FICO 2022 Trends Report

scrolL

Creating a Unified Experience: Mapping Out the Entire Customer Journey

Trend #1

2022

Report

FICO Trends

More Precise Decisions

For the past decade, financial institutions, auto lenders, telecom and insurance companies have all pivoted towards digital transformation. The COVID-19 pandemic undoubtedly hastened this transition and continues to strain many organizations as demand for digital solutions, data, and AI systems grows rapidly.

Financial institutions are realizing they need to provide customers with a consistent, intuitive, and unified experience. This means looking at the entire customer journey from end to end – from onboarding new customers, nurturing existing accounts, fraud protection, collections, and everything in between.

Digital experience is now the primary driver of attrition and it’s a major factor for consumers when it comes to choosing a bank. There’s no doubt that the COVID pandemic changed banking customer behaviors and accelerated the demand for digital solutions. With 89% of brands prioritizing customer-facing digital experiences in 2021 (according to Gartner, Inc.), the banking industry has been scrambling to reorganize and keep up with customer expectations.

Customer experience is critical because the competition is hyper-focused on it. Online retail has also raised customer expectations for digital

Looking ahead to 2022, providing a seamless customer experience is more important than ever. Banks must be able to create a consistent, integrated experience across all channels – meaning that a customer can start an application on their mobile phone, finish it on their computer, and visit a bank branch where employees have real-time data in their systems. It’s important to make sure the customer self-service and bank employee channels are connected.

Removing friction points from the customer journey is key – as is removing obstacles within your own organization, so it’s easier to transform insights into actions. Utilize analytics to study customer interaction patterns so you can understand how your customers behave and what motivates them. Leverage your data so you have a full view of each customer and use those insights to create consistent, personalized experiences.

50%

OVER

#1 attrition driver is a poor banking app. Over 50% of those surveyed indicated a well-designed banking app is a primary consideration factor when choosing a bank.

[Deloitte: Digital banking redefined in 2021]

65%

65% of C-level data/analytics leaders said demand for digital products and services has risen in their organizations because of COVID-19.

[FICO/Corinium: Building AI-Driven Enterprises in a Disrupted Environment]

26%

of customers say that an easy enrollment and login process is most important when choosing a digital bank.

[Deloitte: Digital banking redefined in 2021]

Nearly 9 out of 10 banks experience issues related to digital transformation, with efforts complicated by a set of common internal and external challenges (e.g., constraining investor expectations, lack of FinTech enterprise readiness, etc.).

Over 80% of consumers who depended upon cash and checks as their primary forms of payment prior to the pandemic plan to use more digital payment tools post COVID-19.

[Deloitte: Digital banking redefined in 2021]

1. Fast & seamless onboarding

What is necessary for a unified customer experience?

2. Real-Time updates & notifications

6. Insights via analytics

3. Integrated self-service tools

5. Customer support

4. Security & fraud protection

interactions. People now expect their bank to provide convenience and security via user-friendly features within digital banking products. In order to stay competitive, banks need to deliver a compelling digital experience that works in concert with their physical branch services.

The banking industry has largely weathered the pandemic storm, although sluggish loan activity and low interest rates continue to curb revenue. This will soon change, however, as consumer spending increases and the market bounces back. Banks will need to invest in technology and talent in order to make the most of the recovering economy.

Trend #2

Investment in Infrastructure: Adopting a Robust Platform for Agility & Intelligence Across the Enterprise

In 2022, it’s predicted that a quarter of banks will increase their tech spending by 10% or more (according to Forrester Research, Inc.). It’s become crucial for companies to build an infrastructure that facilitates their digital transformation and helps them provide an exceptional customer experience. For banks, this means viewing your enterprise as a network for digital intelligence and automated decisioning.

“A good decision is based on knowledge and not on numbers.”

- Plato

Consider this quote by the Greek philosopher, Plato: “A good decision is based on knowledge and not on numbers.” When it comes to banking, data alone cannot render good business decisions – you need knowledge. You need a digital decisioning platform and expert logic that utilizes data to help you arrive at the best possible decisions. This is accomplished with data-driven decision intelligence technologies, such as machine learning and AI.

Start by identifying the product and service offerings you want to innovate, as well as the AI use cases you would benefit from. Evaluate the digital maturity of your organization and pinpoint any areas where you need third party support. You should be looking to upgrade your technology stack to a digital decisioning platform that: • Makes your organization agile • Enables you to make intelligent, timely, and relevant decisions • Allows for the seamless integration of data and analytics • Uses contextual data to identify and protect against fraud • You can continuously add to (i.e. build on what you have and extract more value)

59% Meeting regulatory or compliance requirements

65% Building a team with the right skills

65% Dealing with data and algorithmic ethics

61% Integrating new technologies with legacy systems

[FICO/Corinium: Building AI-Driven Enterprises in a Disrupted Environment]

The 4 Greatest Barriers to AI Adoption Today

Based on a survey of data and analytics executives, these were rated as the top barriers:

said it will help them create better customer engagement.

