For many financial services customers, there is little differentiation between rival banks and their products and services. In these consumers’ view, financial products are truly commodities, and with those products widely available from traditional banks, neo-banks and non-bank sources, competition can devolve into nothing but price comparisons, causing a “race to the bottom” in acquiring and retaining customers.
At the recent Earnix Excelerate Summit, we spoke with Dan Latimore, Chief Research Officer at Celent. Dan and his team deliver insightful research and consulting services on technology and business in the banking world.
Here are just some of the key learnings we gleaned from this far-ranging and stimulating conversation, and some of Dan’s advice for growing your banking business.
Targeting Specific Customers & Avoiding Banking Commoditization
In a world in which information is readily available about pretty much everything, including financial products, how do you compete? Or, as Dan put it, “How do you get someone to do business with you in this vast marketplace where information is more available than it ever has been?”
His answer: “I’d suggest that one way of thinking about this, to begin with, is that you’ve got two types of targets.”
Targeting The Unknown (and/or the Unknowing) Prospect
“One is the person you don’t know anything about. They’re just absorbing information, the information you put out there, but you don’t know anything about them. They haven’t given up any personal information. You have no idea, really, what they’re looking for in any kind of specific way.
“In this first one, it’s essentially a broadcast, ‘shouting into the void’ kind of mechanism. You don’t know exactly who you’re talking to besides some very broad demographic swaths you’re potentially trying to target. And you’re trying to get them to take the next step with you and ideally buy a product or service from you.”
For these targets, first impressions count, and are your opportunity to differentiate yourself. “You may have physical locations or brand presence that distinguish you because you happen to have the closest one. You can give them a taste of your customer experience or your personality. You can show that you give them access to a network of partners.
“You can talk about your features and functions, and that may include some of the things that are quite targeted. You can actually be building up your brand and your personality, which when done right, leads to trust. You may sponsor the local Little League team as an example, or you can speak to your values, and these days that’s becoming a lot more common.”
Targeting the Interested – Moving Them to Engagement
There are those with whom you’ve had some contact or an inkling of their interest. As Dan identifies them: “On the other hand, you’ve got someone who’s made some move towards you. They want to engage. They’ve signed up. They’ve given an email address. They’ve started to maybe give you some basic demographic information.”
At this point, you may know they’re searching for an auto loan, for example, and you can go beyond just posting current rates on your website to showing an interest in the customer’s entire auto lifecycle experience, especially for young buyers. Here, personalization is key.
Dan cites what Santander does in the UK as a prime example:
“Santander in the UK, where it has a big brand, has established a car buying site called Your Red Car. And they’re taking a very holistic view of what this all entails. Not only are they just helping customers with the financing, but they’ve gone out and put together a network of 2000 dealers who are pre-vetted and who, if a customer buys and accepts delivery of a car from them, the customer will get a 75 Pound ECR, but the site doesn’t just stop there.
“It talks about all of the vagaries of car ownership, and if you’ve never owned a car, there’s a lot to learn. It goes from things like how to wash your car and what the details are, to how to handle the current petrol crisis in the UK. They’ve got this whole set of car-buying ecosystem features in place.”
More on Personalization – AI, ML, Good Old Testing
There are so many ways to get started with banking personalization. “AI and machine learning are critical parts of that, but you can now get and incorporate real-time feedback [in parallel]. And you can put in place tests, whether they’re randomized trials on sorts of offers or A/B testing, as you see what matters, all of this is really detail-oriented.
“The details matter, whether the placement of a button on a site, or on a phone screen, can make a big difference. And that’s where A/B testing can come in, but test and learn and iterate is critical. The little changes that get made are incredibly important over time in particular.
“And if you think about the digital engagements that you have personally, that are best, they change incrementally all the time. You may not even notice it, but over time they add up – they’re much better now than they were a year ago.”
A New Market to Tap – Gig Workers
Small and medium enterprises (SMEs) represent a significant segment of the economy. The ultimate in “small”, gig workers and independent contractors are a growing market for banks, but one with needs that go beyond deposit accounts and loans.
According to Dan, “Now, another kind of community and customer segment that didn’t exist 10 years ago is that of gig workers. And they are estimated right now to be about a third of the economy in the US at least. And they’ve got a whole set of distinct needs that are very different from people who get a paycheck every two weeks.”
More sophisticated functionality for this audience, which may require connections to partners with complementary products, means that supporting technology must also be sophisticated.
“Given those needs, they’re all sorts of firms that are springing up to meet them. Lance in the US handles not just all the backend stuff and the taxes, which are incredibly complicated, particularly if you start getting remittances from all sorts of different kinds of employers, but they really try to put some order around all this chaos for a gig worker.
“They say that they will pay your taxes, automate your savings, and send you a paycheck, and then will help divide things or send things to subaccounts like your rent account and groceries and the like.”