Knowledge Is Power In Financial Customer Relations

In the competitive and rapidly evolving landscape of financial services, “Know Your Customer” (KYC) is no longer just a regulatory term. Financial institutions and fintech companies are increasingly recognizing that understanding their customers on a personal level, not just a compliance level, is a critical factor for success. Market data from Gitnux supports this theory, reporting that 86% of B2B customers expect companies to be “well-informed” about their personal information when interacting with them.

With new challengers emerging monthly (Ovation reports over 26,000 fintech startups in the market in 2023 compared to less than half that number in 2019) — the ability to differentiate services through a profound understanding of customer needs, preferences, and behaviors has become an imperative for the industry.

Successful brands are leveraging knowledge not simply to meet compliance requirements but to forge stronger, more meaningful connections with their customers — transforming customer insights into a competitive advantage.

In this 5-minute read we’ll explore:

The key role knowledge plays in standing out from the competition
How financial organizations can improve their customer knowledge
The game-changing role of AI in getting to know your customer
The organization-wide value of “Voice of the Customer”
Why CX should be seen as a profit generator — not a cost center

Knowledge as a differentiator in a crowded market

The financial services sector is witnessing a shift in customer expectations, propelled by the proliferation of fintech companies offering novel products and interfaces. In this crowded marketplace, the brands that stand out are those that understand their customers the best and apply this knowledge effectively. The content of both digital and face-to-face interactions is highly valuable, and gathering data at each touchpoint is crucial for continuous improvement, as well as maintaining a competitive edge.

This shift is not just about offering a wider range of digital services; it’s about harnessing the power of customer data to create more personalized, engaging, and valuable experiences. For instance, many financial institutions now employ advanced analytics to understand customer behaviors and preferences, enabling them to offer tailored products and services. This allows them to progress beyond traditional customer segmentation techniques, using real-time data and predictive analytics to anticipate customer needs even before they arise — with personalization down to the individual level.

The strategic gathering of data at every customer interaction point creates a strong foundation for continuous improvement. Each interaction offers valuable insights into customer preferences, pain points, and potential opportunities for innovation. Through this data-centric approach, knowledge becomes a dynamic asset, continually refining and reshaping the customer experience in response to evolving market conditions and expectations.

Building knowledge without compromising CX

Of course, the idea of being continually monitored and surveyed is not necessarily an appealing one for customers. In the quest to build ever more detailed customer profiles, financial institutions face the challenge of maximizing data collection without interrupting the customer experience. The key lies in adopting low-profile data-gathering strategies that seamlessly integrate into each stage of the customer journey.

One effective approach is to gather data in a way that also delivers clear benefits to the customer — for example, interactive tools that provide personalized advice or recommendations based on the data collected. For instance, a mortgage calculator that suggests the best loan options based on the customer’s financial information can add value to the customer experience, while also providing the institution with insights into the customer’s financial status and preferences.

Getting this type of buy-in from customers is crucial — and transparency about how the data they provide will be used to enhance their experience can encourage customers to share more information. A recent article from Acquire reported that a majority of banking customers (63% of respondents) are happy to offer personal data in return for more tailored financial advice — and 40% would switch financial institutions for a more personalized service.

AI: a game-changer in big data analysis

AI and machine learning algorithms excel at sifting through large volumes of data, identifying patterns, and extracting valuable insights that might elude human analysis. — and CX data is no exception. But the potential use of AI extends beyond mere data analysis; it also enhances the process of data collection itself.

For example, AI-powered chatbots can interact with customers, responding to their queries while simultaneously gathering data about their preferences and behaviors, and AI transcription tools can digitize key insights from voice conversations that would previously have been too time-consuming to access.

Integrating AI tools not only improves the efficiency of data collection but also enriches the quality of the data gathered, and the value of that knowledge base to the organization.

By analyzing customer interactions, AI can identify areas of improvement in products and services, suggest personalized offers, and even predict future customer needs, which can inform demand-based product and service development.

The potential is clear — and the industry agrees — with 80% of financial institutions surveyed as part of recent market research by NTT Data expressing a belief that introducing AI tools can give them a competitive advantage now and in the future.

Recording person-to-person knowledge transfer

In the financial services industry, a significant amount of valuable knowledge is transferred during person-to-person interactions such as phone or video calls. Capturing and integrating this knowledge into the broader customer data pool presents a unique challenge. The objective is to extract usable data from these interactions and leverage them to enhance customer experience and service offerings.

As highlighted by CetDigit in a recent article, “While tools and platforms play a pivotal role, it’s crucial to strike a balance between technological innovation and the human touch.” Technological solutions are ideal for streamlining processes and gathering data efficiently, but the nuances and insights gained from human interactions offer a depth of understanding — and an opportunity to build customer trust — that automated systems can’t yet replicate.

Tools like sentiment analysis and natural language processing can help in deciphering the tone and context of customer communications — identifying and flagging important conversations for more detailed review by a human at a later time. The integration of this type of data into the customer knowledge base allows financial institutions to tailor their services more effectively, ensuring that customer experiences are not just efficient but also empathetic and personalized.

Unlocking the value in VOC (“voice of the customer”)

VOC refers to the process of capturing customer expectations, preferences, and aversions to build a complete profile – their “voice”. Financial institutions are increasingly mining customer interactions to extract actionable insights, not only for improving the customer experience but also for informing wider organizational decisions.

Leveraging AI tools and specialist CX teams can significantly enhance the efficiency and effectiveness of VOC programs. AI tools, for instance, can analyze large volumes of customer interaction data, including call recordings and chat transcripts, to identify common themes, pain points, and areas for improvement. This analysis can reveal invaluable insights that might go unnoticed through manual analysis.

The challenge lies in not just collecting feedback but analyzing and implementing it efficiently.

Financial institutions need to establish systems and processes that allow for quick assimilation of feedback into actionable strategies. This might involve regular reviews of customer feedback, agile response teams tasked with implementing changes, and mechanisms to track the impact of these changes on customer satisfaction and business outcomes.

Reimagining CX — from cost center to profit center

Traditionally viewed as a cost center, the customer experience (CX) function within financial institutions is increasingly being recognized as a potential profit center. This paradigm shift is driven by the effective use of big data to determine VOC, which positions CX as a central knowledge hub within the organization. By breaking down silos and sharing CX-derived customer insights across operational, product, R&D teams, and more, financial institutions can leverage these insights to drive innovation, improve service offerings, and enhance overall business performance.

The key to this transformation is the creation of a cyclical model of customer feedback, improvement, and communication. This involves continuously gathering customer feedback, implementing improvements based on this feedback, communicating these improvements back to customers, and then using the response to drive further improvements. This cycle not only enhances customer satisfaction but also fosters a culture of continuous improvement and innovation within the organization.

The potential bottom-line impact of this approach is significant. Gartner calculates that 66% of customer loyalty is attributable to CX — putting it some way ahead of brand or price as a determining factor. By turning CX into a strategic asset, financial institutions can unlock new avenues for growth and profitability.

Conclusion

The landscape of financial customer relations and CX is rapidly evolving, with knowledge capture, analysis, and application playing a critical role in shaping successful strategies — and the challenges and opportunities discussed in this article underscore the importance of understanding and responding to customer needs at every level of the organization.

Partnering with experts in the discipline, such as SourceCX, can provide invaluable guidance and support in navigating these complex challenges and capitalizing on the opportunities they present. Moving forward, financial institutions that can effectively leverage customer insights, balance technological innovation with human interaction, and view CX as a strategic asset will be well-positioned for success.