As originally published in BAI on June 1, 2017.
The banking industry is in the midst of a digital evolution as more customers bypass branch visits for mobile or online banking. Retail banks, used to employing mass marketing techniques and face-to-face product sales in brick-and-mortar branches, now find themselves disrupted by consumers’ need for digital personalization.
And so, many financial institutions face a formidable challenge: to alter their business strategy in a way that embraces customer expectations in today’s digital landscape.
Banks do not exist in a consumer vacuum. They’re now held to the high standard set by companies such as Amazon and Google, which put the customer at the center of a seamless online experience. Banks must work to keep up as result and offer the streamlined, anticipatory and convenient service consumers have come to expect.
But it’s more than work: There’s bona fide pressure involved. Financial institutions must adapt to remain relevant and better serve their customers or face the consequences. Their legacy status and traditional product-centric business model stands in contrast to the growing disruption that rocks the industry.
That being said, pioneering a radical new approach to banking isn’t necessary.
Banks can begin the transition from a transactional past to an interactive future. A first step—and very important one—toward this shift demands a new view of digital banking’s role. A digital platform represents more than a touchpoint for basic transactions; it should fill an advisory role that supports customers through their financial life cycle.
What does this involve? It must allow for financial institutions to develop a high-touch relationship with customers and capture more high-value transactions. That means a personalized concierge experience, accessible at the customer’s own convenience—and, in many cases, without planning a visit to their local branch.
The building blocks of interactional banking
Digital banking, as it’s conventionally known, acts as a channel that allows customers to make payments and check account balances. But it also limits the type of relationships that retail banks can build with their customers—and instead relegates exchanges to a suite of passive transactions.
Creating an interactional experience, on the other hand, opens the door for financial institutions to enter a more integral role in a customer’s life. This can run the gamut from offering services that add convenience to day-to-day financial activities to improving financial literacy based on significant life milestones, such as the first time a customer buys a home.
Manulife’s Vitality program stands as a great example of a financial institution that augmented customer experiences by smooth integration financial services into their daily lives. The company leveraged wearable technology to incentivize customers into healthy behaviors, which could potentially lead to discounts on life insurance premiums and loyalty perks through merchant-funded offers. As Manulife aligns its established life insurance product with the technology that customers use daily, it gives customers a new (and more holistic) approach to how they understand life insurance.
The concierge emerges
And as customers increasingly utilize mobile banking apps, this gives financial institutions a chance to engage with them via digital—and push them beyond traditional transactions.
TD Bank demonstrated this approach with its recent launch of TD for Me. A concierge service embedded in the brand’s digital banking app, the platform delivers targeted information about banking services, upcoming community events and merchant-funded offers.
TD for Me and Vitality are the products of institutions that think of themselves less as financial gatekeepers and more as financial/lifestyle concierges for their customers. Other banks can follow their lead by delivering timely, incentivized advice and services. This helps banks build customer loyalty and create revenue opportunities, and in the long run equips customers with information and services that improve their financial well-being.
Interactional relationships may demand a break from the traditional product-centric approach. But financial institutions stand well-positioned to make that break. Finances play a central role in many facets of consumers’ lives: perhaps all of them. In priming them to embrace a fuller relationship, banks move from business as usual to business as unusual: worthier of their customers, and worth more over time.