If you work in the head office of a consumer bank, you probably spend a lot of your time attending meetings about the threat posed by digital disruption. The conversation will often focus on the digital capabilities of upstart start-ups coming to steal everyone’s lunch.
But disruptive entrants and fintechs are not different because of the experience they offer customers in the “digital channel,” they are different because of how think about what makes a financial “product” (as bankers are keen on calling their services).
Traditional bank products — basic deposit accounts and loans — are really designed to help with a narrow set of needs (e.g. keeping money safe, providing access to credit). And while banks and credit unions do a lot of work to adjust the rates, fees, and additional features of these products, the core function of these products has remained largely the same.
From Product to Customer Challenge
But customers have a large number of financial needs that traditional products are not designed to address – customers struggle, for example, to do the daily work of consistently saving towards their goals, or to monitor and adjust their balances across accounts.
Rather than focusing on core banking capabilities, non-bank providers are instead taking advantage of these unfulfilled needs to launch products that directly address customer challenges to achieving their desired financial outcomes – challenges that are either currently unsolved or for which customers have a poor solution.
This different definition of products highlights an opportunity for traditional banking providers to drive a new kind of value for their customers. In fact, customers are most likely to deepen their relationships with banking providers that help them consistently stay on track towards their financial goals, according to CEB data.
There are a few traditional banking providers that are starting to shift their definition of “products” to really design them around unsolved customer challenges. Two banks in CEB’s global network of financial services firms have made some interesting moves.
Understand how customers are currently solving, or not solving, their financial challenge: To design a solution that works better than how a customer is currently solving a challenge, banking providers first need to understand the current customer approach.
One bank realized that customers were withdrawing their paychecks because they found it easier to save money by managing their cash outside the bank. By studying the financial behaviors of these customers, the bank used design thinking to create a new account aimed specifically at helping this segment increase their monthly savings.
Repeatedly test new products to validate their effectiveness at addressing customer needs: For customers to adopt a new product that changes the way they manage their finances, the solution must become part of their daily lives.
This requires a much closer understanding of customer financial management than, say, adjusting a fee on a traditional product. Bank of Montreal’s uses “customer journey teams” to consistently and rapidly validate new ideas with customers.