Every financial institution should be aware and understand the prime customer-centric strategies – ecosystem, influence, and context – and evaluate the characteristics in order to create a road map for their respective institutions
Every financial institution should be aware and understand the prime customer-centric strategies – ecosystem, influence, and context – and evaluate the characteristics in order to create a road map for their respective institutions, according to IDC.
“While a lot of financial institutions are implementing ecosystem and context strategies, they tend to neglect influence strategies because of their short-term business focus. However, with fierce competition even among other industries, these institutions should implement influence strategies to increase their impact in the long term,” says Handojo Triyanto, Lead for Customer Centricity at IDC Financial Insights Asia/Pacific.
Third Platform technologies and other new technologies lead to changes in financial services institutions' customers’ behaviors and needs either directly or indirectly. The changing customer needs can be gleaned from the following:
- Being in line with everyday customer life – When customers buy products or services, they may also want an integrated offering – one that can be done in a single transaction or point of purchase. This consumer need triggers the demand for collaboration between ecosystem members and for interconnected software systems to provide seamless products, services, and experiences.
- Personalizing toward empathy – Customers may also want personalized products and services (according to customer's profile and preferences), even contextualized (according to customer's situations, conditions, and feelings/emotions). In the ecosystem context, as different members are engaged with the end consumer, greater insight into the individual can be gleaned and be used to personalize product and service offerings.
IDC estimates the software spending for customer centricity in 2021 will account for 27% of the total software spending of Asia/Pacific's financial services industry and will be the highest in 2021 compared with other LOBs (excluding LOB operations) at about USD 5.1 billion. Since LOB operations include customer-facing processes and have impact on customer satisfaction, this LOB should be included in the analysis. Software spending with the included LOB operations will then account 62% (about USD 11.7 billion) of the total software spending of Asia/Pacific's financial services industry.
In terms of average software spending growth in Asia/Pacific's financial services industry, customer centricity is forecasted to have an 11% compound annual growth rate (CAGR) from 2019 to 2024. In Asia/Pacific's financial services industry, there are six countries forecasted to have more than 9% growth rates for customer centricity software spending: China (with the highest growth at a CAGR of 21.8% for 2019–2024), followed by New Zealand, Vietnam, India, Indonesia, and Singapore.
This clearly depicts the significant roles of data processing and management have in IT – accounting for more than 30% of the technology spending. Likewise, the trend also shows that data processing and management have high growth rates. Currently, customer relationship management (CRM) applications spend is forecast to grow at a CAGR of 13.5% in 2020–2024. IDC estimates CRM (software) spending reached US$ 1.3 billion in 2019 (excluding outsourcing spending) in the Asia/Pacific financial services industry.
Key points to remember when implementing customer-centric strategies:
- Understand and consider each strategy – Financial institutions should understand and consider all three strategies for their business as these three create strong and long-term competitive advantages for their respective institutions.
- Select partners carefully – When it comes to partnerships in the ecosystem strategy, financial institutions must consider their partners carefully. In IDC's research about Future of Trust, partner selection is crucial to developing a trusted ecosystem.
- Realize the advantages of influence strategy – Although influence strategies are quite difficult to justify in quantitative measures, they are important for long-term businesses.