Self-directedness: the key to financial institutions’ long-term survival

Uber, Amazon, Netflix. From the way we shop to the way we watch our favorite sitcoms, technology has transformed every aspect of our lives and disrupted business models across industries. This has given rise to a wave of highly empowered consumers and mass customization. As such, today’s consumer has come to expect not only an exclusive experience, but one they can control from start to finish — and banking is no exception.

We partnered with Cornerstone Advisors [click here to read the report] to dive deep into today’s consumer banking mindset and develop a better understanding of what they want from their financial institutions, particularly in the wake of the COVID-19 pandemic. And contrary to expectations, consumers didn’t just want the convenience of a digital experience – they wanted the seamless blending of digital services and the human touch.

Customers want choices

Apps, chats, virtual assistants and more — these are technologies that an increasing number of consumers say they want from their banks and credit unions. So, one would assume that if an institution adopts these technologies, they’ll be successful.

Not exactly.

As always, the devil is in the details. Customers want options for how they interact with their financial institutions and don’t like being forced to use specific channels. But according to our survey, this lack of choice is a significant issue: Of the respondents who interacted with a customer service representative over the phone or in person to complete a transaction, 37% did so because they believed it was the easiest way to get answers to their questions; 36% visited or called because they were unable to find the information they needed online. One-quarter of respondents said their institution was unable to provide the necessary service digitally.

What does this tell us? You can have the flashiest mobile banking app in the world, but if your customers can’t accomplish what they need or want to easily within the interface, you risk losing their business.

Self-Directedness is key

To be competitive, financial institutions must break away from channel-centric thinking – one that optimizes their online and in-person processes in isolation from each other – and instead embrace a process-centric approach. This can be done by deploying both digital and human offerings across all touchpoints, but leaving it open for the customer to determine when and how they engage.

At Backbase, we refer to this as “self-directedness.” It means creating the ability for your customer to problem-solve with the same efficiency and high-touch service no matter how they choose to interact with your institution. Examples of this in practice, the survey found, include offering customers the ability to schedule branch appointments through their mobile banking app, as well as a tap-to-call function built into the app.

But these types of features are table stakes. Financial institutions have much more they can do when it comes to creating a self-directed customer experience.

Get out of your own way

To fully implement “self-directedness,” institutions must digitalize all their services — not just the most used or least expensive ones. According to our survey, customers most often encountered friction points with their financial institutions when dealing with long-tail activities, such as fee disputes (something just 8% of respondents were able to manage without requiring human intervention) or addressing fraudulent activity (which only 10% were able to solve entirely online). In both cases, the vast majority of respondents only opted to work with a human representative because they felt it was the fastest way to address their issue – not because it was their genuine preference.

It’s understandable why institutions may resist digitalizing those things that could cost them money. But in failing to do so, they are just reinforcing counterproductive organizational siloes and restricting their customers’ choices. While it may seem counterintuitive, making it easier for customers to troubleshoot account issues – regardless of the channel they use – helps foster stickiness. A customer who can reverse a fee with minimal headache is far more likely to maintain their existing account with the institution – and to consider additional offers in the future, remembering how easy and empowering their experiences have historically been.

It isn’t either/or

Financial institutions need to meet customers’ digital expectations and demands to stay relevant and competitive. However, humans and technology are not in competition with each other, and jettisoning the human for the digital is as wrong-headed as resisting digital transformation altogether. Our research instead finds that an inclusive strategy – one that blends and harmonizes the human with the digital – is the key to meeting every customer’s demand for a self-directed, tailored experience.

Interested in learning more? Read the full report, The Human + Digital Challenge in Banking, for more insights and actionable steps for creating a human+digital banking experience.