74%

of data and analytics executives believe AI will help their organizations secure a competitive advantage by partially automating business processes.

80%

agreed that AI will help them fully automate some processes.

77%

believe it will help reduce fraud or financial crime.

70%

think it will improve their recruitment processes.

71%

said it will help them automate and personalize customer interactions.

70%

[FICO/Corinium: Building AI-Driven Enterprises in a Disrupted Environment]

Securing a Competitive Advantage With AI

e.g., increases in consumer spending, consumer confidence levels, business startups, etc.

Statistic(s) that support a recovering economy

Decision logic should be embedded in the “brains” your organization – i.e. your employees, which are your most valuable assets (including C-suite executives, CNC operators, marketing directors, and more). Combining your enterprise’s human decision logic with data-driven decision intelligence technologies (such as machine learning and AI) is crucial for making optimal business decisions.

More sophisticated platforms also give you the tools to turn analytics into action and help you improve. The key to success is operationalizing the new insights you gain from these methods. Digital decisioning platforms enable your organization to do this at scale by fully automating the execution of those digital decisions.

Steps for integrating agility and intelligence across your enterprise:

Adopt a unified, scalable digital decisioning platform – the backbone where the network enables data to come together at a single place for development and deployment of analytics, AI/ML, business rules, and optimization.

Empower business users – put the tools in the hands of business owners enabling speed of change and give decision owners the power to make the change

Leverage and reuse the decision assets – enables collaboration and a common language

Create customized, personal treatments at scale

Perform analysis, simulation, validation to get optimal ROI

Banks looking for digital decisioning platforms should look for digital decisioning vendors that: • Empower business experts with decision logic authoring tools • Integrate or include decision intelligence technologies • Support rapid decision lifecycle iterations

It takes capabilities like this (and firms like FICO to enable this) as a baseline for success in 2022 and beyond.

The COVID pandemic caused dramatic changes in the ways businesses could interact with consumers and accelerated the adoption of digital transformation in every industry. Signs indicate that there’s no going back. With rising customer expectations spurred by online retailers and FinTechs, banks will need to start becoming innovators by embracing technologies that help make smarter, faster, and more profitable decisions.

Trend #3

Smarter, Faster Decisioning: Solutions That Satisfy (Increasingly Demanding) Customer Expectations

Digital transformation is table stakes as the world is now “on” 24/7 and customers have more options than ever before. However, it’s not all about product and services in 2022 – it’s about the customer experience. Expectations for instant gratification and customer experience will keep increasing, as will the need for financial institutions to respond and make decisions in real-time. Challengers, upstarts, and newcomers will continue to disrupt the financial services market, which means that banks need to be quick and agile to stay ahead of the competition. The next best offer should never come from a FinTech!

All solutions should have analytics, and a platform approach solves the challenge of having multiple disconnected AI point solutions.

65% of executive (C-level data and analytics leaders) said demand for digital products and services has risen in their organizations because of COVID-19.

According to a recent Gartner survey, 65% of respondents agreed that decision-making has become more complex

47% expect decisions to become more complex.

81% of bank and credit union executives believe that unlocking value from AI will be the key differentiator between winning and losing institutions.

[FICO/Corinium: Building AI-Driven Enterprises in a Disrupted Environment]

[Gartner: 2021 Reengineering the Decision]

[The Economist Intelligence Unit; Temenos]

5. Security & fraud protection

6. Customer support

3. Integrated self-service tools

4. Insights via analytics

2. Real-Time updates & notifications

1. Fast & seamless onboarding

What is necessary for a unified customer experience?

2021 showed us that the new “normal” is constantly evolving, but we can prepare for unexpected adversity by looking for new opportunities. The pandemic has revealed fascinating data and trends, and exposed many weaknesses. While companies have been making huge investments in technology with some progress being made, many are not seeing the results they’ve been hoping for. With consumer expectations continually rising, business leaders are realizing they need to embrace new strategies and technologies to enhance digital experiences for customers as well as employees.

Over the past year, FICO has spoken to thousands of customers across dozens of industries and conducted numerous surveys, studies, and research reports. There are 5 major trends emerging for 2022 from financial institutions that are having success with their digital transformation initiatives despite the challenges of a disrupted environment.

To succeed in 2022 and beyond, incumbent banks need to rethink the way they do business. Decision-making needs to become more contextual and connected. Departments have to collaborate and reach unified customer strategies, meaning that business and technology teams must work together. Financial institutions need to ensure they have nimble environments and the ability to scale business models at the speed of the market.

