Banking, financial services and insurance: the forces driving change in Customer Management and how to address them

If you still view banking, financial services and insurance (BFSI) as a traditional or stable sector, it’s time to think again.

As you read this, the entire sector is undergoing profound changes in terms of customer engagement, technology and competition. The challenges are immense, but the prizes are huge for those businesses that understand the new Customer Management landscape and how to approach it. Digital and AI are key to this.

Comdata works with banks, financial services companies and insurers across Europe and LatAm, including in fintech, branch-based and direct banking, and direct and intermediated insurance and investments. This gives us not only a pitch-side view of the changes happening, but also a key role with the coaching team when it comes to helping these players compete successfully. 

Based on this experience, we’ll first summarize the changes in the industry and then look at the opportunities and strategies to address them.



The most visible change in the BFSI sector concerns the consumer. As in so many sectors, Covid-19 accelerated the pace of change. The early months of the pandemic saw an increase of 20% to 50% across different countries in the use of online and mobile banking channels, and it’s likely this increased usage will continue1

Some customers willingly made the switch to digital, others less so, but all expected their digital CX to be seamless and fast. This despite the fact that banks and other financial services providers experienced a surge of customer queries during the pandemic, amounting to an increase in call traffic of almost 200% in some cases.



The challenge for banks, financial services providers and insurers is that their new digital consumers expect a CX similar to that provided in their other online relationships, whether that’s e-commerce brands or ride-hailing providers: single-click transactions, personalized offers and tailored services, multichannel, omnichannel or round-the clock availability, rapid refunds and cancellations. 

However, some sectors are not as simple as that, BFSI being one of them. The customer relationship is likely to involve a multiplicity of transaction types of varying levels of complexity, with some easily automated and others requiring not just the human touch but high levels of emotional intelligence and empathy. Regulation adds another layer of complexity.

Furthermore, the consumer switch to online is more than a straightforward shift to using different channels to interact. Banks in particular are seeing a rapid increase in the number of transactions, combined with a decrease in the revenue-generation opportunities from these transactions. 

Typically, a few years back, a bank customer perhaps visited their bank branch once a month or so; then they stopped going to the branch but visited an ATM and transacted through the bank’s online or telephone banking service once or twice a week; now they may interact several times a day through a mobile payment app or mobile wallet. It’s similar with financial services customers perhaps used to have an annual or quarterly conversation, then a quarterly statement, now they’re regularly checking balances, values and costs and doing transactions online.



This means that customer relationships in the sector are now ‘always-on’,  yet also potentially more casual. Each interaction can see the relationship weakened or strengthened; each one can create value, but also too easily see value ebbing away in the face of significant new risks:

  • Disintermediation: loss of brand awareness / visibility and access to customers as people switch to comparators
  • Unbundling: consumers select better experiences from single-service providers, often new into the market
  • Commodization: difficulty in differentiation as consumers lose the human relationship and contact and, simultaneously can compare products online with higher transparency.



Here to capitalize on those risks are a multitude of competitors seeking to capture the BFSI opportunities. On one side, there is competition from young disrupters: fintech companies or single service providers who are agile, innovative and digital natives. On the other side are the established technology giants. These share the strengths of the existing players – customer networks, access to capital, and access to customer data that can be mined for personalization – but they also have strengths in technology and innovation that those existing players may lack. 

Both sources of competition also benefit from other huge advantages compared to the established players:

  • they’re not burdened with legacy systems, operating models and silos
  • they can target specific areas of the market that don’t carry a heavy regulatory burden
  • without the same pressure from regulators to cater for digitally excluded or digitally reluctant customers, they can target more profitable segments.



The other tectonic shift we’re seeing in the BFSI sector is, of course, technology. Digital payments and the use of new currencies have become the norm. Connectivity and data are generally transforming the way BFSI operate and transact, and advances in specific areas such as connected health have long-term implications for insurance providers. Most significant of all are the potential of emerging technologies, such as AI, RPA and bots, able to be used at scale to process structured and unstructured data. 

In global banking, it’s been estimated that AI technologies could potentially deliver up to $1 trillion of additional value each year  including through:

  • boosting revenues through increased personalization of services, including real-time personalization
  • lower costs from automation of manual tasks and better resource utilization. For example, one study predicted that the operational costs savings from using chatbots in banking would reach $7.3 billion globally by 2023
  • new opportunities from processing and generating insights from data2.



Our own analysis of the BFSI shows that the winners in this fast-changing Customer Management and technology scenario will be at-scale players offering radical simplicity in terms of the customer experience. They will: 

  • revamp the customer experience, especially on digital channels
  • radically simplify products and services 
  • invest in customer journeys to reach the new standards set by the technology giants and disrupters.

The challenge, of course, is how to achieve this. There are huge operational, strategic, financial, technological and intellectual challenge to move successfully on this, and large-scale end-to-end change may be required. As players of all sizes and in all geographies contemplate the changes required, we see several key themes to guide their response.

Better use of data and advanced analytics. Brands need to understand what data they have, what they need, and what they can do with it in order to improve the CX, anticipate demand, personalize offers and optimize costs. In many cases, this will involve centralizing existing datasets spread across the organization. It will also require navigation of a regulatory environment that’s increasingly stringent and customer-centric in terms of how organizations harvest and use customer data.

AI-first and AI-end-to-end. Studies show that the majority of financial services sector companies have now embedded at least one AI capability – from robotic process automation for operational tasks to using machine learning to detect fraud. But in most cases, their approach to AI is piecemeal – they’re using it in specific cases, rather than across the full lifecycle from front-office to back-office. Only with the latter approach can they capture the potential of AI to improve performance in areas from profitability to personalization to pace of innovation.

Partnerships are essential. If end-to-end transformation was simpler, more BFSI brands would have done it already. But they’re often hampered by a suite of problems including legacy systems, organisational silos, and a lack of the internal digital expertise and resources to make it happen themselves. Many require a complex internal journey around talent recruitment, organisational development, dismantling of silos in customer management, and alignment of goals and performance measures between front-end and back-end.

The pace of change in the sector won’t allow businesses to grapple with these internal changes and then become AI-first. External support is crucial, helping them transform digitally and quickly adopt omnichannel approaches, optimize costs, optimize their customer interactions and process management, and tailor end-to-end solutions covering all business processes. 

And finally, it’s not just about technology. Success in Customer Management and value creation in banking, financial services and insurance depend on technology, but not technology alone. It’s more about the achieving the best mix of  technology, people and processes. Comdata is here to help you get this right.

1. McKinsey & Co (2020), AI Bank of the Future.
2. McKinsey & Co (2020), Ai bank of the future; EY, How COVID-19 has sped up digitization (2020).


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