Led by the Amazons and Apples of the world, consumers today are inundated with new digital experiences, forcing banks to find ways to stand out from the noise. It’s no longer enough to offer basic, everyday banking products and services – consumers now expect a fully integrated, fluid digital experience. Think: Netflix, Uber, Hulu, Amazon Prime, etc. This is the new norm for user experience.
Additionally, the fintech revolution continues to thrive. With more than 15,000 organizations (and rising) formed post financial crisis, many are targeting the consumer to replace the traditional consumer-bank relationship. In response, banks must innovate or risk being squeezed out of an industry they’ve dominated for the better part of the last century.
Yes, there is potential for partnerships with some of these fintechs, but we also can’t forget about the big, national banks, also posing as a competitive threat to the over 13,000 community banks and credit unions across the country.
To stand out and regain market share, it’s time to ramp up digital engagement, especially payment solutions, and utilize customer insights to improve the overall banking experience. Through these efforts, banks and credit unions must ensure they are innovating the right way to avoid potential missteps.
Focus on Faster Payments and Digital Engagement
As real-time money transfers become the norm and certainly the expectation of consumers, payment speed matters. Payments are at the heart of financial institutions’ digital relationship with their customers, and the more banks and credit unions can do to make the experience fast and easy, the more engaged customers will be and less likely to jump to another bank that does it better.
Behind this demand for faster payments are mobile devices, giving financial institutions the means to interact and engage with customers much more frequently than before with a branch. This is key to better engagement. In fact, each transaction presents the opportunity for institutions to learn more about their customers.
According to PwC’s 2018 Digital Banking Consumer Survey, financial institutions must think “mobile first” to win in this market of faster payments and digital engagement. After all, today’s consumers can and expect to engage with their banking provider using smartphones, tablets, or even wearable technology, like the Apple Watch, at any time of day. This new flexibility has significantly increased the number of interactions a customer has with their financial institution, and we can expect this trend to continue as digital channels gain popularity.
Take Apple for example. Apple recently announced a partnership with Goldman Sachs and plans to issue a credit card incorporated into the iPhone. Industry experts believe this pair will be the first of many alliances to drive accelerated mobile payments while also increasing engagement. To compete with these large financial institutions and their tech giant partners, banks and credit unions must ramp up their digital efforts.
Utilize Customer Insights
But success also hinges on how well the financial institution knows its target user, making it critical that banks and credit unions put themselves in their customers’ and members’ shoes. This involves examining common complaints, gathering and listening to feedback, and comprehending the thoughts, feelings and motivations associated with various financial behaviors. New features should improve and enhance existing behaviors, not replace them. By trying to better understand their customers, financial institutions can create and implement solutions that resonate.
So how do financial institutions get to this point of understanding customers? It starts with data that can be derived from digital engagement. Digital engagement allows banks and credit unions to easily collect customer data and gain valuable insight into a customer’s spending habits. Institutions can then leverage transaction details, purchase data and even social media interactions to personalize customer experiences.
In short, measuring digital engagement can help increase digital engagement – and this is key to profitability. In fact, research shows that having more digitally engaged consumers can affect banking providers’ bottom line. According to PwC’s 2017 Digital Banking Consumer Survey, 46 percent of consumers only use digital channels today. This large number of digital interactions provides greater insight into consumer needs and preferences. Total sales can be boosted by 15 to 20 percent when financial institutions have a complete understanding of their customer from leveraging data, according to McKinsey & Company.
Increasingly, companies like Amazon and Apple use customer insights to personalize the experience by, for instance, providing comparable items that may be of interest based on the consumer’s search and order history. There is also an immense focus on the overall user experience – getting from one place to another. Seamless navigation is important, especially across different devices, and these companies learned early on that customer loyalty is largely driven by how long the process takes to get the customer to their desired destination. The longer the process, the more likely a customer is to disengage and move on.
As such, banks and credit unions must develop new tools that use machine learning and artificial intelligence (AI) to encourage customer engagement and improve the overall experience. Advanced analytics and data intelligence capabilities give banks deeper insight into their customers’ behaviors and expectations, which can then be used to develop better products and services.
Approach Innovation the Right Way
It is clear that innovation is critical to stay ahead of competitors in this “Amazon and Apple World,” especially in looking to not only increase digital engagement, but use it to gather and analyze customer insights. The challenge is that not all innovation is helpful. If not vetted well, banks can run into headaches that lead to failed marketing strategies.
A major problem with the industry’s current approach to innovation is the inclination to focus on one channel at a time. In doing do, banks and credit unions tend to narrow their efforts when introducing new technologies or functionalities to a single channel, such as a new mobile banking feature or a chat bot to support online banking. Incorporating innovation into only one channel creates a disconnected customer experience. Because customers today expect a uniform experience across devices, like that of Amazon and Netflix, financial institutions with a disjointed digital experience will ultimately fail.
In a time of considerable change and doubt, one factor remains true – banks and credit unions cannot sit back and do nothing. As disruption from technology giants like Apple and Amazon reshapes the industry, smaller financial institutions must force their way into the competition, ready to innovate. Community banking will never stop evolving but if banks and credit unions fall behind, it’s likely they will be unable to catch up.
Abhishek Veeraghanta is Vice President of Marketing and Product Management at VSoft Corporation. He has significant expertise in the banking industry with an emphasis on financial technology. He has product management experience from leading technology providers and holds a bachelor’s degree in Business Administration from Georgia Tech.