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Why Legacy Modernisation?
Customers have seen businesses and industries around them transformed by technological advancements and innovation. However, there is a noticeable exception to this trend. Decade-old technology remains at the heart of the Financial Services Industry, and the cracks are starting to show. Long onboarding processes, a lack of cross-functional data sharing, and inadequate data security all contribute to negative customer experiences.
It is clear that stasis is not an option for these legacy institutions. Old technology needs to be abandoned, and processes, systems and offerings brought into the modern world should meet the needs and expectations of the modern consumer.
With ‘neobanks’ and innovative Fintechs capitalising on maximising cloud capabilities to both create customer-centric propositions and deliver cost-savings, incumbent financial institutions are struggling to compete in agile business environments. While still a trickle, this can clearly be seen by the CASS data – in H1 21, Starling, Monzo and Virgin Money were the big net winners in terms of current accounts (net gains of c. 15k), whilst Natwest, Santander and TSB were all net losers (c. 10k). While it is true that such financial institutions remain dominant by virtue of their established customer bases and high street presence, these new realities must be addressed, as IT operating costs increase and dedicated budgets decrease.
Perhaps the greatest shift has been in consumer power : For a quick comparison between ‘Born Digital’ banks and incumbents, let’s look at the number of clicks it takes to register an account (acquisition) – Revolut requires 24 clicks to register an account, while Barclays requires 74. That’s more than three times the number of clicks required!
However, in recent years, incumbent financial institutions have started investing significantly to streamline their legacy infrastructure, in a bid to compete with more agile challenger banks. The question now, is whether in the context of the current upheaval in markets and interest rates, the updated customer experience plus the wider product set offered by the incumbents will now be good enough to compete with the challengers.
Here’s Manifesto’s take
What does legacy modernisation mean? The ultimate objective is to make sure the engine that powers the organisation can operate at full speed, while keeping consumer-centricity at the core. This comes down to two fundamental points: firstly, for the business to become more agile and to lower the barriers to digital deployment, the key is to identify the bottlenecks in the data pipeline – the flow of data within an organisation. Critically, there needs to be a commitment to shifting the mindset of the organisation for the long term. When these conditions are met, it allows delivery of a High Performing Experience (HPX).
Every customer interaction is an opportunity to deliver on your brand promise, but they’re not all equally important. Recognising that principle is what High Performance Experience is all about – understanding that some experiences are more ‘valuable’ than others.
Evolution of Customer Expectations
There isn’t a simple solution to this problem, and we’ve seen that sometimes when companies try to design innovative consumer-centric propositions to drive technological change, they neglect the underlying infrastructure. For example, without the proper CRM infrastructure, advanced data analytics, and automated data processing, companies fail to deliver on new, innovative and customer-centric propositions simply because they lack the necessary technical capability. However prioritising investment spend against the value both to the consumer and the company of the experience is a critical step in your approach.
How should you do this? At Manifesto, we approach these challenges with a customer value lens. What need are we meeting? How valuable is that need? And how well does the experience meet that need. Consumers are now well used to having their voice heard and we can maximise this opportunity in order to design the experience in order to best meet their needs and capture the maximum possible value from them.
Acquisition – There has been much investment in acquisition experiences – delivering seamless onboarding experience to improve conversion rates of prospective customers. This means having the technical infrastructure to support tailored propositions designed to align with the specific need states of customer segments. It’s critical to align the off platform marketing, with onplatform acquisition strategies and sometimes multichannel conversion journeys. Our experience shows that tailoring messaging and journeys to the right consumers as well as simple ways to reduce friction can increase the acquisition funnel by up to 25% with very little additional investment.
