Making customer experience transformations pay off in banking

As banks stare down potentially several more years of a low interest rate environment—and a possible wave of credit losses—many are looking to fortify their income statements. Some will be tightening their belts. Others will focus on top-line growth to offset lower margins and losses. In either case, many banks globally are realizing that more efficiently and effectively delivering for their customers can both reduce costs and improve sales.

With these objectives in mind, many banks are seeking to transform their customer experience delivery, hoping to both capture financial upside and make their customers happier. For a long time many banks believed that customer experience was a trade-off with efficiency: the implicit assumption was that better experiences cost more money to deliver.

In fact, banks have learned in the past decade that better experiences for customers lead to increased throughput in their sales journeys (and therefore more revenue) and lower friction in service journeys (and therefore lower cost to serve). In short, customer experience performance does not require a trade-off with financial performance; in fact, for many banks, it is a primary driver of financial performance.

We have seen the financial value of experience time and again in both consumer and commercial banking. Recent examples include:

  • A bank that increased its sales conversion in a priority product by 15 percent through reducing obstacles to customer completion of the shopping and sales journey
  • Another bank that freed up more than $100 million in annual operating expenses trapped in its call center in the form of calls that were unintentionally routed to agents
  • Another firm that was able to raise pricing by more than $500 million across its commercial book of business by reducing the operational costs it imposed on its commercial clients

Short-term gains are only part of the story. Over the long term, banks that excel in measures of customer experience also lead on revenue and expense performance, and see sustained improvements in shareholders returns. Between 2009 and 2019, experience leaders in banking delivered 55 percent higher total shareholder returns compared to firms with low customer experience performance, based on an analysis of shareholder returns and McKinsey customer experience benchmarking.

Good things don’t come easy

Despite the clear value in improved customer experience, most transformation programs fail to deliver on their financial promise. Those that do, based on our experience and analysis, share six features:

  1. Focus on the business impact: The best programs start and end with measurable and strategic business objectives in either boosting revenue (e.g., better experience leads to improved sales throughput) or reducing cost (e.g., better experience reduces cost to serve). Programs that target primarily experience metrics (such as CSAT and NPS) tend not to deliver promised financial value.
  2. Target the concentrated returns from better experience: Returns on customer experience are highly concentrated by product, segment, and customer journey. The best experience performers do not aim to transform every element of customer experience; instead, they target the experiences that matter most to customers and are most aligned with the strategy. Most “broad-based” experience programs are spread too thin to be effective.
  3. Do not apply the B2C recipe to B2B journeys: Many customer experience tools in the industry (such as design thinking, or digital migration) are heavily skewed towards B2C journeys. B2B use cases often represent greater levels of impact, but improving the B2B experience requires a more nuanced approach, a deep understanding of the underlying business processes of the client, and an appreciation of the multiple personas involved in a given B2B journey. Most B2C experience teams cannot succeed in B2B use cases.
  4. Measure for impact, not for measurement’s sake: Experience measurement systems are critical for achieving impact. However, they are often too broad (e.g., based on total relationship satisfaction), too delayed (a quarterly survey), and not actionable (they don’t show why an experience was poor). The most effective measurement systems leverage multiple data sources—including operational data in addition to traditional customer experience survey data—and are refreshed in as close to real time as possible.
  5. Align incentives and operating model for collaboration: Experience performance is often hampered by operational incentives (e.g., the call center agent who is scored on marking an issue as resolved) and by management incentives (e.g., branch leaders who send complaints to another channel to protect their own numbers). Strong performers work through incentive and channel conflicts and align incentives on the desired business outcome, not the channel or front-line outcome.
  6. Invest the senior time and talent that high quality design and engineering require: Delivering truly effective and differentiated experiences that create financial value is hard work. The design of digital and analog processes to create a top-flight experience requires significant senior attention, multiple iterations, a test-and-learn approach to refinement, and constant awareness of competitor offerings. Top-notch experience “craftsmanship” is required for a program to succeed.

Five simple questions for getting started

There are five questions that leadership teams can discuss and debate to help unlock the value customer experience programs can deliver, whether the bank is just getting started or in the midst of a program that isn’t bearing fruit:

1. What business metrics are we committing to improve—and by how much?

2. What customer journeys matter the most to our customers and to improving those metrics?

3. What specific aspects of these important journeys will we improve? How do we know those improvements will matter?

4. How will we know we have succeeded? What KPIs will we monitor? How will we course correct until we succeed?

5. What specific segments of customers will experience impact first? When will they start to see the changes?