Forward-thinking enterprises will utilize hybrid human and AI decision-making to leverage a full view of the customer with intelligent, relevant, and timely decisions. Remember that the more data you put into behavioral analytics, the more accurate your decisions can be. This is also valuable when it comes to expectations for managing fraud. Customers want to feel protected, but not inconvenienced. Use contextual data to understand the customer and their behavior, which gives you a better understanding of potential fraud and equips you to make more intelligent decisions.

According to Forbes, 90% of the world’s data was created in the last 2 years. While many organizations have embarked on the digital transformation journey, they don’t actually know their customers any better than they did before. Financial institutions are sitting on a treasure trove of data that continues to grow exponentially and yet much of it remains underutilized. In 2022, that will change.

Organizations will need to have the ability to bring in data, and effectively move it and map it. To do this, banks must learn to be comfortable with employing new technology (e.g., AI-enabled solutions) that provides a holistic view of both internal and external data, along with end-to-end data integration and management tools. In addition to streamlining business processes and reducing waste, AI solutions will also be used to help create customized digital experiences, relevant offers, and features/products that customers want.

Trend #4

Embracing the Power of Data: Maximizing Data Monetization, Effectively & Responsibly

With the shift to data aggregation, data portability and data responsibility will become even more important. Companies must adopt a mindset that ensures all automation is balanced with ethics and social responsibility. To echo the sentiment of the Peter Parker principle: the more data you have, the bigger the responsibility. This is where Responsible AI comes in.

Organizations need to make sure they’re using AI ethically, transparently, securely, and in their customers’ best interests. However, a global survey by Corinium found that 78% of C-level data/analytics leaders are finding it hard to secure executive support for prioritizing AI ethics and responsible AI practices. This indicates a dangerous lack of awareness about the risks that come with irresponsible AI use.

Consumers are getting more data savvy and they’re not happy about giving up data without receiving genuine value in return. Banks need to provide a data value exchange and find ways to empower customers with their own data. This includes using data insights for better risk assessment and fraud protection, as well as customer engagement and personalization.

In order to differentiate their brands in the pandemic aftermath and become more resilient, banks must learn to effectively leverage all the data available by developing and deploying ethical AI capabilities within their organizations.

“There has to be a standard of Responsible AI development for the enterprise, which should be sanctioned by the CAO, and there should be checks and balances to ensure that it’s followed.”

- Scott Zoldi (CAO, FICO)

“If you believe that you want to give back to the world, then don’t let your AI take from it.”

- Cortnie Abercrombie (Founder and CEO, AI Truth)

Global spending on AI systems is forecast to jump from $85.3 billion in 2021 to more than $204 billion in 2025. The compound annual growth rate (CAGR) for the 2021-2025 period will be 24.5%.

[International Data Corporation: Worldwide Artificial Intelligence Spending Guide]

By 2025, the 10% of enterprises that establish AI engineering best practices will generate at least 3 times more value from their AI efforts than the 90% of enterprises that do not.

[Gartner: Top Strategic Technology Trends for 2022]

of the world’s data was created in the last 2 years.

90%

[Forbes]

A global survey of 100 C-level data and analytics leaders revealed that 65% of respondents’ companies can’t explain how specific AI model decisions or predictions are made; just 35% have taken these steps to ensure they’re using AI transparently and with real accountability.

[International Data Corporation: Worldwide Artificial Intelligence Spending Guide]

Make sure your enterprise is using AI responsibly: • Understand the risks associated with AI • Develop better practices to ensure regulatory compliance • Place greater emphasis on ongoing AI model monitoring and maintenance

The Path Toward Responsible AI

Trend #5

Financial Wellness & Education: Humanizing Digital Experiences & Caring About Customers

Customer-centricity has become a popular (if not over-used) branding tagline for many companies over the past few years, but what does it really mean and how is it translated into real business action? For financial institutions, being customer-centric means providing positive experiences and caring about the financial health of customers. Therefore, to be truly customer-centric, a bank’s efforts must be focused on customer experience and anchored to financial wellness outcomes for its customers.

In the fog of digital transformation, many organizations have leaned too heavily on automation and forgotten the importance of the human element – a meaningful aspect of customer experience. Banks are now realizing they need to move beyond product enablement and the inclination to digitize everything. 2022 will bring an evolved focus on humanizing interactions that lead to outstanding customer experiences.

Human interaction matters — and 82% of U.S. consumers want more of it in the future. Furthermore, 59% of global consumers feel companies have lost touch with the human element of customer experience, and only 38% of U.S. consumers say the employees they interact with understand their needs. [Source: PwC “Experience is everything”]

“90% of the top banks and insurers have customer-centricity at the top of their strategic agenda and their leaders say that they want to become more customer-centric.”