Retention – Efficient use of data collation to create personalised financial offerings to existing customers. Having the right technical platforms to support the data capture points allows organisations to not only quantify success, but provides tangible means to gather deeper customer insights. This often requires more investment, as customers expect to be known and treated in accordance with their value. Retention journeys need to be tailored with the knowledge already gained from customers. However, focusing on engaging customers with regular digital outreach prior to the end of their product life, encouraging them to visit, transact and browse all helps to provide insight into their behaviour and needs and makes retention easier. Personalisation and content are critical here in the customer journey – retaining and growing a customer before they need retaining is the key. Other industries have successfully pioneered membership propositions to drive engagement in the brand and the offering. Successful financial services brands will need to pick the best of these propositions and deploy them to their customers to make the most of their retention journeys.
Advocacy – This leads you to the creation of an offering that drives loyalty and encourages existing customers to refer prospective customers. This is a consequence of having a positive customer experience, and can subsequently act as a driver to deepen brand penetration.
What’s the key takeaway? It’s important to recognise that the three stages of the customer journey are intertwined, meaning that a company can only maximise Lifetime Value (LTV) of a customer by offering meaningful value exchanges throughout the customer journey, from Acquisition through to Advocacy.
What would this look like? Here is an example of the work we’ve done to help a client achieve a HPX.
A client in the lending industry came to us with a brief – consumer behaviours were changing as a result of the pandemic and demographic changes. Previously differentiated sales tools that once resonated with consumers were declining in performance, increasing the cost per acquisition by ~20%. The client wanted to better understand their customers, and align product offerings and services to evolving customer needs.
First, we sought to better understand their customers – specifically, we conducted a quantitative and qualitative survey to identify the passion points and pain points of customers at the start of their digital journey. The data collected then formed the foundation of our hypotheses:
- Increase the intuitive nature of the journey on the existing infrastructure – implementing ‘Quick Wins’ to drive acquisition
- Creating more tailored needs and intent based journeys to address individual needs would boost engagement and conversion performance
We quickly worked with the client to design and help launch quick wins and deployed A/B testing to assess performance. After 2 months of data collection, the evidence showed that ‘Quick Wins’ had generated a 30% plus increase in conversion performance (from landing page to enquiry) against control – a 7 figure increase in EBITDA.
Hypothesis 2. Tailored journeys were introduced with greater channel choice. The increased data capture points in the customer journey allowed us to gain deeper insights into the split of individual needs, urgency and actions that customers would commonly take. External infrastructure was used in order to boost speed of delivery and “prove the case”: for internal investment. Results are still coming in, but first indications are that more tailored journeys allowing greater control over channels of choice are driving greater engagement.
This mindset around high performance experience, pervasive with the client, has allowed them to leverage the value based approach to inform their technology modernisation in a way that is a win win for the customer and the company.
Once the incumbents have caught up? It’s actually a two-way street
Some analysts predict that no amount of investment would see incumbents ‘catch-up’ to their ‘born digital’ counterparts – with the belief that the capability gap between incumbents and neobanks is simply too large. One thing we know for sure is that in the current climate ‘born digital’ banks dominate the front-end technology with seamless UI, CX, and innovative payment technologies, while incumbents have robust back-end infrastructure and capital to dominate the lending market. With incumbents gradually catching up to neobanks on front-end infrastructure, neobanks have also recognised the competitive advantages of incumbents – with Starling, Monzo, and Revolut all starting to roll out overdraft and loan features. This suggests that the scales may not be as one-sided as it seems.
Assuming somewhere down the road incumbents catch up to neobanks, could we see a Financial Service sector where firms’ product offerings are aligned to their core competencies – specifically, legacy banks offer financial services such as loans and mortgages, whilst customers use neobanks day-to-day as a finance hub?
Where Manifesto can help
Delaying modernisation to avoid risks is no longer an option with the momentum that ‘born digital’ Fintech companies have amassed. This is where our Experience Economics Mapping comes in. Our previous experiences of working with FS clients have sharpened our lenses in ideating HPX solutions.
We work with organisations to identify opportunities that accelerate and deliver High Performing, revenue generating, experiences to ensure growth and maximum value is delivered to both your customers and your business.