19  Industry interventions

In this part I examine how firms can improve financial wellbeing through the way they design and distribute their products, and interact with customers post sale. We will do this by examining each stage of the product lifecycle.

19.1 The financial product lifecycle

A financial product’s lifecycle can be roughly broken down into four stages: design of the financial product, distribution or sales of that product to customers, the post-sale period where the customer uses the product, and the product close. This is a simplification, but will provide a framework for us to discuss how financial services firms can better serve their customers.

Product design: The bank develops the product in light of the customer’s and its own needs. Product design includes the basic function of the product and any additional features. For example, credit cards provide a payment card to the customer and access to a capped line of credit. Interest is charged on outstanding debt. Additional features might include interest free periods on purchases, access to cash advances, differential interest between cash advances and purchases, access to discounts for balance transfers, cashback offers, rewards points, purchase insurance, access to concierge services, and so on.

Product distribution: Distribution is the process by which the financial product or service is sold to the customer. There are multiple ways that products are distributed in Australia. Increasingly, distribution is by digital channels such as websites and apps, although with more complex products the initial digital process is often shifted to a human at some point. Distribution can also be in branches, via advisers, through sales representatives on phone, or through other agents. An example of another agent is a car salesperson who sells add-on car insurance during the purchase of a motor vehicle.

Post-sale: The interaction between the financial services firm and customer can have varying degrees of intensity through the life of the product. Some products are used and interacted with daily, such as transaction accounts and their associated cards. Others involve a one-off purchase, with interaction only occurring if a set event occurs (e.g. insurance). In either case, however, the design of the system by which the financial services firm interacts with the customer post-sale can have a marked effect on the way that the customer uses the product and their outcomes.

Product close: In the simplest case, product close involves the customer choosing to close their product. Although we will not be covering the produce close process in this book, it can have marked effect on financial wellbeing. For instance, how easy is it to close a credit card? Product close can also involve more complex processes with material effects on customer outcomes, such as complaints, dispute resolution and remediation.