Way back in 1994, Bill Gates had famously said, ‘Banking is essential, Banks are not’. Over the course of the last 22 or so years, that statement has started to ring true. Banks are still around but banking has changed and is changing even more, as I write this.
Changing simultaneously, are the challenges faced by and opportunities in front of Marketers in banking.
A set of digital technologies and a massive change in customer profiles are the driving forces behind the disruption in banking. Millennials have very different expectations of their banks. They no longer depend on banks for financial advice; they trust their own networks far more than they trust bank brands. They don’t seek the comfort of human interfaces in branches; they are more comfortable with digital interactions. They do want mechanisms to store their money at low cost and ways to pay for goods and services but no longer do they believe that they need to turn exclusively to banks to get these services. Not surprisingly, the latest Millennial Disruption Index report states that more than half between the ages of 18 and 33 believe that offerings from their banks are not differentiated and more than a third believe that soon they will not need banks.
How does the Marketer convert the non-believer and spur the inactive to action?
As banks race to provide customers a seamless, consistent experience across different channels, the opportunity for Marketers is to play to the banks’ digital strength, creating opportunities to sell better, create more loyalty and generate greater long-term profitability.
Branch transactions in the US fell by more than 30 per cent between 2005 & 2010 and they are expected to fall even further. It is estimated that this year (2016) the average consumer will interact with her/his bank brand 300-400 times digitally for every in-person interaction in the bank’s branch. Thus no bank can hope to have good enough an experience in the branch when the customer interacts so many more times digitally with the brand, outside the branch. It will need to nail the experience in those digital interactions.
While emphasis in the past was on distributing financial products, banks must also focus on satisfying customer needs and providing educational resources. Effective digital marketing is critical to success. For banks (now and in the future), marketing is and will continue to be a core capability. It is what helps banks define and refine customer experiences across all channels.
With the massive loss of ‘face-time with customers’, as fewer and fewer of them step into branches, Marketers need to rely on the depth of customer knowledge (powered by data and analytics) to come up with real-time reactive offers across all channels. Digital systems these days, allow any offers to be made in real time, directly in response to customer action. A bank can analyse spending and saving patterns and deliver timely offers that correlate to those patterns, or even to an aberration within a pattern.
Online banking is well on its way to become an advisory service, rather than just a transactional platform, as the bank draws a complete picture of its customers and accesses their full histories instantaneously. The same data and analytics will be key in building loyalty too, as Marketers gain the ability to offer targeted rewards directly related to their customers’ spending patterns.
In addition to leveraging analytics and interactive marketing, marketers must listen carefully to customer voices — in branches and across all digital channels, including social media. Channel optimisation will be critical to creating differentiated digital customer experiences.
In the digital era, all marketing has become substantially more sophisticated. Especially so in banking, because of the pace and degree of disruption it’s witnessing. To be successful, marketers in the space will need to master innovations in online banking, customer voices across physical and digital channels, mobile services and social media. For those interested in further reading on the topic, I will recommend this great piece by Susan Marshall, CEO of Torchlite Digital Marketing.
In an industry, that has been long perceived to be short on innovation, opportunities offered by digital banking could be the most exciting development for decades. No doubt there’s significant churn, in a space that historically hasn’t dealt well with changes and can be rather set in its ways. But the fact is the customer has moved on. Expectations from banking today are substantially different that they were a decade ago. The opportunity to create value however remains strong, albeit in somewhat changed forms. Marketers will be able to seize these opportunities. Some re-orientation (of perspectives) and re-calibration (of approaches) will be needed though. The pace of change is clouding the picture right now, but it’s a cloud that really does have a silver lining.