Key Points When Considering CX in Digital and Net Banks

CX is an area where banks can differentiate themselves from the competition. It is thus necessary to pay attention to points of difference among financial institutions in what they should tackle. For example, in the case of retail banks, the CX they should offer will differ depending on whether their target customers are the wealthy classes, the mass market, or demographics with high or low financial literacy. What sorts of measures each bank should take is something we believe should be considered after properly aligning each bank’s business model and value offering.

There are three points to consider when looking at the business model from a CX perspective. The first is who the target customers are. Are they wealthy or mass market? Do they have high or low levels of financial literacy? Are they better suited to push or pull sales approaches? etc. For example, suppose the target customers are wealthy. This would likely necessitate offering a customer experience through not only digital channels, but in combination with real channels. If the target customers have high financial literacy, meanwhile, it would be necessary to provide expert columns, foreign exchange data or other high-level information. Conversely, for customers with low financial literacy, banks would need content that helps their customers feel at ease with finance.
The second point to consider is whether the bank will secure its own customer contact points. For example, will the bank provide financial services through its own channels? Or will it avoid having its own channels by offering banking products and services as Banking as a Service (BaaS) operator to businesses that have large-scale customer platforms? If the bank decides not to have its own channels, it will not need its own marketing function.
The third point to consider is whether the bank is able to offer all of its products and services on its own, and whether it will do so. For example, the CX a bank would need will likely differ depending on whether it will offer securities and insurance services, or even non-financial services, on top of banking services.

Once the business model is settled, the next thing it is important to think through is what sort of value the bank will offer to customers. The three main components of value that should be looked at when considering CX are: (1) economic terms, (2) customer experience, and (3) ecosystems (see Figure 2).
(1) Economic terms refer to the provision of competitive financial terms to customers through interest rates and fees on financial products, cash-back programs, or incentives such as points schemes.
(2) Customer experience refers to the provision of highly convenient services on the basis of a thorough analysis of the apparent and potential needs of customers. Transaction time, the ease of procedures and transaction-related content (such as reports and simulations) are key points to consider here.
(3) Ecosystems refer to the one-stop provision of services customers need in their daily lives through partnerships between financial and non-financial companies across a variety of industries. Looking at cases where digital and net banks have successfully turned profits in the past, it has been possible for banks that have been able to compete on (1) economic terms to turn a profit, even if their (2) customer experience or (3) ecosystems were somewhat lacking. However, for banks that cannot present favorable (1) economic terms compared to competitor banks, we believe it is important to refine the (2) customer experience and (3) ecosystem elements.

Once the business model and value offering have been decided on, the next step is to create specific systems. We will look at creating systems for success in CX by breaking it down into six points. It should be noted that the necessity and importance of these six points will vary depending on the business models and value offerings described above. For example, the specific systems necessary, as described below in (1), will vary depending on the target customer, which is the first point to consider, and the systems described below in (2), (3) and (6) will be especially important if the bank puts an emphasis on economic terms.

It is important for digital banks and net banks to build systems for having customer frequently access their services if they are to succeed in CX. This will allow digital banks and net banks to not only analyze customer behaviors and needs and thus make them optimal proposals, but it will also secure an effective contact point for when it comes time to market to them. The fact is, however, that banking has less frequent customer access rates compared to other industries. The vast majority of customers only access their accounts to check salary or accounts receivable deposits, or to make bank transfers. It is therefore important for digital banks and net banks to build systems that embed customer contact points such as the use of apps as part of the course of daily life, by offering content that is useful to customers, such as providing payment methods, distributing coupons or managing budgets.

The next thing digital banks and net banks need to consider after access systems is systems for collecting customer data.
Whether physical or digital, internal or third-party, it is important for digital banks and net banks to collect all kinds of customer data so that they can know what sorts of content their customers are interested in, when and in what kinds of products they transact, and in what behaviors and interests each individual customer engages.
This begins with gathering not just attribute data, but data that banks can obtain for themselves after thinking through what information could be expected to be useful for marketing, such as data on changes in transaction behavior. It is then important for digital banks and net banks to effectively build customer data platforms (CDP), that serve as foundations for marketing, by acquiring, in a step-by-step manner, external data through partnerships with other companies, such as fintech companies, while paying due heed to the Act on the Protection of Personal Information.

Analyzing customer data thus collected using tools such as AI can allow digital banks and net banks to gain insights, such as how much customer attributes and changes in transaction behavior will affect the transactability of financial products, which in turn allows banks to improve the precision of their offerings.
Having refined down to the most effective analytical approach from amongst the wide variety of approaches that exist, it is important for banks to offer each individual customer the right information, products and services through the right channels, at the right times, based on the results of said analysis.

For digital banks and net banks placing an emphasis on ecosystems as a value offering, it is especially important to build platforms that integrate services from other companies through the use of APIs or inter-business partnerships, and to thus enclose customers in the ecosystem.
A wide range of ecosystem patterns are possible. For example, there is the “cross-industry partnership model,” that appeals to customers through usefulness value in an economic sphere. This is seen in the case of Rakuten Bank, which acts as the core bank in the Rakuten economic sphere, and offers a variety of financial services with Rakuten Points as a hook. There is also the “financial services partnership model,” which offers financial services in a one-stop shop by partnering with multiple financial institutions and fintech companies, such as banks, securities companies, insurers, lenders and leasing companies. Another model is the “regional business model,” which provides highly useful services for regional startups and small to medium-sized enterprises through partnerships with local companies.
In selecting companies to partner with, digital banks and net banks need to not only drill down to the customer needs they themselves will target, but also to form win-win relationships with their partners, in which they supplement each other’s management resources in the form of technology, personnel, data and capital.
In building an ecosystem, it is also important for banks to develop API platforms that they open to a variety of other companies. We believe that by opening up an API, banks can offer customers useful services in partnership with external companies.

In working to provide services and enclose customers, it is also important for digital banks and net banks to visualize how the marketing activities they engage in connect with outcomes, and to regularly revise their measures.
In setting KPIs, banks need not only to set indicators that show ultimate outcomes such as increases in loan balances, but also to analyze processes that tie into ultimate outcomes such results for the extent to which marketing measures are executed and how customer react, and how much this contributes to increases in loan balances, then set per-process indicators to track this (see Figure 3).

To continuously advance the marketing activities described thus far, digital banks and net banks need to develop personnel who can analyze and make use of data.
Data analysis and utilization personnel need three skills: “the ability to organize business issues having understood their background (business skills);” “the ability to understand and use information science knowledge such as information processing, artificial intelligence and statistics (data science skills);” and “the ability to implement and operate data science in a meaningful form that can be made use of (data engineering skills).”
Digital banks and net banks thus need to define skill frameworks and strategically develop personnel, having used these to clarify what personnel they need.