It was only eight years ago that most of us were making the bi-weekly trek into the bank branch to deposit a check or seek financial advice. Even with product and account information available online, most consumer transactions required some form of assistance from the bank. The technologically savvy knew how to view account balances from their mobile phones and deposit checks at an ATM but the branch was still the center of all transactional activity, allowing large institutions like U.S. Bank and KeyBank to tout themselves as “relationship banks”.
Things have changed a bit since then. Consumers now see their bank’s logo on a screen just as often as they see it on an office building or printed material. Most of my peers have visited a branch fewer than five times this year and are unable to name a single employee at their local branch. This industry-wide transformation in banking bears the following question: what is the extent of a relationship one has with a business that lives through their electronic devices?
Such is the self-service banking environment that the market is coming to embrace. Unlike the highly-personal banking relationships of Generation X consumers, my peer group’s relationship with their bank is largely confined to web and mobile channels. This is a byproduct of consumers being given the reins to transactional functions like bill pay and mobile deposit, reducing processing costs on the bank’s end and saving consumers a trip to the branch.
Banks enjoy the cost reduction aspect to this model as they save money while increasing the number of interactions a customer has with them. But are these self-service sessions the types of interactions that help sustain a customer’s relationship with the bank? By allowing customers to perform a large portion of banking on their own, banks have partially disintermediated themselves, limiting cross-sell opportunities and tainting their role as financial advisors.
While customers prefer to do banking on their own, they expect banks to be up-to-speed with their financial affairs at any given moment. This phenomenon is comparable to a child going off to college. As a parent, you’re expected to provide him with a finite level of support from afar while also maintaining the close relationship you’ve held for 18 years. No longer does he need your daily presence – oh, but he’d love a fresh batch of groceries when you’re in town.
Any neglecting parent can send a check each month – but, the extraordinary parent is the one that adds real value every time they come in contact with their son. That parent might help him locate academic halls during orientation or offer some tips on interviewing during his senior year. Providing the appropriate type and volume of interaction keeps that parent-child relationship strong and makes the child want to keep in-touch with his parents.
This ‘going off to college’ scenario is strikingly similar to what banks are facing in the digital and self-service movement. Their customers are ‘going off to college’ and will likely graduate to the more convenient and exciting world of digital exclusivity. And rather than trying to force their customers back to the branch, the agile bank will embrace change and make it work in their favor. Every interaction must be valuable to consumers, who have grown partial to services that make their lives easier.
Consumers’ relationships with tellers will cease to exist in three short years – just like your child (hopefully) isn’t coming back home to live with you after college. Banks must find ways of keeping consumer relationships alive through value-added engagement in the digital channel. This does not mean honing in on self-service features that any techie in a garage can develop. Instead, banks must capture a holistic view of a customer’s financial life through insights on spending habits and potential borrowing needs.
Data from financial transactions serves as the source of these insights. A bank might collate customer restaurant transactions to determine when, where and how often a particular consumer segment or individual dines out. Armed with this knowledge, banks can pass contextually-relevant offers to consumers, when appropriate. One example would be issuing a digital coupon from Egg Harbor just before an individual grabs brunch on Sundays.
Just as valuable as spending insights to the bank are major life events and milestones that individuals broadcast on social networks, such as hitting the five-year mark in a relationship, moving to a new town for work or preparing for a long vacation in Europe. Banks might use this information to offer financing on engagement rings, showcase housing options in certain neighborhoods or point out how foreign exchange rates are processed ahead of a consumer’s trip abroad. It’s like having a coach at your side throughout all decision making activities – and that coach is none other than your bank.
This is surely not the role that banks are accustomed to playing in the consumer market. But, as primary overseers of consumer financial activity, there is no reason why banks are sitting on the chance to use data and information as vehicles for earning income. More importantly, banks should be using these assets as a means to building a stronger bond with customers that could reopen the doors to cross-sell opportunities and trusted advisory.
Perhaps the college scenario isn’t a carbon copy of the digital revolution in banking – but there are certainly parallels to the challenge that banks face in not having physical exposure to the customer the same way that they used to (you know that this was the perfect analogy when you consider that I went off to college just as the digital era in banking was hitting critical mass). If banks adopt a customer-centric approach in the digital movement, they may be able to genuinely call themselves ‘relationship banks’ in the near future.