Digital transformation is accelerating, and competitive pressure is rising. Banks and insurers are preparing for what comes next.
Artificial intelligence, blockchain, and voice recognition all promise to reshape the financial services industry. Institutions are researching these technologies and developing long-term strategies that will keep them competitive.
These investments are an important part of a broader innovation strategy. However, it remains unclear when and how they will generate returns. At the same time, many banks and insurers are so focused on reinventing their business models that they are losing sight of their most valuable asset: the customers they already have.
Customers do not want to wait five years for better service. They expect personalized support today, whether they interact through digital channels or speak directly with a service representative.
Unlike ambitious technology roadmaps, these expectations are already well understood and supported by research. That creates a significant opportunity for customer-focused innovation today.
According to an EY Innovalue Insurance Roundtable survey, half of the executives at German insurance companies believe that global technology companies such as Amazon, Google, and Facebook pose the greatest threat to their business models.
That concern is understandable. Technology companies are not simply digitizing legacy processes. They are building entirely new digital experiences powered by vast amounts of customer data. They recognized the opportunities in banking and insurance years ago.
Facebook, for example, has actively recruited blockchain experts to explore how the technology could expand access to healthcare and financial services for billions of people.
Faced with growing competitive pressure, some banks and insurers respond by rushing into digital transformation. They imitate technology trends before determining whether those investments actually solve customer problems.
Established financial institutions already have one important competitive advantage. Customers trust them.
Many technology companies continue to struggle with public trust because of concerns surrounding data privacy. Investigations into Facebook's data practices and reports that Amazon employees listened to private Alexa recordings illustrate why trust remains such a valuable differentiator.
The priority for banks and insurers should be straightforward. Strengthen relationships with existing customers while continuing to build a loyal customer base.
The business impact is significant. A Bain Company market study found that loyal insurance customers, referred to as promoters, own 68% more products than detractors, remain customers for 1.7 years longer, and recommend their insurer six times more often.
Banks and insurance companies should continue modernizing their business models and introducing new services. At the same time, they must stay focused on what customers need today. Organizations that consistently meet customer expectations are far better positioned to strengthen loyalty and compete successfully.
Many organizations still have work to do.
Large financial institutions often launch ambitious innovation initiatives with names such as "Vision 2025." Yet many struggle to implement even small operational improvements in their day-to-day business.
The good news is that companies already control one of the most effective drivers of customer loyalty: regular communication.
Another Bain Company study found a clear relationship between customer contact and an insurer's Net Promoter Score. The longer a customer goes without hearing from the company, the lower the insurer's NPS becomes.
The data is compelling. Customers who have at least one interaction with their insurer each year report significantly higher NPS scores than customers who receive no communication at all.
Interestingly, these results do not depend on whether customers viewed the interaction positively or negatively. The simple fact that meaningful contact occurred makes a measurable difference.
Organizations that also deliver a positive customer experience during those interactions create an even stronger foundation for long-term loyalty.
The way companies communicate has changed dramatically.
Customer engagement was once measured through branch visits and mailed letters. Today, the smartphone has become one of the primary ways customers interact with financial institutions.
Messaging plays an increasingly important role. Customers of every generation already rely on messaging apps in their daily lives. Banks and insurers that provide service through these channels can deliver experiences that feel both personal and convenient while creating immediate business value.