Embracing Uncertainty: Key Imperatives for Financial Services Industry Leaders Amid Market Volatility

By Karen Oakland, VP of Financial Services Marketing at Smart Communications 

Price inflation, rising interest rates, bank failures, geopolitical tensions, regulatory changes, generative AI: banking and financial services organizations have been coping with a range of seismic shifts like these over the past year. In an era defined by market volatility, executives and operations teams find themselves looking for ways to not only respond more quickly, but to adapt their strategic plans for both short- and long-term success.

This market volatility brings forth unparalleled challenges, risks, and opportunities. How should financial institutions respond to the serial shocks, whether economic, technological, or geopolitical? Should they curtail investment in areas like improving digital customer experience or new product launches in the face of margin pressures, or should they prime their operations for future growth through targeted spending?

By harnessing new technologies, banks and lenders can confront the growing digital ecosystems and emerge victorious against Big Tech," states Karen Oakland from Smart Communications.

To better comprehend the unfolding waves of uncertainty and disruption, Smart Communications and Salesforce partnered with MoneyLIVE to conduct a comprehensive study. The research, encompassing a survey of over 430 senior executives from the global banking and lending sector, revealed a strategic divergence among respondents. While 37% advocated limiting spending in an uncertain future, an overwhelming 63% remained committed to sustained digital investments, capitalizing on whatever lies ahead.

According to the survey, the future is likely to bring forced changes to business plans, margin pressures, skill shortages, and customer contact surges driven by crises. However, it also presents significant opportunities for leveraging emerging technologies to enhance efficiencies, drive growth, and elevate the customer experience. This positions banks and lenders to confront Big Tech and thrive within expanding digital ecosystems.

"The banks and lenders we surveyed recognize that challenging times lie ahead and harbor no illusions about operational difficulties in the coming years," says Karen Oakland, Vice President of Financial Services Industry Marketing for Smart Communications. "However, they are equally aware of what needs to be done to not just survive, but flourish amid uncertainty. First, they need to cultivate agility to adapt their business plans in response to economic, technological, or strategic shocks. Second, they must elevate the customer experience by providing hyper-personalized, value-added financial management services to ensure customers weather the economic storm and emerge stronger. The outcome of these investments will be financially resilient customers and optimized financial institutions prepared for growth in the dynamic digital landscape."

Rebuilding Customer Trust: An Unprecedented Opportunity

The financial services industry's reputation suffered a significant blow in the aftermath of the 2008/9 financial crisis, and today, leaders are determined not to repeat past mistakes. An impressive 88% of respondents believe that the current era of uncertainty presents the best opportunity for banks and lenders to rebuild customer trust since the financial crisis.

This trust must be built on secure, user-friendly systems that remain fit-for-purpose under any circumstances. Moreover, it grows through the efforts of highly skilled professionals who are available, empathetic, and digitally empowered to make a difference.

Agility and adaptability play to the strengths of smaller, non-legacy banks and lenders," emphasizes Aman Kirk, Senior Director of Customer Transformation at Salesforce.

"However, seven out of ten respondents believe that larger financial institutions, with their substantial human resource pools, may have an edge in building trust with stressed customers."

Optimizing the Human-Machine Equation

While skills shortages and crisis-driven surges in customer contact are anticipated, best practices in automation will play a pivotal role in ensuring that customer communication channels can meet demand. This involves reducing demands on staff time by enabling customers to use automated self-service channels, as well as proactively and personally deflecting potential inbound calls through automated outbound communications.

The research reveals that only a minority of organizations have fully optimized these capabilities across their enterprise. Seamless transitions from digital to human assistance are crucial, particularly for self-service customers who require help from a human agent. Efforts to improve this area remain ongoing.

"People remain a crucial component of every strategy," affirms Oakland from Smart Communications. "Equipping staff with the best digital tools to enhance their productivity and adaptability, while directing their efforts where they can make the most significant impact, will underpin success in customer experience during times of skill shortages."

According to Virk, the best digital tools will consolidate and present all customer data and real-time contact history in a single location, enabling human agents to provide targeted and personalized assistance effortlessly. AI-based guidance will enhance human capabilities without the need for extensive coaching. Additionally, analytics capable of discerning a customer's psychological and emotional state will facilitate tailored support, ensuring vulnerable or complex cases receive the necessary assistance promptly.

"These digital tools not only enhance the customer experience but also transform the nature of human agents' jobs," emphasizes Virk from Salesforce. "Empowered to make a difference by solving problems and providing assistance during difficult times."

Delivering Value-Added Convenience

Uncertain times necessitate focused and proactive customer support, with many respondents anticipating the rise of hyper-personalized financial management services.

"We envision an opportunity to redefine exceptional customer experience in banking and lending," shares Virk from Salesforce.

More than reducing friction to enhance convenience, there’s a greater prize at stake: the ability to deliver concierge-style private banking at scale. Industry leaders recognize the potential to redefine customer experience in banking and lending by offering "value-added convenience" that simplifies customers' lives holistically.

As per the research findings, the next three years will witness the emergence of "value-added convenience." This includes areas such as AI-generated budgeting recommendations, personal financial management, AI-driven price checking, automated bill-switching services, and ongoing assessments of product suitability for customers as their situations evolve. Respondents widely agreed that these services would become competitive differentiators in the years to come.

Elevating Self-Service Capabilities a Competitive Must

For these services to become mainstream within three years, banks and lenders must accelerate their current investments in automation. A staggering 92% of surveyed executives concurred that hyper-personalized, automated digital self-service maturity is crucial to providing "value-added convenience" financial management services—a level of maturity that many institutions have yet to achieve.

"This automated digital self-service maturity is characterized by capturing new data sets to understand changing customer needs better, digital forms that adapt based on customer responses to foster conversational experiences, AI-prompted questioning to deepen customer understanding, and AI-prompted conversations that guide customers through important decisions," outlines Oakland from Smart Communications.

"While substantial investments are required over the next three years, our survey indicates that organizations are likely to make these investments.

Addressing the "3 As" Key to Strategic Investment

Automation, agility, and adaptability hold the key to success in this era of uncertainty. Consequently, reevaluating existing systems and operations is imperative. The industry is shifting toward advanced automation, encompassing low-code/no-code development, cloud computing, and cloud-based microservices with APIs. This direction enables rapid scalability and flexibility without increasing fixed costs.

However, while many respondents expressed intentions to host the majority of their systems in the cloud, the current reality falls significantly short of these aspirations. Merely 4% reported having crossed the threshold of hosting over 50% of their applications in the cloud, despite 27% expressing their organization's intention to do so within two years. These statistics indicate slow progress, even among the most ambitious proponents of cloud technology.

In fact, 65% of banks and lenders surveyed believe that their organizations face an investment gap when it comes to developing a systems architecture based on cloud, microservices, and APIs. This means there’s opportunities, so long as financial leaders view it as such and take the appropriate actions to ensure their future place in the market.

For more information on these topics, read the infographic here.

About the Author
Karen Oakland is Vice President of Industry Marketing for Smart Communications, focusing on thought leadership and solutions development for banking, investment advisory firms, and other financial services institutions. For more than 20 years she has been dedicated to helping enterprises transform the way they communicate and engage with their customers, partners, advisors, and other stakeholders, driving revenue and profitability. Karen previously held leadership roles with content and business intelligence software providers including Intelledox, dunnhumby, Thunderhead, FileNet and Epicor.