Financial service companies have a very specific duty of care to their customers because they are managing financial products. A retailer must carefully manage their customer relationship, but if something goes wrong with a purchase then a refund or exchange is usually all that is required — with financial products the implications can be more serious.
Financial service companies need to protect their customers, but they also need to protect their own business from bad actors using customer accounts to gain access to their data and processes.
The team at VXI has many years’ experience designing the interface between financial service companies and their customers. Our deep experience of managing this process in a number of different countries positions us as genuine experts. Our team loves giving advice based on our experience — especially to startups and mid-size financial service companies.
The focus is to manage risk in the customer relationship, but at the same time also create a great customer experience. But risk is all around for financial service brands.
Where do they need to focus?
Fraud and Cybersecurity Threats With the increasing digitization of financial services, fraud, hacking, phishing, and data breaches pose significant risks. Companies must invest in robust cybersecurity measures to protect customer data and prevent unauthorized access to accounts. Genuine customers want an easy way to log in and use the service, but this has to be balanced against the need to protect customer account data.
Regulatory and Compliance Risks Financial institutions operate in a highly regulated environment — health and finance are possibly the two most strictly regulated industries. Financial service companies must comply with laws and regulations designed to protect consumers, such as anti-money laundering (AML) rules, Know Your Customer (KYC) regulations, and data protection laws like GDPR and local equivalents. Failure to comply can result in large fines, legal action, and damage to the brand reputation.
Operational Risks These include risks from internal failures such as system outages, human errors, or procedural failures. Ensuring smooth operations and having backup plans in place is essential to prevent disruptions in customer service or financial loss. People, processes, and technology all need to be balanced with plans for how to handle unusual situations — such as a major storm or natural disaster.
Reputation Risk A company’s reputation can be severely impacted by scandals reported to the media, poor customer service that goes viral on social networks , or ethical issues. Financial service firms must manage public perception and uphold a high standard of integrity and transparency to maintain customer trust and loyalty. The integrity expected of financial services companies is higher than for other industries simply because the product being handled is financial. This is your customers’ cash.
Liquidity Risk This occurs when a financial institution cannot meet its short-term financial obligations. Companies need to ensure they have sufficient liquidity to respond to market conditions, customer withdrawals, or unexpected financial demands. Bank runs used to feel unusual in the USA — something only ever seen in movies — but since the financial crash of 2008 this is a risk that has been taken far more seriously. The downfall of Silicon Valley Bank in 2023 is a good example.
Technology Risk As financial service companies increasingly rely on technology, they face risks from system failures, obsolete technology, or third-party service disruptions. Regular updates and patches to essential software, monitoring, and investment in new technologies are essential to minimize these risks.
This is finance. This is what financial service companies need to manage so they earn the trust of their customers. This is why small startups can offer a fantastic service that costs less than established companies, but they will still struggle to find customers. When the service itself is focused on cash then the brand needs to be completely trustworthy.
VXI has extensive experience in managing these customer interactions while mitigating these risks. We use the appropriate technology for customer engagement, but with a deep understanding of the customer needs for this type of financial service.
You can protect your business and your customers and deliver a great customer experience all at the same time — if you have the experience and the right strategy.
For more information please visit us here .
