How banks are missing the “millenials” mark?

“Banking is essential, banks are not,” Bill Gates, then CEO of Microsoft, famously said in 1994.Mobile phones, however, are essential. And many of us today are doing a majority of our banking transactions on the mobile.

Forrester had this interesting thought –“The moments that characterize the mobile mind shift are getting shorter. Simple triggers — messages, sounds, even tactile sensations — spur consumers to take action, both on devices and in the real world”. Forrester defines this quick-reaction subset of mobile moments as micro moments.

Millennials are digital natives — the first generation to have grown up with Internet-enabled devices and digital technologies — and they expect real time engagement with brands.

millenials 1

According to a study by Viacom Media, banking, as an industry, runs the highest risk for disruption. 53% of the Millennials they surveyed said they didn’t think their bank offered anything different than a competing bank. 71% said they would rather visit the dentist than hear what banks have to say. 73% would rather handle their financial services needs with Google, Amazon, Apple, PayPal or Square than from their own national bank.

India has a strikingly young population, especially compared to China. It has 440mn Millennials, larger than China (415mn).

So what must banks do to engage better with the Millennials :

  1. “To service is to sell” will be the new philosophy

Banks will leverage the rich customer data to “service first” , rather than sell. Sales will happen because banks anticipate service moments that lead to a sale. This will need appropriate technology investments for banks to sense “customer moments” in real time & respond to them. Millennials will demand that. Customer service may completely morph with Marketing into a Customer Experience function. More importantly banks will need to control their “push selling” paradigm. Regulators may help by mandating an end to “mis- selling” …but that may not happen anytime soon. More progressive banks will regulate themselves & move to this new philosophy! Banks have huge data that signifies a “service need moment”-eg providing an NOC to an auto loan customer without any follow up. Also picking up a credit card airline transaction & converting that to a bunch of “partner privileges & offers for that country”.

Again research shows that “marketers will build their own contextual marketing engines to connect with customers not through campaigns, but through ongoing interactions. To do so, they will have to combine systems of insight and systems of engagement”. So the mass & blast campaign management will change & instead much more relevant service based messaging will engage customers.

2. Become “Gurus”
Financial marketers have a clear opportunity to become financial gurus to Millennials. This generation is hungry for knowledge, is ready to learn digitally, and would prefer simple, easy to understand content to make better decisions about their lives. But this content has to be created to connect to Millennials.
Bank of America’s initiative “Better Money habits” launched in collaboration with the non-profit Khan Academy is one of the examples of interactive education resources targeted at the Millennials.      http://bit.ly/1xce4Uv

3.Think ‘Outside the Bank’

 Millennials are the experiential generation. They focus on today’s needs and take on debt for vacations or education. Research from Facebook IQ has shown that Millennials tend to show off not through the ownership of things but through experiences. How can financial marketers leverage this knowledge to bring an “experience edge” to their marketing. American Express provides its members with live streaming concerts on its unstaged website, and Chase treats some of its Sapphire cardholders with VIP access to music shows who can then share their experiences via social media.

http://bit.ly/1KPmY0N

None of this is new & brands should find more exciting partnerships – with writers, photographers, Theatre artists, social sector leaders, and other influencers. Research shows that “Such collaborations could result in storytelling initiatives with advice on different experiential topics in connection with financial matters behind them. Communications should be built not so much around a transaction, but rather all the exciting things you can do with it”.

4. Tear down the silos

Define, and start executing an overall payment strategy. Not only is responsibility for payments split between retail and business banking teams, but even credit cards and debit cards are often run by separate teams. Marketing tends to be a central team but may not have as much authority across silos to own a consistent communication paradigm.

5. Embed analytics into Mobile banking: 

Help customers see an accurate forecast for their spending. DBS digibank leads in the Indian market with its budgeting and spending tool. This allows customers to manually categorize transactions and autopopulate transactions like bill payments; they can also choose to receive email alerts when they hit 70% to 90% of their budget. DBS digibank also provides a basic saving tool to enable customers to assess their spending and save money. In terms of advice and planning, ICICI Bank offers customers a few useful tools, such as calculators for mortgage payments, investments, and pensions.

Mobile banking offers the opportunity to cross-sell to existing customers and to promote additional services. “Yet few banks use the context of a customer’s current product portfolio,recent life events, location,past behavior,and other factors to offer personalized marketing in their mobile apps”.

Unloved, undifferentiated & intrusive-is that a Bank?

Unloved, undifferentiated, and incapable of innovation — that’s what today’s  digitally savvy users, primarily including high-school students, entry-level  workers, and thirty-something professionals, believe about the banking industry says a recent survey of Millenials.

