Are we heading into a recession or not?

While there’s a lot of talk about a “soft landing” for the US economy, many prominent leaders in the financial services industry aren’t so sure.

The recent BankWorld Conference held at Mohegan Sun revealed alarming insights into the financial world. While our team had some great conversations at this event, it was clear that participants had mixed feelings about the forecast for 2024. Whether or not a recession is on the way, leaders from across the banking industry need to be prepared with innovative approaches to support their stakeholders, their communities, and their employees.

“How can you become innovative?” asked Jay Sidhu of Customers Bank. “You need to ask your customers about their pain points — then change those to make them say Wow!”

Monsters under the bed

JPMorgan Chase & Co CEO Jamie Dimon recently expressed skepticism about the “Goldilocks kind of scenario” being discussed by leading economists. Instead of seeing a silver lining, he cited forecasts of a historically high 42% chance of a recession this year.

One session that highlighted this concern was “Monsters Under The Bed: What The CFO Sees”. In this panel discussion, CFOs from Thomaston Savings Bank, Liberty Bank, and Torrington Savings Bank spoke about the challenges facing the banking sector in 2024, including the dreaded Inverted Yield Curve.

The phenomenon of inverted yield curve, where short-term interest rates exceed long-term rates, has historically been associated with impending recessions. However, what made this revelation particularly noteworthy is the fact that in 2024, the impact of the inverted yield curve is being felt differently by banks.

For CFOs, the inverted yield curve represents a significant cause for worry. They tend to think of worst-case scenarios, and the inversion has put liquidity in the spotlight. Regulators are closely monitoring the situation, making it imperative for bank & credit union CFOs to act prudently especially around budgeting.

One pressing concern stood out: How to reduce costs without compromising customer satisfaction.

How to budget in during an inverted yield curve

While CFOs and CEOs acknowledge the need to invest in technology, payments, and digital efforts, the main questions on their minds revolve around return on investment (ROI) and cost-cutting measures. The CFO’s role has become more complex than ever.

The inverted yield curve and changing economic landscape have forced them to rethink their approach to cost-cutting. The challenge is not only about reducing expenses but doing so without negatively impacting the customer experience.

Traditionally, CFOs have focused on maximizing revenue and minimizing costs. However, with customers increasingly expecting top-notch service, cost-cutting measures that result in a decline in customer satisfaction can have dire consequences. Rebekah Stokes, Paul Young, and Jennifer Marchand accentuated the importance of striking the right balance.

What is Sogolytics’ recommendation?

To address this challenge, we recommend turning to analytical tools that help to identify the aspects of a customer’s experience that have the most significant impact on their feelings about your brand. While asking about customer satisfaction (CSAT) or another key metric, like Net Promoter Score (NPS), can be valuable, a single number alone cannot provide insight into which improvements should be made.

Beyond simple CX metrics, it’s important to delve deeper into the customer’s experience — as efficiently as possible, in order to respect their time. One important addition to a CX survey or conversation is the discussion of key drivers. Key drivers are those variables you’ve come to understand as important to the experiences of many of your customers — wait time, customer service, products offered, etc.

When you ask both a CX metric question (CSAT, NPS) and a Key Driver question, you can learn so much more. For those who love spreadsheets, now’s the time for correlation. If, like me, you prefer the instant-data option, the Key Driver Analysis Report is the perfect one-click report.

You can learn more about KDA here, but in short: This analytical tool helps identify the strengths that can provide a substantial Return on Investment (ROI) while ensuring a positive customer experience. By focusing on the important strengths and weaknesses (as opposed to the unimportant strengths), CFOs can identify opportunities for improvement that align with customer expectations. This approach allows leaders to prioritize cost-cutting measures that enhance efficiency without negatively affecting the customer experience.

Looking ahead

Throughout the conference, BankWorld 2024 highlighted the challenges CFOs face in cutting costs without losing customers due to poor experiences.

At Sogolytics, we believe that through data-driven solutions like Key Driver Analysis, CFOs can strategically address these challenges, ensuring their institutions remain competitive while providing excellent customer service. By striking the right balance between cost-cutting and customer satisfaction, financial institutions can thrive in the ever-changing landscape of 2024.