Customer experience is more important than ever before.
Customers expect every activity to be as frictionless as searching on Google or buying those new sunglasses on Amazon — and their expectations extend to financial services. Innovation within the industry teaches customers to expect hyper-personalized experiences with insights, recommendations and offers tailored specifically to them.
Unfortunately, many financial institutions have overlooked one of the most effective ways to improve customer experiences. Oftentimes, banks create their products and services with their own operational efficiencies and processes in mind rather than focusing on who they are designing for. One way forward is design thinking — a methodology for developing new products, services, and features centered on empathizing with customers and iterating on solutions that will serve their needs.
Research shows that banking customers are more than ready for change. A 2018 Deloitte study found that while most consumers are satisfied with their primary bank, they also say that their “favorite brands” — mostly top-performing tech companies — outperform that bank by an average of 12 percentage points on measures of emotional engagement like “know[ing] me and what I need.” In other words, tech companies are doing a better job of showing customers they care.
Financial institutions need to close that gap. Delivering an experience that “wows” customers and drives long-term loyalty requires more than a sleek app or a one-off email campaign. It requires a shift in mindset across the whole organization toward serving the needs of the customer first.
It requires design thinking.
In order to meet the challenges posed by big tech companies and fintech upstarts, banks need to change their approach — and quickly.
Serving customers and boosting bottom lines
First popularized in the early 2000s, design thinking is now a mature process that’s been implemented successfully by organizations from IBM to Airbnb. This approach to design isn’t just about aesthetics: it involves a ground-up rethinking of how a company creates and delivers products and services.
One of the classic design thinking case studies features a large financial institution that saw significant results by leading with empathy. In 2008, the founder of design firm IDEO wrote in Harvard Business Review about how his team used design thinking to create Bank of America’s “Keep the Change” savings program, which rounds up debit card charges to the nearest dollar and transfers those extra cents into the user’s savings account. The program was a creative and empathetic solution to a painful customer problem: the difficulty of saving for the future. By 2008, the 3-year-old program had already attracted 2.5 million customers who eventually opened 1 million new savings accounts at Bank of America.
This framework has since been adopted by other financial institutions, and Acorns even built an entire company around the “invest by rounding up” concept. Bank of America’s story serves as a blueprint for how to use design thinking to launch new financial products and services while improving customer experience in a lasting way.
Research shows the methodology can also pad a bank’s bottom line. According to a 2017 McKinsey study, organizations that prioritize design thinking see their revenue grow faster than industry benchmarks by as much as two to one. By embracing design thinking, financial institutions can internalize the needs of their customers and deliver products and services that are meaningful, frictionless, and relevant. Design thinking also enables banks to compete against an ever-growing number of financial services players. Many of these disruptors are prioritizing customer experience management from day one, and it’s time for banks to use design thinking to do the same.
Applying design thinking in 5 steps
While financial institutions can implement design thinking in different ways, most experts agree that the methodology includes five basic steps. By following this process, banks can hone in on customers’ pain points and perspective, allowing them to design solutions that serve real user needs.
- Empathize. Empathy for the customer is at the center of the design thinking process. For this first step, design thinkers strive to understand customers’ needs by observing how they use a company’s products and services in their everyday lives and also by carrying out customer interviews, focus groups, or surveys.
- Define. During this step, design thinkers take the insights they gleaned from Step 1 and focus in on a few key problems that are important to users.
- Ideate. After narrowing things down in Step 2, ideation means it’s time to “go wide” again. The design thinking team attempts to brainstorm as many solutions to the selected problem(s) as possible, and out-of-the-box thinking is welcome. At this stage, it’s important to source ideas from across the organization, especially from front-line employees who interact with customers more often.
- Prototype. When ideation is complete, design thinkers choose their best solutions to build out prototypes, or preliminary models. Often, a prototype will take the form of a physical object or a bare-bones software product; however, it could also be a role-playing scenario, a storyboard, or anything else that gives the user the flavor of an idea under consideration.
- Test. Once there’s a prototype, it’s time to put it in front of actual users. If possible, testing should take place in the same environment where the final product or service will eventually be used. Based on feedback from the tests, design thinkers can go back and iterate on a new prototype as needed to help improve the design. Since testing and prototyping are so closely tied, some experts consider them one step.
Interested to see what this looks like in action? Bank of America’s “Keep the Change” program illustrates how each step in the design thinking process was used to create an innovative, customer-driven product.
- Empathize: The IDEO team interviewed baby boomer women with children about how they managed their finances.
- Define: Based on what they learned, the team decided to zero in on the challenge of saving on a tight budget.
- Ideate: The “Keep the Change” idea was one of 80 different product ideas generated during brainstorming sessions that involved software engineers, finance experts, and other stakeholders across Bank of America.
- Prototype: To field-test the idea, IDEO made a cartoon video about the service that could be shared with customers for feedback.
- Test: Based on feedback from customers and stakeholders, the IDEO team added new features to their prototype including more detailed reporting and overdraft protection.
Delivering customer-first success stories
Bank of America isn’t the only financial institution reaping the rewards of design thinking. Other banks are using the methodology to reimagine their customer experience, especially for digital products. For example, 200-year-old State Street Bank used customer feedback and research to refine functionality for its award-winning trading platform, Iris, which is designed to easily incorporate new technologies like blockchain and machine learning. Consultancy Oliver Wyman used design thinking principles to help National Australian Bank develop a lending solution for small businesses that answered users’ need for a simple process and speedy decisions.
Design thinking isn’t just useful for launching new products and services. It can also help banks reenvision how they promote existing ones. In another Oliver Wyman project, the consultancy helped OCBC Bank launch a new investment product. When deciding how the product should be promoted to clients, they brought in front-line employees to brainstorm communication materials and messages. By incorporating the insights of the people actually selling the product, OCBC Bank increased sales of the new product by 150%.
Banks have a great deal to gain from engaging with design thinking principles. The process of empathizing with end-users’ pain points, brainstorming creative solutions and iterating on prototypes yields products and services that surprise and delight customers, keeping traditional financial institutions competitive in the digital age.
