Some of the world’s leading financial companies are primed to lose customers to fintech and digital startups. Read why that is and what the companies can do about it to stop the financial sector losing customers. You can download our e-book, Digital Disruption in Financial Services: How to Manage Change
Legacy companies all across the financial sector are losing customers to more agile, digitally savvy and accessible alternatives.
The trend can be seen in private banking, insurance and asset management where startups and fintech offer solutions, services and even storytelling built specifically to meet the expectations of the modern day customer.
“Over the past few years, we have seen a large number of new companies enter the financial market. These new companies have a significant focus on transparency and accessibility. They also have a strong sense of brand identity that they market and communicate extensively to meet the aspirations of modern day customers that don’t necessarily identify with the older institutions,” says Customer Service Director at AlfaPeople, Lucas Santacruz.
According to Lucas Santacruz, new players in the financial market engage younger customers more efficiently than their legacy counterparts. Legacy companies tend to rely on their experience and a large portfolio of services. However, they lack the eye-catching rhetoric and pathos of new companies that have created their profile for an era of social media and swift digital communication. This is one of the key reasons as to why the financial sector is losing customers.
“A lot of these new companies entering the market communicate much more clearly and perhaps even aggressively on social media. They have a strong sense of the spirit of the company, which makes them super identifiable compared to legacy institutions,” explains Lucas Santacruz.
A customer-centric approach
Many new players in the financial market have developed their businesses around a customer-centric approach. These companies are characterised by a high degree of flexibility and digitalisation that enables them to adjust their business extremely efficiently according to market trends and the needs of the customer.
Industry experts predict that legacy companies within the financial sector will need to focus on multi-channel customer service and customer experience, transparency, personalisation and identification to keep up with the new players in the market.
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Do legacy systems prevent growth?
His analysis is supported by the latest World Retail Banking Report 2022 conducted by Capgemini and Efma.
In the report, three quarters of customers surveyed are attracted to the fast, low-cost, easy-to-use products and experiences that fintechs and new players in the market put on offer.
And 95 percent of banking executives identified that legacy systems and outdated core banking modules inhibit efforts to optimize data- and customer-centric growth strategies.
“Take customer service as an example. There are so many new digital channels available that can be used to make customer service more flexible and accessible. For example, with some of the new companies in the financial market you can text the manager using WhatsApp and later that same day, you will get in touch with the person you were looking for. Then, on the other hand, there are legacy companies where customer service is strictly based on call centers and if you want to talk to a manager, you need to book a physical meeting,” explains Lucas Santacruz.
Customer service as the starting point
Originally published in the summer of 2019, the report still reflects some of the challenges that legacy institutions in private banking, insurance, asset management etc. face when going up against some of their younger competitors:
Today, many bank processes are anchored to how banks have always done business—and often serve the needs of the bank more than the customer. Banks need to reverse this dynamic and make customer experience the starting point for process design.
To do so, they need to understand what customers want, and how and when they want it.
A frontline revolution
According to Lucas Santacruz, legacy companies have historically prioritised the development of new products within its core output whether in private banking, insurance or other parts of the financial landscape.
The understanding has been that if the core products are good enough then everything else will take care of itself. Customer service and customer experience has been a lesser objective, but that might need to change going forward.
“I think that in the near future legacy companies will start to transform their frontline business. These include all aspects of the company that have a direct impact on customer service and the customer experience. The thinking will gradually become that ‘yes, we have a great product, now let’s make sure that our customers have a great experience using it’. Personally, I definitely think that is the correct approach,” says Lucas Santacruz.
Keywords in the ‘frontline business revolution’ will be customer service, customer experience and personalisation. Customers should be able to personalise products and services and have easy access to customer service as it fits the schedule and channel preferences of the customer.
“I know that it is much easier said than done, but this is my take on what legacy companies need to do,” says Lucas Santacruz.
Learn more about how companies should navigate a changing financial sector in our e-book, Digital Disruption in Financial Services: How to Manage Change.
Interested in learning more? You can always contact AlfaPeople