noted an article in Crowdfund Insider by Omar Faridi. Faridi quotes Ravi Kittane, Financial Services Technology Consulting Lead at PwC Malaysia:

“In the last few years, banks have stepped up their investments in digital capabilities in response to increasing customer demand for online access and the availability of new technical capabilities such as data analytics, cloud and Artificial Intelligence (AI), and a more open regulatory environment.”

Kittane says that research reveals that most of the digital transformation initiatives haven’t delivered the level of expected or desired results.

“Of the $1.3 trillion that was spent on digital transformation in 2018, it was estimated that more than $900 billion went to waste,” he adds.

The reasons for the failures noted by Kittane, won’t be a surprise to our readers. It goes back to a lack of alignment with the organization’s strategy and customer needs.

“Failure to automate end-to-end business processes (such as customer onboarding, account opening) results in fragmented solutions. [Another challenge is the] inability to build organizational capabilities and talent to sustain continuous development beyond initial Proof of Concepts.”

As we have noted in previous Extracts, the pandemic raises the stakes on the importance of digital transformation.

Organizations looking to transform can’t focus solely on the technology. Digital transformation is a business model change, which requires new strategy, cultural change, and obsession about perfecting the customer experience.


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