- Henrik Naujoks (Partner, Bain & Company)

The key is to balance self-service with the human element. The technology that banks use to support human interactions must work seamlessly across platforms/channels without intruding on the customer experience.

The customer experience involves intellectual, behavioral, emotional, and sensorial dimensions – which includes understanding your customers and each step of their journey, empathizing with them, anticipating what they need (before they do), and being able to deliver the products/services/support

[Deloitte: Digital banking redefined in 2021]

90% of Americans use customer service as a factor in deciding whether or not to do business with a company, according to Microsoft’s Global State of Customer Service study. Companies that provide above-average customer experiences perform better financially than their counterparts and gain more customer loyalty.

that helps improve their financial lives. To become customer focused, banks must leverage their data to understand how customers behave, what drives them, and how they feel about their experiences. Many organizations make the mistake of analyzing these insights separately without looking at the big picture.

Just because people have access to services doesn’t mean they’re financially healthy. Younger generations may be digitally savvy, but they aren’t financially savvy. There’s a troubling lack of financial education, and research indicates that only 33% of Americans are financially healthy despite near-universal financial inclusion (based on Gallup’s Global Financial Health Study). While banks cannot solve this problem alone, they are part of the process.

Financial wellness is a comprehensive and layered approach. For banks, it involves helping customers to meet their current/ongoing financial obligations and feel secure in their financial future by becoming more resilient in their financial activities. It should seem obvious that helping customers succeed also helps your organization succeed. Studies show that banks can grow more profitable portfolios and increase long-term shareholder value by putting customers’ financial wellness at the center of their business strategy. This means designing products using a financial health lens and making financial services more impactful for customers.

How banks handle fraud matters a lot too. A global survey conducted by FICO in 2021 found that 75% of customers would leave their financial institution if it was involved in a money laundering scandal.

The COVID pandemic has isolated people and forced customers onto digital channels where there are more opportunities for fraud. Customers should be able to get in touch with someone at the fraud department quickly and easily. Banks need to ask themselves: Are you treating your customers fairly? Are you educating them about fraud protection? Are you using their data ethically and transparently?

People don’t care what you know until they know that you care. Providing the best service means caring about customers and their financial wellbeing. This approach has both social and business benefits, allowing your bank to cultivate more financially healthy customers, which in return, improves the financial health of your institution.

[Microsoft: State of Global Customer Service]

84% of companies that work to improve their customer experience report an increase in their revenue.

84%

Companies that lead in customer experience outperform laggards by nearly 80%.

80%

Companies with a customer experience mindset drive revenue 4-8% higher than the rest of their industries.

4-8%

77% of consumers say inefficient customer experiences detract from their quality of life.

77%

73% of consumers say a good experience is key in influencing their brand loyalties.

73%

96% of customers say customer service is important in their choice of loyalty to a brand.

96%

The Value of Customer Experience

[PwC: Experience is everything]

[Oracle Communications : Modern Experiences for Connected Consumers]

[Bain & Company: Are You Experienced?]

[Forrester/Qualtrics: Total Economic Impact Study]

[Dimension Data: 2017 Global Customer Experience Benchmarking Report]

• Make them feel reassured knowing their finances are safe with you • Take the stress out of managing their finances • Understand their unique financial needs • Empower them to achieve their financial goals • Give them the freedom to manage their finances as they see fit • Give them confidence that their financial health will be better tomorrow than it is today • Help them live a good quality of life • Make them feel like they belong to something more than just a bank • Take action to make the world around them a better place

Look for Opportunities to Develop Emotional Connections With Customers

Financial Institutions Perform Poorly When It Comes to Emotional and Sensorial Dimensions

84% of customers said it’s important for banks to demonstrate conscience through good ethical practices.

[BAE Systems’ Applied Intelligence: The global state of anti-money laundering]

75% of customers said that they would leave their financial institution if it was involved in a money laundering scandal.

[FICO 2021 Consumer Fraud Survey)]

65%

CAN'T EXPLAIN AI DECISIONS

35%

HAVE TAKEN STEPS

65%

47%

81%

$85.3B

$204B

10%

90%

Click for more

FIs, on average, perform strongly on the behavioral dimension, but trail on delivery of emotional and sensorial experiences

[American Banker: What your bank clients need to know about humanizing their customer experience]

50-bank average scores: overall and each of the 4 dimensions

Overall HCX Score

Average score

Behavioral Dimension

Intellectual Dimension

Emotional Dimension

Sensorial Dimension

Top 10 Banks

Middle 30 Banks

Bottom 10 Banks

84%