Banks are facing a crisis of commoditization. It seems like every day there's another fintech disruptor hitting the market and offering the moon.
It's against this backdrop that banks must attract customers and hang onto existing ones. To this end, more and more digital ink is being spilled about the need to focus on customer journeys and create more meaningful customer experiences in the banking sector.
This undeniable truth has spurred some banks into action. But problems still exist. Change has mostly focused on technology adoption, with legacy institutions quickly catching on to things like mobile apps and omni-channel selling. This is unsurprising, as the capital, R&D aspects technology play to their traditional strengths. But it misses the broader point.
Fintech is winning the battle for one main reason: because it combines financial convenience with the community advantages their technology provides. Traditional banks that don't place community adoption at the forefront of their strategy will find themselves hemorrhaging customers and eventually disappearing entirely.
To counter this, it's critical that banks understand the importance of community adoption for the modern banking consumer.
The Neighbour Effect
A few decades ago, all it took for people to do business with a bank was if it was recommended to them by a friend, neighbor or close relative. What banks need to understand is that the effect of community hasn't changed – only the nature of the community has.
Too many banking executives still view social media as a throwaway toy where no serious conversations are had. But the reality is that these serious, neighborly conversations of old are now happening on social media channels like Facebook, Twitter or Instagram.
In other words, customers making important financial decisions look to their social media communities for advice and support. This is even more prevalent among Millennials and especially Generation Z, for whom there is no separation between online and offline communities .
Banks that don’t have a presence in online communities will certainly lose to financial institutions that do.
Community Data IS Product Research
One thing that all banking executives can agree on is the need for product research. What many don’t realize, however, is that online communities provide one of the best opportunities to collect effective, actionable data.
There are two reasons for this. The first is because online communities are an organic forum where people feel comfortable speaking their mind. And the second is because everything that happens on social media and online community channels can be tracked and therefore measured.
This analytic capability provides a wealth of information that banks can use to improve their products and services. Those that don't have robust communities will be behind in the analytics game. Ultimately, this means their product research will be inferior to competitors – and so their service will be as well.
Marketing Via Social Good
One of the most important advantages that fintech has over traditional banking is that consumers perceive it as a common, public good. This makes it much easier for them to get positive publicity and marketing.
There are numerous reasons for this. One is the perceived ability to eliminate financial exclusion in poorer or underdeveloped areas. Another is the ability to create true price transparency for consumers; even crowdfunding and micro-finance options which level the playing field between big venture capitalist money and smaller entrepreneurs.
Unfortunately, as guardians of the old financial institutions, banks are often perceived as being on the flip side of this equation — either unwilling to help or actively part of the problem. Those that cannot break out of this mould risk alienating the modern consumer.
This is a shame for many reasons, not the least of which because banks do do a lot of positive work in the community. What they need is to ensure that this work is public knowledge. And one of the best ways to do this is to take time to cultivate an online community that will champion the positive social good your institution is doing.The positive ROI businesses can enjoy by running socially conscious marketing campaigns on social media is well-known. But banks that don't prioritize community adoption won’t be able to capitalize, ultimately missing out on opportunities for organic positive exposure.