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Trading Technology

12:06 PM
Julio Gomez
Julio Gomez
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Customer-Centric Strategic Initiatives En Vogue, Once Again

Financial Insights' research shows that customer-centric strategic initiatives are on the rise.

Investing in growth is back. But even better for customers, investing in the customer experience is back. After the orgy that was the late '90s, when financial service customers of all types were treated to a tsunami of market data, analytics and transaction capability — all available through a browser — spending growth came to a screeching halt. The combination of the downturn in the economy and markets, and the vanishing act of competitive pressure made development budgets huge targets for cost-cutters — and killed the customer experience-improvement momentum.

Financial Insights' research shows that customer-centric strategic initiatives are on the rise. Every year Financial Insights releases its Top 10 Strategic Initiatives for Capital Markets. For 2007, we produced a list for both the sell side and the buy side. Out of 20 strategic initiatives, six were decidedly customer-centric. Considering that issues such as risk, compliance, market structure and evolving investment strategies share the other 14 initiatives, customer-facing initiatives fared quite well. Can we be heading toward a new era of customer experience improvement?

Definitely. Firms have identified that customer experience is a key differentiator that attracts clients, increases loyalty and has lots of room for improvement. And this is not just for retail. In our recent study on sell-side electronic trading services, we found that buyers complained as much about ease of use as they did about information leakage. Clearly the customer experience is not only an opportunity for firms to differentiate, but also a screaming need for clients. We believe firms will get there with improvements in three primary areas:

1. Ease of Use. The science of interactive design has come a long way, and talent is deep and widely available. Time to put that talent to work to ensure that the design elements of firms' offerings help achieve business objectives as well as satisfy clients.

2. Personalization. Another important area in which firms will show improvement is helping clients interact with firms' offerings on their own terms. Whether this involves sophisticated alerting capabilities, customizable interfaces or tweaking of algorithms, firms are making strides to ensure that one size fits one.

3. Speed and Reliability. Across the board, financial service customers see high-speed and reliable performance as non-negotiable. Web offerings are trying to shave seconds and trading is grinding out improvements in terms of milliseconds, but all have the need for speed. As for reliability, nothing strikes fear into market participants of all stripes like a system going down.

These three pillars of customer experience will continue to attract investment. Differentiation commands a premium, and nothing differentiates more than customer experience. Take this classic example: Coffee is a commodity — Starbucks is an experience. And building a premium into your products is a great reason to invest — and a great road to growth.

Top 10 Strategic IT-Supported Initiatives — 2007

Sell Side

1. Capital Formation Globalization

2. Increased Trading Automation

3. Customized Development of Algo Trading Tools

4. Growth in Structured Products

5. Trading Partner Connectivity

6. Market Compliance

7. Development of Alternative Market Segments

8. Customer Relationship Management

9. Enterprisewide Technology Management

10. Straight-Through Processing

Buy Side

1. Quest for Portable Alpha

2. Improved Portfolio Management, Risk & Administration

3. Diversification in Prime Brokerage

4. Increased Investment Specialization

5. Enterprisewide Technology Management

6. Increased Trading Partner Connectivity

7. Market Compliance

8. Trading Analytics (Transaction Cost Analysis)

9. Operational Risk Management

10. Sourcing

Source: Financial Insights

Julio Gomez is the head of research at Financial Insights in Framingham, Mass.

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