Should you focus on sales volume or get closer to the customer?
Engaging your customers is becoming increasingly important for all companies, so how does that work for a bank that matches a big portion of the worlds currency trades.
This summer we helped build a new Algorithmic FX trading service. It will be available later this year as one of the first of its kind. While there were several lessons in making a great user experience to be had, even in a fairly conservative industry; the shift in the importance of the Customer Relationship is interesting.
As the project to develop the new service was well underway and we started to have the first internal version, it seemed another bank was going to roll out a similar type of FX trading service. Is the industry going in a new direction, and why?
The majority of the worlds currencies are traded through a handful of cities. The numbers are huge, and everything is digital. In recent decades a small number of highly rated banks have gradually taken over all of the trades. There is little human involvement, so the actual costs are very low and the market is bound to Internet effects. When a trade is just bits over the wire, customers will all seek the low cost option backed by a AAA bank. So it has become a high volume low margin business  . After consolidation, it is hard for the incumbents to grow further as they are providing a commodity.
So where do you find growth? Previously it was by making business deals to reach new audiences such as Bloomberg Terminal customers, but eventually you are available to all the big audiences. So you can try to look attractive to more of the people that are already a click away from choosing you. Or you can offer a more expensive service.
When margins are already thin, you can’t offer better prices, so you have to differentiate on quality and appeal. What banks are realising is that they need a more direct relationship with customers, but the traditional approach is costly. Having account managers, sales teams etc. is a big expense, and you can’t raise the price in a hyper-competitive market.
IT has always been seen as a cost centre for banks. The traders and dealmakers are the ones bringing in business, while the software used to trade with is a necessary cost. Many are now realising that quality software is a differentiator. A great user experience will make customers more loyal. The frustration of a bad experience is a big negative brand effect. With the rise of the iPhone people learned what good Consumer Level Software feels like, and they are increasingly unwilling to struggle with the crap that many companies produce.
A great business case for this effect is Danske Bank in Denmark. By creating a mobile payment application with a quality User Experience they captured >80% of the working population as customers. While the earliest attempts were made to create a mobile payment solution ever since the 1980s, this didn’t take decades to build up. The service launched in May 2013 and within 2 years they had an untouchable position.
A web trading application done well is a regular reminder to users of what your bank stands for, so in our customers case this is clearly an opportunity. They provide a place to fulfill trades via trading interfaces such as Bloomberg Terminals, which gives them no direct contact with the customer. By offering additional services wrapped up in a Web Application the end user have an incentive to build a bridge directly to them.
So in the end our fairly modest project done by a couple of people turned out to be a significant strategic shift away from anonymously handling huge sums of foreign currency exchange.
Increasingly we see Experience Design for Acquisition and Retention of Customers as a way to a gain business advantage.