The financial services industry is undergoing major changes. Due to the fast pace of advancements in digital technology, changing customer expectations, and competition from disruptors (mobile network operators, technology companies like Apple and Google, and hundreds of FinTech startups) incumbent banks are becoming increasingly vulnerable.

Online payments, loans, remittances, and financial advice is moving out of the exclusive control of banks as disruptors are often providing superior and more convenient services.

To counter these threats, and to remain relevant and agile, banks around the world are resorting to digital transformation.

One key area for these transformation programs is digital banking, where banks are investing a significant amount of time and money to please their consumers with ever-fresher, ever-more-appealing mobile and online banking services.  

However, if banks are not careful, they might risk losing their existing customer base during the digital banking transformation process.

Breaking customer habits

Research into the workings of the human brain published in the Harvard Business Review (https://hbr.org/2017/01/customer-loyalty-is-overrated) suggests that the human mind loves familiarity and automation more than just about anything else, and certainly more than engaging in conscious consideration. Given a choice, the brain would like to do the same things repeatedly.

The reason is that the human brain is not so much an analytical machine as a gap-filling machine: it takes incomplete information from the world and quickly fills in the missing pieces based on past experience, which we often identify as intuition. With repeated exposure, this intuition becomes stronger over time and increases with number of exposures, thus forming subconscious habits.

This means that if a bank’s digital banking value proposition is what attracted the customer first, it is not necessarily what keeps them coming back. Most of the time, existing customers subconsciously value the familiarity of their digital banking service rather than the rational, perfect choice.

However, a digital banking transformation can easily disrupt that familiarity and break the customer’s habits developed over time. If, during a digital banking transformation, content is moved, deleted, or modified in a significant way, it can be disorienting and frustrating for users. This is because they expect to find the content based on their previous behavior thus requiring customers to break their existing habits and forcing them to make conscious choices again. This can result in increased customer attrition.

Maintaining familiarity

Holding on to existing customers is not a matter of continually adapting to ensure the rational best fit. But rather, it’s about helping customers avoid having to make yet another choice.

Of course, banks have to keep their customer facing applications up-to-date, but changes should ideally be introduced in a manner that allows the new version of a product to retain the customer’s habits − which have themselves developed over time.

This requires deliberately designing the user experience in a way that maintains familiarities, even if the underlying technology is changing. This can be achieved by carrying out small, iterative changes to the user interface that do not break existing user habits, while maintaining the maximum level of familiarity. Running A/B tests to find out what works best for particular parts of the design, whilst at the same time training users to follow new routines by implementing smaller changes, without overwhelming them with too much.

Conclusion

Developing and driving a digital transformation is a complex task. During a digital transformation banks should carefully design their customer facing applications to maintain those customer habits that minimize attrition of their existing customer base.

After all, you wouldn’t want to arrive at your destination and find that you have left your customers behind.