NEW YORK (MainStreet) The Millennial generation's need for products and services to be tailored to their tastes and preferences has made a huge impact on Internet and e-commerce businesses. Personalization has been the flavor of the month for many months now and it is the new normal.
Banks have been at the forefront of using technology for their core banking processes and customer acquisition, but only now are they adding user experience to their "To-Do" list. Fascinating examples are emerging about how banks are innovating to address and even surpass customer expectations.
The Customer Speaks
However it would be useful first to listen to what exactly the customer is saying. First Data, a leading financial technology solutions provider, conducted a survey of almost 4,000 people with bank accounts and credit cards across markets ranging from the U.K. and the U.S., to the emerging markets of China, Brazil, and India.
First Data's VP of Product for Mobile Solutions Chris Cox shared some interesting insights.
Banking apps were used by 52% of respondents, and 58% expected the banks to take their individual circumstances into consideration, he said. It gets more interesting: 71% of those surveyed said they expected real-time access and support from their financial services provider. Welcome to the impatient world of the Millennial customer.
First Data's observations are echoed by technology major Cisco, pointing to the symbiotic relationship between finance and technology.
Their 2012 Omnichannel Banking Study shows that 45% of customers favor a virtual banking alternative over a physical branch where they may not get the personal attention they feel they require. While there may be considerable gaps in income and standard of living between the developed and emerging markets there is hardly any difference in their behavior78% of developed market customers preferred to use the Internet for banking needs, closely matched by the 72% in emerging markets.
What explains this homogeneity between the developed and emerging world, something not seen in other sectors like automotive or transportation? The answer may lie in the ubiquitous smartphone.
"Mobile evolution has opened up a new platform for the financial sector," Cox says. "Banks that provide their customers with the option of mobile banking or downloading a mobile wallet give them with the tools to bank and shop how and where they want."
In fact, the First Data sample had a higher percentage of Chinese respondents with a Smartphone (92%) than Germans (55%). Marry that with the fact that 80% of Millennials own a smartphone, and a pretty clear picture starts to emerge.
So how do banks take advantage of the opportunity offered by smartphones and deliver a rich, rewarding experience that not only engages the customer but fosters long-term loyalty?
Only recently the answer to that question would have been to customize the bank website to every user's needs, make frequently accessed accounts and utilities feature prominently, and send marketing communication based on user transactions.
New Ball Game
However, such measures only constitute the baseline of user experience that a bank must provide.
The Millennial customer has another defining attributethe need for gratification. Look at how Spanish bank BBVA offered its customers the chance to play the "BBVA Game"a gamification application integrated with the main BBVA consumer banking website. All you have to do as a customer is to perform normal financial transactions and the app awards you points. Watching financial education videos and inviting friends to the game brings you additional points. Users can then redeem these points against a host of rewardssoccer match tickets, music, IPads and Samsung Galaxy phones. Not only has the game drawn 110,000 customers in the space of 10 months, but it also won the bank a gamification award beating out the likes of youth marketer MTV and sports heavyweight NFL. Who says banks can't be cool?
The BBVA example is not restricted to the developed markets. Malaysian bank CIMB launched a Facebook app called CIMBYouth which gives players virtual credits and encourages them to bid and buy products using the virtual currency. Targeted at account holders in the 13 to 25 age group, the app got over 6,000 customers to participate in a few days of the launch.
The gamification is not just targeted at young people alone. ABN Amro introduced a feature where customers using their mobile phone application could give a personal name to their accounts and attach custom photos against them, giving it a feel similar to social networks. Interestingly, the First Data survey showed respondents were more likely to purchase products and services from companies that were "smart" about using social media and technology.
The Price of Loyalty
Another reason to invest heavily in customer engagement is that loyalty is an increasingly rare phenomenon. E&Y's Global Consumer Banking Survey 2012 reported that 12% of customers had changed banks in the past year, up from 7% earlier. Customers banking with only one bank were down to 31% from 41% earlier. These numbers seem to have a high correlation with other aspects of the survey e.g. only 44% of respondents said their bank adapted to meet their needs.
This brings us to the heart of the bank-customer relationship. Ultimately, personalization efforts should be reflected in the array of financial products available to a customer. Banks have some way to go in this and would do well to borrow from the experience of other players in the financial services space like brokerage TD Ameritrade that has 40 different investment products based on user preferences.
The ability to slice and dice customer needs, serve them, and manage that effectively calls for some major investments in technology.
Initiatives like Citi's multi-billion dollar "Project Rainbow" that aims to move the bank's multiple platforms used for retail banking to a common platform are steps in that direction. The stated goal of the project is to provide a 360-degree view of customer relationships given the multiple channels through which today's customer transacts.
"The interaction between banks and customers is now spread across multiple channels and reaching farther than it has before," Cox says.
To wit, the huge amount of data that a bank like Citi collects on its customers has led to a parallel five-year program inside the bank, called the Global Data Roadmap to create standards for the different businesses inside the bank to share information with each other seamlessly.
The Silent Segment
Digesting reports of all the sophisticated tools and technologies banks are deploying one could be easily seduced into painting a picture of a customer that is extremely financially savvy and has a long standing banking relationship. That is only half the picture.
Ironically, the innovations in technology and financial products are now making it possible for banks to address a huge untapped segmentthe unbanked and underbanked customer. Currently, the U.S. market in this segment is estimated at around 68 million customers across 22 different financial product types approximately $78 billion in revenues per year.
Pre-loaded cash cards called General Purpose Reloaded (GPR) cards provide unbanked and underbanked customers with services similar to debit cards. Access to web banking and mobile banking, bill payment, automated cash withdrawal is all made possible through these products. Industry watchers point to high degrees of social media and mobile phone penetration in this segment as proof that technological innovation is actually a means and not a barrier for such customers who seek banking services.
First Data surveyed unbanked and underbanked customers specifically and came away with one overriding conclusionthere is a high degree of distrust of banks and other financial institutions amongst this segment. Customer friendly, innovative services are the need of the hour. Cox emphasizes the roots of the problem that "many consumers may simply not know how much control they can have over their accounts or may be unfamiliar with how online banking works."
Explaining, either through a one-page overview or with helpful customer service, how an online banking system provides real-time access to their account balances, pending payments and pending deposits as well as the ability to receive alerts and notifications can often overcome the trust deficit in such customers.
Banks have received a lot of flak in recent years around the global financial crisis. Using technology to deliver a great user experience offers an opportunity to get back in the good books of their customers, and make profits along the way.
--Written by Preetam Kaushik for MainStreet