One of the hardest problems for a bank to address is churn, the failure to retain new customers. In banking, some new customers don’t even make it past the first 90 days.
According to some estimates, the rate of churn can be as high as 25-30%, with poor service and not meeting customer expectations a primary driver of this.
As such, building engagement and improving customer experience has now become key. Given how easy it now is to switch banks, and the reduced need to visit a physical branch, an inability to make a connection can severely hamper a company’s efforts to keep new customers.
The issue from this perspective is not even really about competition between banks. Instead, it is about the difficulties involved in building customer engagement in the current market.
For a start, there is the challenge from 3rd party services, particularly mobile apps, like Venmo and Apple Pay, which make things like payments or splitting a bill in a restaurant convenient and straightforward.
While US banks have begun to fight back with their own version called Zelle, with its own branding and layout, it doesn’t necessarily build loyalty to a particular bank.
Messaging apps also offer payment services — sometimes these are in-house, but often they are hosting bots for payment companies like TransferWise and Venmo’s parent, PayPal.
Perhaps the most notable one is WeChat, China’s answer to WhatsApp with over a billion users. WeChat is itself a payment platform and is used to pay for pretty much anything and everything. That, of course, means that banks don’t get a cut from debit or transaction fees, and many young Chinese people have skipped having credit cards entirely.
For banks looking to be globally relevant there’s also the Open Banking initiative, which is intended to open the world of banking to 3rd parties.
A European Union directive (the Payment Services Directive, or PSD2) sets out explicit guidance for this, effectively encouraging banks to engage with 3rd parties with the intent of providing a wider range of services to the consumer.
As the consultancy firm McKinsey puts it: “Banks are better served getting ahead of and defining the trend rather than waging a futile battle to repel it.” In other words, banks should ensure they spearhead new offerings to guarantee these are connected with their brand and values.
The world is mobile
What these challenges really come down to is the spread of mobile connectivity, the resulting convenience associated with being “always-on”, and the fact that people have come to expect this convenience.
According to GSMA there are around 5 billion mobile subscribers in the world. The latest generation — which trendy consultants are keen to call “the FANG (Facebook, Amazon, Netflix, Google) generation” or “digital natives” — have grown up with mobile technology.
In fact, according to the British telecom regulator Ofcom, 78% of people in the UK have a smartphone, and this rises to 95% among 16-24 year-olds.
Ofcom also found that their average constituent checks their smartphone every 12 minutes, and 64% said the internet is an “essential” part of their lives.
Meanwhile, over in the US, Bank of America’s own study found that 3 out of 5 Americans already use mobile banking. In the CIS, the GSMA also notes that ‘[a]t the end of 2017, there were 232 million unique mobile subscribers… equating to a penetration rate of 80% of the population.’
Users are coming to expect the kind of personalisation they get from the tech giants that dominate the online sphere from all the companies they interact with.
Traditionally, banks did this in-branch. Customers visited their bank manager, loan officer, or financial advisor and got tailored advice. This has proven harder to accomplish in the digital realm.
Mobile is the solution
No longer being a conduit for certain services — especially in a WeChat-like scenario — is obviously a concern, but banks should also worry about the fact that these trends mean that banks are no longer the main point of contact for customers’ daily financial needs.
Consequently, the bank is no longer at the forefront of the customer’s mind when they need other financial services, and customers feel less loyalty or attachment to the brand. However, the very ubiquity of mobile presents an opportunity.
The simple ability to address a customer by name (rather than as “Dear sir/madam”) in an email is a great way start to start building customer engagement.
To build on this, banks can exploit a range of other, mobile-centric engagement channels, such as push, SMS, and 3rd party “OTT” apps. This doesn’t necessarily mean more ways of reaching the customer (that may end up simply bombarding them from all sides) but more importantly, lets them pick and choose how they want to interact.
This is part of building what McKinsey calls “a new operating model that puts the customer’s needs and wants at the centre.”
Marketing isn’t the only thing these channels can be used for. Apps can be used as platforms by banks themselves. Some are already doing so.
Ally in the US have their own Ally Assist app with voice recognition that can help customers with account queries; Ally is also connected to Zelle and smart technology (more on that below).
Bank of America also have their own app, through which users can access “Erica” — another chatbot that helps customers access account features and services, and even analyses transactions to better personalise suggestions and offers.
Citibank, in Singapore and Hong Kong, has gone even further: their Citi Bot is accessible via Facebook Messenger, without needing a bespoke app.
Using messenger apps like this is becoming more common. Messenger apps are secure, they can create a dialogue with customers, and they support bots.
In the future, an app may not even be necessary at all: SMS’ potential successor, RCS (Rich Communication Services), can support fully branded chatbots itself and is delivered via the same built-in app as SMS messaging (the problem here is whether or not an operator supports it yet). Then all you would need is a bot.
Even more channels
Being able to reach customers using the method they would prefer is imperative. SMS and messenger apps are integral to this — in fact, surveys have found that most young people prefer to text rather than talk.
And who wouldn’t want to avoid waiting on hold to speak to a call centre operative?
But there are more channels than those above, some of them are only just emerging.
While having companies as near to hand as one’s regular contacts via RCS is still a way off for most of us (the RCS-ready Samsung Galaxy already has a search tab for chatbots in its messaging app) there are plenty of other options for banks looking to expand their engagement capabilities.
Ofcom’s research found that in addition to their phone, 20% of people owned a smartwatch and 18% a smart speaker, aka home hub. Banks can use these to increase their presence, ensuring immediate reactivity to a customer’s needs.
For example, Ally has a “skill” for Amazon’s Alexa, as well as an ATM finder that works on Apple and Android Wearables.
The multichannel “journey”
Reducing churn is about meeting customer expectations, and customers expect personalised service.
At some level, people will always want face-to-face interaction, particularly with their bank, but multichannel engagement can enhance this — and ensure it’s your bank they want that interaction with.
Personalised messaging goes some way to bridging the divide between face-to-face communication and digital, making the latter more meaningful and relevant.
Something as simple as customising your SMS campaign messages can start to build this personalisation. Automating simple tasks via chatbots gets everyday customer service issues dealt with in a timely, convenient manner, whilst retaining a sense of dialog and interaction.
That frees up human representatives to deal with complex requests like large loans or mortgage extensions and to devote more time to each customer they deal with.
Furthermore, using a range of channels — for both marketing and service provision — ensures that your message gets across, whilst giving customers autonomy over how you reach them.
Banks should remember that this means that customer engagement happens across all these channels. As McKinsey points out: “When most companies focus on customer experience they think about touchpoints — the individual transactions through which customers interact with parts of the business and its offerings… But this siloed focus on individual touchpoints misses the bigger — and more important — picture: the customer’s end-to-end experience.”
The customer’s “journey” takes places via multiple channels and discrete interactions. A marketing message from a bank may spur them to research a mortgage on their phone, followed by an email to a local branch, where they meet a representative in person the following week to sign a deal.
Those touchpoints didn’t result in a sale, the journey did, and according to McKinsey “the companies that perform best on journeys have a more distinct competitive advantage than those that excel at touchpoints….”
Banks should explore the multichannel options available to them and integrate them into a cohesive engagement strategy that makes the most out of our mobile world.