The Future of Retail Banking: Customized Offerings & Self-service Product Selection

Banks have a tendency to push what they believe customers want, rather than allowing customers to select their preferences or utilize customer data to offer appropriate products and services.

Let’s begin by saying that it is not only about retail banking products and services, but as importantly, it is about what customers need. Banks should consider, for example, a customer’s particular stage in life and offer value-added banking and non-banking products and services targeted to that stage.

The priorities of an individual will change as they progress in life and so do their financial and non-financial needs. This being said, not all customers look at financial institutions with the same view. For example, some customers may see institutions as a safe place to store their money, while others a place to grow their savings.

Customers typically fall into three categories:

  • Those that prefer banks to recommend a set of products or services that will benefit them.
  • Those that want to choose what they want, when they want it, and have the ability to change their choices whenever there is a need to.
  • Those that will use the bank for basic needs, such as savings or loans.

I believe retail banks should focus on the first two categories as offering the greatest revenue opportunities. Banks can capitalize by mixing banking and non-banking product and service offerings for their customers in an easy, convenient and efficient manner.

What is a product bundle?

Product bundling is a concept that has been applied successfully by various industries for many years. Recently, it has begun to catch interest in the banking world. A bundle is a group of two or more products or services offered to a customer, from which a customer derives better value than if the products were purchased individually.

Product bundling is the concept of tying products together to create an appealing package for customers. These products do not have to belong to the same line of business and can introduce customers to additional businesses and ideas that they otherwise might not have been exposed to.

Bundles can be categorized into simple offerings where convenience or price is the main factor, or integrated bundles where non-price benefits (such as additional product features) provide added value. Other lifestyle-oriented bundles may look at the overarching need of a customer.

What makes product bundling so appealing?

One of the best-known everyday examples comes from the fast food industry: the McDonalds’ value meal. What is a value meal? It is a combination of various items from the McDonalds menu offered at a discounted price. Customers are drawn to value meals due to their cheaper price, as well as the ability to get more for a better price, rather than buying each product individually.

Similarly, banks offer customers a package of products with some sort of incentive for doing so. Value is derived from a discounted price, additional non-price benefits or other rewards. What are some of the different types of bundles available through a Product and Pricing Lifecycle Management solution, such as miRevenue?

Closed bundle: A bundle where all the products or services are mandatory. Based on subscribing to the bundle, a customer will receive added value.

Open bundle: At least one or more products or services is mandatory and by adding optional products or services, the customer receives additional benefits or value. Products and services are chosen from a pre-fabricated list.

Dynamic bundle: A personalized bundle created by the customer or relationship manager. It is comprised of products and services to meet the needs of the customer at a specific point in time and provides additional value based on the customer’s chosen combination.

Going to the next level

It’s time for banks to move towards the next level of customized offerings and services. For banks to differentiate themselves and move forward, they need to allow customers and relationship managers to dynamically bundle products and services based on their preferences. The value should vary based on utilization of each of the product or service within the bundle.

Simply put, “the more you bank with me, the more value we will provide in return”.

By applying these concepts, the revenue uplift could be tremendous. Statistically, the average person has three or four banks with two or more products in each bank. Using bundles, or providing the ability to customize products and services based on preferences, banks can shift customer behaviour, assets and utilization. If a customer was to move his or her assets or products to your bank or if you were to influence the customer to utilize more of your products or services, imagine the revenue uplift and increased customer wallet share.

The digital marketplace: Bundling non-banking products

By introducing non-banking products or services, banks can cater to customer lifestyles and needs. For example, banks have begun to offer insurance on items such as mobile phones, travel insurance, identity theft protection and premier event access. Banks can explore lifestyle bundles with television and Internet services in association with a home loan and home insurance.

Why introduce these value-added services into the mix?

  • Banks can generate additional revenues from existing customers by offering these services.
  • Bank customers can have a single location to purchase multiple products and services, especially if there is additional value in the form of convenience or price.
  • Most importantly, customers will return to continuously update and personalize their non-banking products or services on a regular basis. This forum provides banks with a captive audience to whom they can offer banking products and services.

By allowing customers to customize their experiences through various channels, and by allowing banks to offer suitable products and services based on customer data, banks can increase their wallet share, generate additional revenues, and create customer stickiness and retention.

For example, when a 20-year-old customer logs in to his mobile bank account, banks can offer him a package where he gets two free movie tickets per month if he spends at or above some dollar amount on his credit card every month and subscribes to insurance for his gadgets (phone and tablet), as opposed to offering a life insurance policy or wills and estate planning services. Alternatively, banks can let the customer pick and choose what he or she wants and, based on those choices, offer incentives, discounts or rewards.

Product and Pricing Lifecycle Management

Under a Product and Pricing Lifecycle Management (PPLM) model, suitable product and product bundles can be generated based on customer or other data, across lines of business and business units, allowing product and relationship managers to create dynamic bundles at the right price point and with appropriate customer benefits.

Example retail banking packages and relationship bundling solutions

With PPLM, banks can empower relationship managers to create and offer product and service bundles dynamically and encourage customers to use banking channels to dynamically create products and services bundles based on their needs. This will allow banks to have a balanced push and pull strategy to attract new customers, enhance customer loyalty and increase revenues.

For more information on how Zafin can deliver complete Product and Pricing Lifecycle Management for your banking needs, please contact us at here.

About Zafin

Zafin (@zafin) is a leading financial technology provider that enables banks to form richer, more personalized client relationships. Built from the ground up for financial services, its platform empowers banks to enhance revenue and operational efficiency. Founded in 2002, Zafin sits among North America’s top FinTech companies, and is trusted by retail and corporate units at some of the largest banks worldwide. Headquartered in Toronto with global offices, Zafin has a proven track record with a 100 percent client retention rate as validation.