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By Steve Cocheo, Senior Executive Editor at The Financial Brand
Many banks and credit unions are pursuing customer experience strategies built around delight, entertainment and extended engagement. However, financial services expert Derek Corcoran argues that this approach may be fundamentally misguided.
In his book, Designing for Need: The New Rules of Customer Experience in Banking, Corcoran explains that banking is not designed to entertain customers. Instead, it exists to help people complete important tasks quickly, securely and with minimal effort.
Banking Is a “Need-to-Do” Experience
Corcoran believes financial institutions must first accept a simple reality: most people do not want to spend more time banking than necessary.
Customers may enjoy vacations, fine dining, shopping or entertainment. These are activities people often choose because they are pleasurable. Banking is different. Customers use financial services because they need to pay bills, transfer funds, finance a home, purchase a vehicle or manage their money.
That distinction creates two different customer experience models:
- Want-to-do experiences: Activities that are expected to be fun, enjoyable and memorable.
- Need-to-do experiences: Essential tasks that should be fast, simple, convenient and painless.
For banks, the goal should not necessarily be to make customers excited about banking. The goal should be to remove unnecessary effort and help customers complete their financial tasks with confidence.
Customers Want What Banking Makes Possible
People generally do not want a mortgage, a six-year auto loan or a complicated account-opening process. They want a home, a car or the ability to manage their finances effectively.
As Corcoran emphasizes, customers want the outcomes that banking enables, not the banking process itself. This means financial institutions should design services around the customer’s objective rather than the bank’s internal procedures.
A successful banking interaction may not produce an enthusiastic review or a memorable story. Instead, customers may simply think, “That was easy.” In financial services, that reaction can be a powerful sign of success.
Why Banks Cannot Copy Retail Customer Experience Strategies
Some banks have tried to imitate the customer service methods of companies such as online retailers, airlines and hospitality brands. Those strategies can work well in industries where employees have broad discretion to resolve problems immediately.
For example, a retailer may replace a damaged pair of shoes without requiring the customer to return the original product. A bank, however, cannot always resolve a disputed transaction, mortgage payment or loan issue with the same flexibility.
Financial institutions operate within strict regulatory, legal and financial boundaries. Customer experience improvements must account for compliance requirements, fraud prevention, risk management and the long-term impact on the institution.
This does not mean banks are unable to deliver excellent service. It means their definition of excellent service must be tailored to the realities of financial services.
Respecting the Customer’s Time
One of the most effective ways banks can improve customer experience is by eliminating unnecessary delays and distractions.
Corcoran highlights the difference between a helpful digital conversation and one that becomes overloaded with personal comments, loyalty messages and unrelated interaction. While a friendly tone can be valuable, excessive conversation can frustrate customers who simply need an answer.
People are busy and often turn to digital banking because they want speed and convenience. A concise response that solves the problem may be more valuable than an elaborate interaction designed to create emotional excitement.
When a bank gives customers time back, it demonstrates that it understands their priorities.
When Friction Can Improve Banking Security
Removing every obstacle is not always the right answer. Some friction can protect customers from fraud, unauthorized transactions and other financial risks.
The important issue is whether the level of friction is appropriate for the specific situation. A large transfer from one customer may carry a very different risk profile from the same transaction conducted by another customer.
Rather than applying identical restrictions to everyone, banks could use customer data and risk analysis to make security requirements more flexible. Low-risk activities could remain simple, while higher-risk transactions could receive additional verification.
Do Customers Really Want Banking Superapps?
Some financial institutions are attempting to increase digital engagement by adding more services to their mobile applications. The objective is often to encourage customers to spend more time inside the app.
Corcoran questions whether longer app sessions should be considered a meaningful success metric. If a customer can complete a banking task in a few seconds, that may be a better outcome than keeping the customer inside the app for several minutes.
Consumer banking applications may become less useful when they expand into unrelated areas such as entertainment, shopping or ticket purchases. Customers may prefer to choose those services independently rather than have their bank make every decision for them.
Additional services can make sense when they are directly connected to a financial need. For instance, a bank could offer relevant insurance options to a customer applying for an auto loan. The service adds value because it supports the customer’s immediate goal.
Design for the Customer, Not the Institution
Banking experts and product teams can struggle to identify customer frustrations because they are too familiar with the institution’s internal processes. They understand how products are built, but customers may interact with the bank only occasionally.
Corcoran recommends that financial institutions become customers of their own services. Employees and executives should open accounts, apply for loans, request credit cards and complete routine transactions through the same channels used by the public.
This exercise can quickly reveal problems that internal testing may overlook.
Real-World Lessons from Banking Customer Experience
In one example, a senior digital banking executive attempted to open an account from home. The process required retrieving a wallet from another room, creating enough inconvenience that the executive abandoned the application.
The lesson was straightforward: if a senior banking leader was unwilling to complete the process, potential customers might also leave before finishing. The account-opening journey was subsequently redesigned to reduce unnecessary steps.
In another example, a bank noticed that online activity increased during television commercial breaks. Customers were using those short windows to remember and complete pending financial tasks, such as paying bills or moving money.
That insight led the institution to develop a digital account-opening process that could be completed in approximately 90 seconds. The experience was designed around the customer’s available time rather than the bank’s preferred process.
How Banks Can Improve Need-to-Do Experiences
Financial institutions can apply several practical principles to improve customer experience:
- Make account opening and loan applications as short and clear as possible.
- Remove steps that do not add value for the customer or improve security.
- Measure convenience, completion rates and resolution time instead of relying only on app engagement.
- Use customer testing to identify confusing language and unnecessary requirements.
- Match security friction to the risk level of the transaction.
- Offer additional products only when they support the customer’s immediate financial objective.
- Evaluate every digital journey from the customer’s perspective, not from the institution’s internal viewpoint.
The New Definition of Banking CX Excellence
Customer experience excellence in banking does not require banks to imitate theme parks, luxury hotels or popular retailers. Financial institutions have a different responsibility and operate under different constraints.
The strongest banking experiences are often the least noticeable. Customers should be able to complete important tasks quickly, understand what is happening and move on with their day.
For banks and credit unions, the path to better customer experience may begin by abandoning the idea that customers want to spend more time with them. Instead, institutions should focus on being useful, accessible, secure and easy to work with.
Source: Thefinancialbrand.com