The race to meaningfully engage with customers is on
The disruptive threats that banks face today are well documented: fintechs, decentralised cryptocurrencies, distributed ledger technology (DLT) and now the tech giants like Amazon, Facebook and Apple, to name a few. These players are all now placing themselves between retail banks and their customers, meaning that banks are not just competing with other banks anymore.
Customer dis-intermediation is one of the biggest challenges that a retail bank must contend with when it comes to retaining its central standing as the number one go-to provider of financial services. This challenge is only set to intensify once the Second Payment Services Directive (PSD2) comes into force, leaving the goal wide open for non-banking, data-rich giants like Google and Facebook, as well as pioneering fintechs and developers to score with their superior financial management and payment services apps using data from the banks.
But what if banks can learn from the very fintech, big tech and social media pioneers that are threatening them, and go on to beat them at their own game when it comes to meaningful digital engagement with their customers through their banking apps?
The good news is that banks are well-positioned to win because they have the competitive edge when it comes to access to customers’ and financial data at scale, which they must use to enrich the engagement experience. The catch is that they need to move swiftly to make gains on their advantage, while ensuring they do it in a sustainable way. To drive longer term meaningful engagement, the focus must be on habits that drive real value and impact, designing for time well spent.
The cornerstone to driving meaningful engagement is to help customers develop positive financial habits through their bank’s app. Excellent usability must of course be a given when it comes to checking balances and transferring funds, but beyond that, feeding customers insights that inform and educate them is crucial. This could be in the form of recommending a product or giving financial advice that is relevant to them. How can you encourage them to save 10% of their income each month if they are new to the world of work? The motivation of a card-linked offer that could give them an instant cash reward could be extremely effective. Gamify the experience, enable community reinforcement via sharing progress with peers, or simple categorisation can go a long way to helping people get to grips with their finances.
In a post-PSD2 world there will naturally be increased competition in the digital banking space, and banks will no longer be able to rely on the inertia of lifelong customers. The Directive standardises the regulation for banks and for new PSPs, breaking down barriers to entry and enabling new payment services ensuring transparency and fair competition to the benefit of consumers. According to a recent research, 73% of millennials say they are more interested in new financial services offerings from the likes of Amazon and Apple than a traditional bank, so it is essential that banks aim to foster long-term relationships with their customers via their digital platforms.
Long-term retention is not just about frequent engagement, but about building up trust and being there for customers with the right advice at the right time. Guidance on budgeting during university, advise on pensions and savings on securing that first job, or longer term financial planning guidance on the birth of a child; these are just some of the ways that a bank can show its customers that it knows them and their ever-changing financial situation well. Earning this trust should, in turn, mean that a bank wins its customers’ loyalty in the long run.
An extension of this premise is personalisation of every customers’ banking experience. Everyone has a different relationship with their finances, yet most banking apps look more or less the same. By developing a digital environment that caters to an individual’s needs, provides relevant content for them and makes a user feel like their bank understands them, will engender deeper, more meaningful engagement.
If a banking app’s functionality can also serve different financial behaviours – from those who are more conscientious and “good” with money, to those have lower measures of impulse control and tend to struggle with getting to grips with their finances – and help them develop better financial habits no matter what their personality type, then this is a powerful way to help customers change their lives for the better.
A best-in-class banking app should provide a digital environment for a continuous contextual dialogue between the bank and its customer that goes beyond the transactional to the emotional. This doesn’t just mean transactional engagement like account transfers, payments and balance notifications. The key is to combine these core banking functions with other types of services such as easy-to-consume personal finance advise, targeted financial service product offers and other personalised offers relevant to individual customers. Social media-style “activity feeds” promoting additional financial services are a good method of keeping such engagement going, enabling effective integration of multiple types of financial services and advice in a familiar environment.
The race to meaningfully engage with users is on. The banks that can help the most people gain insight into their current financial situation and motivate them to improve it through meaningful digital engagement will be the bank that wins ongoing loyalty from its customers. This is a boon for customers as well as the banks, as it boosts and creates new revenue streams for the latter, so everyone is a winner. However, the countdown to PSD2 is on, so if they haven’t already, banks must move quickly to prepare to comply with the Directive (upgrade IT architecture, develop and test in good time). They will then be able to prepare to compete by developing innovative post-PSD2 personalised banking products and services and bring them to market ahead of the competition.
By Bragi Fjalldal, CMO, VP product & business development, Meniga