Understanding the Value of Customer-Centricity in Financial Institutions

Understanding the Value of Customer-Centricity in Financial Institutions

Customer-centricity is integral to the survival of financial institutions. It’s all about putting your customer first and at the centre of everything you do. So while it may sound elementary, there’s more nuance to it that involves understanding the needs and context of consumers.

The financial services industry is in an era of disruption. The new wave of innovation has reshaped how traditional organisations interact with their customers and the thinking of the value of their service offerings. As a result, there’s a growing need for brands in this sector to increase customer loyalty and enhance customer engagement.

Financial institutions that desire a more customer-centric approach have to re-evaluate what they know about their customer to know better who they are, what interests them, what they value and what drives them. It’s about creating meaningful experiences beyond the transactional one — a relationship that resembles a partnership tailored to the customers’ needs.

Changing the Perspective of Customer-Centricity in KFS and FSAs

Financial service associations (FSAs) are membership-based financial institutions that offer credit, savings and transactional services. They can be considered a hybrid of savings and credit cooperative organisations (SACCOs) and micro-finance institutions (MFIs), with local ownership of the share capital and a strong emphasis on user-owner governance and management.

In 2005, K-Rep Development Agency (KDA) formed K-Rep Fedha Services (KFS) to oversee and manage FSAs commercially to solve capacity weaknesses often found in small informal financial intermediaries. This way, FSAs would maintain their appeal of member ownership and low operation costs while upholding best practices and standards for their activities.

Our Spindle Design team was engaged in helping these organisations deliver more value to their customers by adopting customer-centric models. The need for transformation was influenced by negative customer experiences that eroded customer trust, product uptake, engagement and led to overall dormancy. The financial products for low-income communities experienced poor credit performance and unsustainability, requiring exploration of new business models.

We took a mixed-methods approach leveraging the power of HCD and business design to uncover customer needs, motivations, behaviours that form barriers to customer-centricity and identify sustainable business models.

Assessing Customer-Centricity in Your Organisation

There’s a notable gap in most businesses between knowing about customer-centricity and being customer-centric. Your organisation’s customer-centricity will be determined by the feedback received from its internal and external customers.

You also have to create a culture that empowers employees to make decisions that benefit both the customer and company simultaneously — consider how every business decision, process change and touchpoint can affect the customer’s experience.

In our case, we used this five-level framework to evaluate customer-centricity in KFS and FSAs:

  1. Strategies and policies: Your strategies and policies are at the core of customer-centricity. Recognising customer-centricity as a key corporate value and leading indicator of success should be reflected in your organisation-wide strategies and policies.
  2. Processes and systems: Your business processes can make or break the customer-brand relationship. Customer-centric organisations have the customer perspective in-built at every stage of development in their operations and systems.
  3. Employees: Employees are arguably the essential asset to any business. They’re the ones that deal with your customers directly and therefore need to be valued at the same level. Empowering your employees, measuring their performance and building a rewards system can help move the needle in establishing customer-centricity in your organisation.
  4. Products and services: Your products and services are the value you give your customers that meets their needs. You need to create unique value propositions and deliver them throughout the customer journey and experience.
  5. Structure: Your business structure needs to be aligned to the organisation’s strategic direction and founded on a sense of shared purpose — a purpose that transcends financial metrics and resonates with all critical stakeholders in the organisation.

The bottom line is that customer-centricity is equal parts strategy and culture. It has to be ingrained in an organisation to matter to the final decision maker, the customer. Successful organisations gain higher customer retention rates, more referrals and ultimately greater profits.

Transforming to a customer-centric model doesn’t happen overnight. If you’re ready to start the transformation journey reach out to us via email at hello@spindledesign.co.