Addressing the digital customer quandary
Customers' expectations have evolved radically.
Digital and personalized services are no longer a luxury but a necessity. With diversification in financial relationships and waning brand loyalty, institutions face a dual challenge: to retain and to innovate. While churn rates have been gradually rising over the past decade, 2023 marked an acceleration in this trend across retail banking, wealth management, and insurance. As customers sought hyper-personalized experiences that mimicked big tech firms, they readily switched accounts and expanded relationships with new digital entrants.
This competitive threat is multilayered. Agile financial technology companies (fintechs) and digital platforms armed with client insights are peeling away customers, especially digitally savvy millennials. Private markets are attracting assets from high-net-worth investors with differentiated alternative investment offerings and higher perceived returns. Disruptors in payments and embedded services are disintermediating banks’ customer touchpoints.
Incumbents will need sharper customer analytics, seamless digital capabilities, and advice reimagination to defend their customer franchises. Segment-of-one experiences, integrated health-wealth advisory, and goal-based wealth management can help deepen engagement. Strategic loyalty partnerships with non-financial brands may also be prudent.
Wealth management: The demand for hyper-personalized financial advice is palpable. By harnessing data analytics, firms can deliver bespoke advice, fostering deeper client relationships.
Banking: As customers diversify their banking relationships, there’s an opportunity to collaborate. Banks can partner with non-traditional financial entities, from fintech startups to trusted brands outside of finance, to provide comprehensive solutions.
