In the face of evolving regulations and a push for greater customer-centricity, the financial sector is undergoing significant transformation. Together with a panel of industry experts, we delved into how technology and collaboration are crucial not only for meeting new demands but also for laying the groundwork for sustainable growth and innovation.
| You can watch this video roundtable on YouTube. |
The financial industry is under increased pressure to provide good customer outcomes. Organisations are determined to make greater strides towards improved efficiency – encompassing technology use, cost, and operations.
But what are the key challenges that the financial sector is facing, and how do we overcome them?
The compliance landscape is constantly evolving, with regulatory bodies requiring businesses to adhere to certain laws and guidance regarding client communications and data.
Now, the recent emergence of Consumer Duty has added another layer to this complex field. Although the elements within Consumer Duty may have been best practices before, they are now more formalised, leading organisations to take a deeper look at them.
So, how has it impacted communication with customers?
Chloe Taylor, CEO of communications consultancy Quietroom, shares that Consumer Duty has significantly changed how people approach communication – particularly in terms of frequency and personalisation.
“There are lots of parts of Consumer Duty that talk about the timeliness of communication. There’s very explicit guidance saying that, particularly in the financial advice space, once every two years is not frequent enough to be speaking to your customers and to be giving them advice.”
— Chloe Taylor, Quietroom
“One of the big benefits of moving to more digital channels is the flexibility for personalisation, but also for evolving understanding and an iterative approach to what your consumers really want from you.”
— Chloe Taylor, Quietroom
Consumer Duty has made a huge push for taking the onus off consumers, ensuring they aren’t provided with vast amounts of information and left to make sense of it all on their own.
Chloe explains that communications should be driven by what is known about consumers so that messages land at the right time and in the right context.
“The spirit of the regulation is about the duty that is on the providers, the duty that is on the industry, to do some of the work for people. We’re the experts – and it’s therefore our role to give people the information they need at the right time that is pertinent to them in their circumstances. Sending the same letter to everyone once a year isn’t very helpful. That person’s life isn’t the same as your other consumer’s life.”
— Chloe Taylor, Quietroom
Alan Clay, Head of Strategy for Customer Data Solutions at LexisNexis® Risk Solutions, adds to this, explaining that there is a need to consider customer communications from an organisational level to create a singular customer view.
Currently, there is a siloed approach, with correspondence coming from several areas such as operations and marketing, leaving customers bombarded with information and contravening Consumer Duty.
"It’s about sending the right communication through the right channel, at the right time, and to the right person.”
— Alan Clay, LexisNexis Risk Solutions
Organisations are increasingly looking for ways to minimise costs without sacrificing service, with Beyond Encryption CEO, Paul Holland, stating that "cost cuts shouldn’t come at the sufferance of consumer outcomes."
But how do organisations balance an investment in technology with the tangible benefits it brings to customer experiences?
Matthew Krzywicki, Senior Manager at Alpha Financial Markets Consulting, shares his experience:
“Enzo Ferrari once said that ‘when a thing works better, it’s usually more beautiful to the eye'. While we’re not building supercars here, I do think the principles are the same, and this is what we see working with a lot of our clients. When a more efficient, streamlined process is built, that benefits both the customer as well as the bottom line.”
— Matthew Krzywicki, Alpha Financial Markets Consulting
"It’s not all about cutting costs - it’s about making sure that money is spent in the right way and aligns to strategic imperatives. Making that relatively small investment upfront to understand the customer and bring that thread through any sort of technology implementation is going to help your top and bottom line.”
— Matthew Krzywicki, Alpha Financial Markets Consulting
In essence, this means that from a cost optimisation standpoint, you’re going to have a better customer experience and increased retention.
From an operational standpoint, it’s going to be more streamlined, and you’re going to receive less pressure on your call centres and customer service teams.
With companies now increasingly prioritising customer experience by onboarding new tech, a problem has arisen in the market – that of technical debt.
When financial organisations invest in new solutions without removing the old, they create a significant build-up of legacy software and waste.
Simon Leuty, Founder and Chief Innovation Officer of Livingstone Group, shares more about why this is a problem:
“We’re seeing people try and react to their customer demands, we’re seeing them react to regulation, but what we’re not seeing them do is clean up afterwards.”
— Simon Leuty, Livingstone Group
“Some of these systems are archaic and incredibly complex to change, which keeps you on that old stack. The older that stack becomes, the more it costs you to support, and that’s why you have to tack on all the new bits on top of it. You’re just in this perpetual cycle of inefficiency.”
— Simon Leuty, Livingstone Group
When thinking about how this affects a business, it’s clear to see that it harshly impacts opportunities for growth and stunts adaptation speed.
“What we’re seeing in the market is double-digit budget growth, but not double-digit benefit. Software budgets go 20% year-over-year, but revenues are not. What that’s telling us is people are not getting the value from that technology.”
