The fact that retail banking is under siege from new market entrants and regulation is nothing new. From current account comparison tools to “transaction-first” Millennials and real-time offers, we take a look at three digital trends that are shaping the future of consumer banking.
Comparing current accounts online
The UK government is preparing to launch an online tool to help consumers compare current accounts across banks and make it easier to select the right account for them. By analyzing current account data, past transaction behaviour and reward/loyalty point options, customers can decide if opening an account at, say, their supermarket could be the right choice.
With this kind of comparative information at their fingertips, consumers win, but so do the banks that get it right. Both current and prospective customers want simple current account products with easy digital access, value-added features, personalized rewards and transparent pricing.
Catering to “transaction-first” Millennials
As Glen Fossella noted in his recent American Banker article, there is an emerging segment of banking customers under 35 years of age that is more oriented toward transactions than to deposits – a trend that may prevent banks from establishing traditional relationships. Since low interest rates are the norm for this group, a deposit account may have little value.
With this group, banks need to focus on maximizing the volume of interactions, including transactions, information and advice, and offer loyalty programs with flexible earning and redemption options – even in small increments – for things like bill payments. This segment also represents a source of additional fee-based revenue for “white glove” upgrades to basic transactions, such as immediate access to funds on mobile deposits.
“The bad news is deposit accounts will not engender strong bonds with transaction-based customers,” said Fossella. “The good news is these consumers are fiercely loyal to brands that provide exceptional transactional experiences and associated value-adds. They are also willing to pay a premium for them.”
Yesterday’s “one-size-fits-all” approach to products simply won’t work in the retail banking landscape of tomorrow – and transaction-oriented customers are no exception. Matching product attributes to customer behaviour, and pricing them accordingly, can help capture these previously underserved or unserved segments.
Real-time offers for tailored products
In a recent report from The Banker and SAP on customer engagement, 57 percent of banks said they are able to disseminate real-time information to customers, such as pre-determined alerts for account balances. However, only 21 percent can currently offer tailored products based on specific events, such as a large deposit in a current account.
“People want personalized interactions that are relevant and value added at the right time and moment, but there are differences of view about what is intrusive,” said SAP’s Andy Hirst. “For example, if I found out from social media that you were getting married next year, and I tried to sell you products such as life assurance that you might needs, then is that too personal?”
“Another example is if someone receives an annual bonus, which most individuals switch out of their current account and into their savings account within 48 hours,” noted Hirst. “Approaching the customer with an investment product is potentially value adding – the real-time offer is something we think has enormous potential, but there is a need to manage it without pushing it too far.”
According to Accenture, more than half of customers want their bank to proactively recommend banking products and services, and that such offers would increase their loyalty to the bank. Tailoring products and offers with this level of granularity requires a unique combination of:
- Visibility into the entire customer relationship;
- Actionable insights from analytics;
- Customizable product attributes and pricing plans for specific client needs; and
- Robust offer management capabilities.
Real-time offers for tailored products are not without risk, but customers are becoming increasingly open to it. This trend will continue to gain traction as a potential treasure trove for financial institutions.
To learn more, get started with Product and Pricing Lifecycle Management and browse our past issues of Relationship Banker: Journal of Product and Pricing Lifecycle Management.