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Digital growth and retention strategies for financial services

Apr 25, 2023

This article was co-authored by Mike Morris and Terry Ammons

When financial services organizations look to build resiliency, the focus is usually on organizational performance and adaptability. But resiliency isn’t just about how you deal with present challenges; it’s also about preparing your organization for the future.

Resilient organizations watch trends. They understand new technology and changes in customer expectations so that they’re ready to take advantage of possible opportunities.

If you want your organization to continue growing amid rising interest rates and economic uncertainty, start looking forward. Adopting these strategies for digital growth and customer retention in financial services can help you diversify your offerings and find new customer segments.

For financial services organizations looking to stay resilient, consider these four strategies:

1. Digital customer engagement

Customer behaviors and expectations in the digital age are changing, especially for the younger generations.

Millennials and Gen Z want streamlined, more engaging digital experiences. They’re used to AI and technologies that help make interactions faster and more personalized. And if they’re not finding that experience with your organization, they won’t be afraid to leave.  

Standard online banking portals have also aged and fallen short of creating an engaging experience for younger generations. Providing basic, digitally static and hard-to-navigate access to online services is not going to win newer generation adoption. They want embedded, catered product offering capabilities.

For example, wealth and asset managers can use modern digital platforms that connect legacy systems, creating an engaging and feature-rich experience. This would help to augment standard in-person meetings and maintain client relationships, rather than just provide moderate access to the basics of the business.

But all customers, no matter what generational segment they belong to, will continue to want the same: faster, easier access to digitally personalized services.

To create a true digital customer engagement model, service and product providers need continuous digital evolution. That includes improving customers’ online experience and expanding the way you handle engagement, product offerings and delivery through digital interactions. Leveraging emerging technologies such as AI and machine learning will be key to delivering on those expectations.

With products such as insurance, customers want to be able to access more than an online application that will be processed quickly. They’re looking for more dynamic and proactive digital guidance via AI, based on who they are and where they are in life. They don’t want to have to reach your company over the phone, fill out general online forms or wait in a queue for a person or an old digital system to validate their needs and provide a response.

2. Institution as a service

Looking at your current capabilities may uncover opportunities to be a provider not only to your consumer base but also to other financial services companies that need your expertise or access to your core market licenses or charters.

Institution as a service (IaaS) allows organizations to increase the value of their franchise by joining together with fintech or partners outside of the industry.

Fintech and similar sectors are growing and becoming more popular with younger generations. But they’re often unable to complete the challenging regulatory requirements needed to offer financial services.

In partnering with them, they gain the legitimacy they need to operate, and your organization gains an added source of revenue in the form of deposits and fees. The right partnership can also help you reach customer segments you couldn’t before or expand the financial services you offer.

With IaaS, your organization can:

  • Power fintech, insuretech or wealthtech companies.
  • Participate in, facilitate, complement or enhance buy now, pay later options.
  • Partner with purpose-driven organization to tap into different segments.

Of course, entering any partnership comes with potential risks. In addition to the business risks, your institution will also be responsible for ensuring the regulatory compliance of whatever vendors you work with.

One option to help manage risk is to employ an intermediary service. Intermediary services can help facilitate partnerships, although the cost of hiring them will result in lower revenue for your organization. You can also employ separate compliance functions for your partnerships to help you better manage the regulatory compliance issues.

3. Niche strategies

Niches offer a way to reach untapped markets and increase revenue. With niches, your organization uses branding or partnerships to target specific demographics and address pain points and causes that aren’t being reached.

And once you’ve gained new customers, you can continue to grow those relationships and offer services from your wider organization.

For example, insurance providers can use niche strategies to tie into new generational awareness or perceptions without alienating their current customer basis.

Companies can target newer generations with options such as:

  • Online-only services.
  • Demographic-focused offerings such as renter’s insurance or pet insurance.
  • Community-oriented value propositions.
  • Options for gig workers.

No matter your services, finding a good niche starts with understanding customer segments so that you can address their specific pain points. Look for ways to provide a new service or supplement existing services for customers who are underserved.

4. Platform partner strategies

Platform partner strategies let you provide your existing customers with services or products your organization wouldn’t normally be able to provide.

Leveraging these existing platforms, you can create a partnership network that connects customers or clients with the services they need, even if those services are outside your organization. It gives your customers a trusted source to access products while you gain another way to generate revenue and broker that transaction.

For example, if a financial institution has a customer application that doesn’t meet its requirements to be approved for a loan, it doesn’t have to turn them away. Instead, platform banking can be used to connect that customer to an open lender. Their application can be completed through a third-party system at the financial institution, allowing them to collect fees for acquiring the customer.

With financial services, your organization can use the same general process to offer new insurance or investment options, gaining one-time fees, or even lifetime-reoccurring fees.

And as the industry moves closer to open banking and financial services, using platforms partners to connect to third-party partnerships, and even other financial services organizations, will become increasingly easier.

How Wipfli can help

As you look to the future of your financial services organization, trust Wipfli for support. We can offer guidance on new technology and help you navigate the impact of regulatory compliance on your organization. Contact us today for more on how we can help your organization continue to move forward.

This article is part of our series on how your financial services organization can use technology to build resilience. We cover the latest technologies and strategies to improve efficiency, engage customers and increase revenue in any economic conditions.

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Carlos Vega
Director, Digital Strategy
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