— Simon Leuty, Livingstone Group
Matthew continues this thought, sharing that:
“With a complex tech landscape, you’re unable to adapt to changes in the industry, whether that be regulatory changes or competitive pressures. That can really hamstring growth.”
— Matthew Krzywicki, Alpha Financial Markets Consulting
Beyond Encryption CCO, Adam Byford, says that while there is no avoiding technical debt entirely, especially with advancements in technology and the fact that admin systems in the financial sector have been used for decades.
"You mustn’t let it restrict your ability to innovate, because if you don’t innovate, you’re going backwards."
— Adam Byford, Beyond Encryption
But how do we minimise technical debt?
One key method lies in tech hygiene, identifying and removing hardware or software within your stack that is no longer useful:
“Freeing revenue up in those spaces by just doing what you should be doing anyway, which is managing your estate, is where you can wheedle out revenue for innovation and other process efficiencies.”
— Paul Holland, Beyond Encryption
With customer expectations continuing to grow, there is significant pressure on businesses to provide services that meet their demands.
"The financial industry is well behind other industries in terms of what it provides its customers with and how it understands them."
— Adam Byford, Beyond Encryption
Chloe explains that the human instinct to provide better customer service is by adding more, whether this is more tech, more communication channels, or even just adding more paragraphs to a document.
"None of these are necessarily bad options. But they often come from a place of a lack of clarity about what you’re trying to achieve. You need to ask yourself; what have you done and is it working? And if it’s not, how much awareness do you have about why it’s not working?”
— Chloe Taylor, Quietroom
This highlights the vital need for insights – in other words, building a robust framework with accurate data.
"We know from all the research that asks people what they want, the results are ‘tell me about my money. I want to know what’s happening to it, where it is, and what I can do with it.’ The only way that the industry can satisfy that need and desire from consumers is through good quality data.”
— Chloe Taylor, Quietroom
Alan describes the need for financial organisations to take a holistic approach and ensure that information is assessed for correctness and timeliness, with instances such as an incorrect date of birth and out-of-date addresses having several implications for engagement.
“With the evolution from sending out a letter once a year, to now more frequent and interactive digital communication, there’s a two-way continuum - meaning your data now needs to be as good as it possibly can be. It’s not a one and done – it’s a continuous monitoring to make sure that whenever your data is used, either proactively or reactively connecting the right dots together to give customers the right experience.”
— Alan Clay, LexisNexis Risk Solutions
Simon agrees with this, highlighting:
“When you think about managing software and investments effectively, we need three key data sets. ‘What do you own, what are you using, and then what do you need in the future? If that’s not a clean data set, it’s incredibly difficult to make an informed decision.”
— Simon Leuty, Livingstone Group
As to why organisations aren’t fulfilling this already? Chloe argues that it’s down to fear of making mistakes.
“Because schemes and businesses are so afraid of the wrong data, they shy away from a lot of opportunities that are there for personalisation. That fear drives a lack of innovation and a lack of people being willing to, at least for a portion of their consumers, give them what they really want and need, which is tailored information about them and their circumstances.”
— Chloe Taylor, Quietroom
Many organisations are aware that they both want and need to do better. But what does better look like?
Here's the top advice from our experts:
“Frequently, we find that businesses and organisations don’t really know what their consumers do and don’t understand, what they do or don’t want from their providers. Insight is a really big thing upfront so that you then invest in the right changes.”
— Chloe Taylor, Quietroom
“It’s fundamentally about getting more of the basics right, more of the time, and that’s where the first wins are. Then, when you’ve got a solid foundation, you can build for the future from there. Don’t build the future on a bed of sand.”
— Alan Clay, LexisNexis Risk Solutions
“As they say – ‘what is measured is managed’. Being able to understand that the correspondence was opened, that it was opened by the right person, and then be able to track that there was an action made on the back end of that is incredibly valuable for managing a business and demonstrating the impact of communications.”
— Matthew Krzywicki, Alpha Financial Markets Consulting
“Expect the challenges that you come across to be very varied, and don’t try to answer them all yourself. Seek help – there are people who are experts in very specific areas, and if you get help from one of them rather than trying to answer everything yourself, then that’s going to be of benefit to you and to your customers.”— Adam Byford, Beyond Encryption
“If it doesn’t work – that’s fine. You can learn from your failures of things that you tried, as long as you find out why it didn’t work instead of moving on without the learning experience.”
— Alan Clay, LexisNexis Risk Solutions
“You’re not necessarily going to get it perfectly right, but just getting it a bit right is actually going to generate a significant gain. Sometimes people are overwhelmed by the task and intimidated by even getting started, but you have to start somewhere to drive those efficiencies.”
— Simon Leuty, Livingstone Group
“To use a Formula One analogy – the driver and the car are two different components, with the car being built by a whole team of experts. It’s that collaborative piece, with all working together towards that common goal being where the best results come from.”
— Alan Clay, LexisNexis Risk Solutions
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