It’s no secret that the banking industry’s reputation has taken a hit over the past 10 years. Starting with the repeal of the Glass-Steagall Act and ending with the horrific market crash of 2008, the financial sector has since been hurting for a revamping of the banking brand.
However, banks have known this for a decade and have been diligently working to make the consumer experience better and to empower the financial customer. The rise of technology, for example, has helped the financial sector make great strides in its ability to better serve its users. Unfortunately, not many people know this, and the banking reputation in the United States continues to suffer.
It’s a marketing problem, not an operational problem, and one that needs to be addressed. So, how can retail banks increase brand equity, build consumer loyalty, and at the same time, create a truly unique customer experience?
Build an Integrated Community of Users
The retail banking sector is ripe for innovation. Companies like PayPal, Braintree, and Venmo are all examples of this. You see, a recent study conducted by Access Development found that 45% of Millennials would consider switching retail bank for a better fintech alternative. Further, the study found that 18% of Millennial customers have switched their primary banking to another firm in the past 12-months, compared to 10% of Gen-X / Gen-Y and 3% of Baby Boomers.
And with the rise of financial technology, many of these “other firms” are nontraditional fintech companies. But what is it that sets these companies apart from traditional retail banks? What is it that these old-school financial institutions are missing from a marketing perspective? Sure, fintech companies provide the following:
1. Reduced Fees and Transaction Costs – With a lack of branches and a reduced number of employees, fast and agile fintech banking companies can provide a greater level of service at a fraction of the costs. Think about Wealthfront, a robo-advisor that manages your money for 12x less than a traditional broker.
2. Ease of Use and Accessibility – Of course, with easy to use apps that transfer money, cash checks, and pay bills, many fintech companies are disrupting the retail banking industry by providing consumers with the least amount of banking headaches.
And sure, these benefits are great, but they don’t touch on the main marketing competence of these fintech companies: Community building.
With Venmo, for example, users integrate with their Facebook accounts and can follow friends as if their banking transactions were a Twitter feed. Customers can like and comment on the activity of their friends, post comments, and even use emoji’s to express their feelings.
In this modern day of connectivity, community building is one of the most important aspects of marketing. This increases brand equity and brand loyalty among companies, and also helps with word-of-mouth marketing via the network effect.
What’s more, the data collected through this network of users allows fintech companies to suggest products to consumers that like-minded customers have already enjoyed, thus increasing the network effect.
Traditional banks need to take note of this marketing tactic if they expect to succeed in this current financial environment.
Meet and Exceed Customer Expectations
This may seem like marketing 101, but many retail banks are not currently meeting their customer expectations. Now, this doesn’t mean that they don’t have the ability to, it’s just that they currently aren’t.
You see, the fintech companies mentioned above have changed consumer expectations. Now, if a retail bank wants to compete, it has to provide services that increase ease of use and reduce fees, as well as provide great customer service and support.
This is paramount for the success of traditional retail banks. It should come as no surprise that across all the major retail banks in Europe, North America, and Australia, there is a high positive correlation between growth and customer satisfaction. In fact, KPMG found that there is an average growth rate of 163% among retail banks that are ranked in the top 100 of great customer experience.
What’s more, Edleman found that financial companies with efficient electronic payments systems garner more customer trust than the overall industry average. This shows that by meeting customer technology expectations and then working to exceed them, traditional retail banks have a good chance of increasing loyalty among its consumers.
This is where fintech solutions come into play. And in another KPMG study, if retail banks can focus on internal data analytics, they have the ability to understand customer needs and create strategies that effectively service those consumer desires. It’s the only way that traditional financial institutions can compete with marketing tactics of new and shiny fintech companies: Use technology themselves.
Retail banks need to revamp their brand. They need to rethink their current strategies if they want to compete in the current financial environment. How can they do that? Well, by adjusting their current marketing strategies to take into account two very important business principles:
- Community building
- Exceeding expectations
Today, fintech companies are doing a better job than ever at using evolving tools to increase customer engagement, thus providing users with a better retail banking experience when compared to traditional financial institutions. This makes it increasingly important for retail banks to leverage similar customer management tools to better their consumers’ experience and connect with them emotionally.
If traditional institutions are unable to pace this industry disruption, they run a high risk of losing customers to better fintech alternatives that provide an engaged community of users who have their high expectations met. To compete, retail banks should adjust their marketing strategies to include innovative new techniques that can provide them with insights into consumer behavior, decrease fees and costs, and increase ease of use.
If retail banks are unable to mimic fintech companies by increasing emotional engagement with innovative customer experience strategies, they’ll be further thrust to the wayside.