But often a bank’s marketing only reinforces this image. Pushing hundreds of irrelevant communications to customers despite having data about them frustrates customers.

And now consumers are begining to have choices.Nonbank solutions for financial services are not just imminent — they’re already here. Today’s digitally savvy retail banking customers are rapidly turning to Geezeo, Personal Capital, LearnVest, and others for personal financial management solutions. And they’re looking forward to other technology giants entering the market such as PayPal, Apple, Amazon, Facebook, and Google. Most of these new entrants are far more marketing savvy & have disrupted other industries by bringing the customer into the boardroom.

And yet, Banks often think of Customer centricity as a “fluffy” topic. Most bankers are hard wired left brain types & the retail banking business is such that customers are often prisoners & cannot leave very easily. According to Capgemini’s 2014 World Retail Banking Report (WRBR), less than 40% of customers globally reported positive customer experiences with their financial institution.

And yet there are contradictions: banks are probably amongst the few businesses that have an “extreme level of data” about customers. Banks know when you move your house, when you get that bonus & they even know when you are eating out at a restaurant or travelling internationally for the first time. Banking also was amongst the early adopters of analytics & so has the institutional capacity to understand customers better. And Banks have invested in huge amount of technology that can enable customer centricity. And yet Technology is transforming the way digitally savvy customers think about and manage their finances. And this is where banks may not be moving fast enough.

Banking tops the list of industries at risk of disintermediation by digitally savvy customers including millennials. And banks seem secure in the belief that this business is very hard to dislodge & too regulated to disrupt. Key findings from the Millennial Disruption Index (MDI), a three-year study of industry disruption at the hands of teens to thirty somethings (Millennials) found that 71% of Millenials would welcome a new bank from Amazon, Google, Square, Apple or Paypal.

I had written about the unbundling of banks earlier.

digital banks

In India, there seems to be a mad race by private sector banks to show Digital superiority. A lot of Apps are being launched. But at its core, the issue of being Customer centric still eludes many banks. Banks need to be committed to having an innate knowledge of their customer and using that knowledge for the customer’s benefit. Today most analytics teams in banks spend most of their effort in doing analytics that will benefit the bank: reduce risk, increase cross sell & reduce cost.

Chris Skinner, Chairman of the Financial Services Club and author of the book, Digital Bank, said, “A digital bank is a bank built with a vision to reach out to customers through digital augmentation. It is built specifically to offer the customer the service of their choice through the access of their choice.”

And yet banks do an extraordinary amount of push based marketing-pushing messages to customers which may not be relevant through emails, sms & calls. Banks set up campaign management teams that mine data & use marketing technology to automate campaigns for customers. But sometimes we need to be cautious about technology & automation. Our campaigns are not customer centric; they intrude & do not provide relevant information. In such a case, automating & increasing the volume of this campaign is pointless. You are only automating a more intrusive form of marketing, that doesnt work.

Often there is this belief that complex analytics is required to become more Customer centric by providing appropriate offers.But you don’t need too much fancy analytics to become more customer centric. There is so much data that exists with a bank that you can create hundreds of examples of campaigns that connect to customers.

I saw this wonderful example from Jim Bruene at Finovate:

“Card reissues after a data breach, or lost/stolen situation, are annoying for cardholders. But it’s even worse for the issuer who has to pay for a new card, hound the customer to activate it, handle customer service calls, and then risk losing recurring revenues from now-broken automated pre-authorized charges.

So kudos to Capital One for taking an important step in solving this problem.

Earlier this week I received a new card and number from Capital One, presumably because my card had been involved in a breach. I am not aware of any unauthorized attempts to use it.

In a followup email this morning, the giant issuer reminded me to activate the new card. That’s a fairly typical technique these days. But the help didn’t end there. The bank provided a list of likely merchants where I may need to update card info to avoid the charge being denied (see screenshot below)”.

http://bit.ly/1eOZroI

Simple communication like this can diffrentiate a bank & make it more relevant to consumers.

Here is what I believe banks need to think about:

  1. Treat customer communication with the same intensity that FMCG companies treat their advertising.
  2. Look at their data to “help customers”. Banks have rich information & everyone should be thinking about simple ways to connect with customers. Most times banks engage with customers only to cross or upsell. Bankers may want to think of a paradigm where sales begins to happen because you connect with customers at relevant moments with personalised communication like the example above.
  3. Set up a Customer Intelligence unit-use them to derive insight “about customers for customers”.
  4. Use that insight to create engagement programs with customers which help them lead their daily life.
  5. Cross sell will happen as an outcome.
  6. We believe that Marketing will move towards relevancy:
    • “Marketing that is done so well that it feels like a service”
    • “Marketing as a relationship”
  7. At Cequity we call this philosophy-“To service is to Sell”.