It’s tempting to write off the unconventional banking platforms that are currently making headlines as gimmicks – after all, how can a mobile-only bank like Atom hope to compete at the same level as a large national or international institution?
The key idea is that these innovative new platforms don’t need to compete on scale. Instead, they target specific demographics to develop a following of loyal customers who are willing to spread the word about their bank experience. According to research from McKinsey & Company, “word of mouth is the primary factor behind 20 to 50 percent of all purchasing decisions.” That same report indicates that personal referrals can generate more than double the sales of paid advertising, which means that getting customers excited about your banking platform should always be a priority.
Unconventional banking platforms reflect a growing trend toward personalized banking experiences targeted at particular segments of the population. The days of everyone in a neighbourhood banking at the community branch are long over – today’s savvy consumers expect to do business with companies that align with their values and target their individual needs.
By understanding the new kinds of banking platforms available, you can start to understand your own place in the market and better target the kinds of customers you want to attract. Ignore those critical niche markets to offer a homogenous banking experience and you risk losing customers to competitors who are willing to disrupt traditional models for the sake of offering more personalized service.
Here are four key lessons your financial institution can learn from unconventional banking platforms.
1. Online-only banks teach us that some customers value convenience above all else.
By now, most major financial institutions have phone apps or websites specifically designed to keep busy customers connected to their banks. That’s enough for some consumers – they’re still happy to visit their local branch or ATM for anything more complex than balancing their checkbook. But for a growing segment of the population, those digital platforms need to evolve to include features such as mobile deposit or interactive budgeting tools.
Banks that don’t continue to invest in and grow the digital experience that they create for their customers risk losing those customers to institutions that do. As long as online-only banks can offer the same services and customer care that your branches provide, there will always be a segment of consumers who aren’t interested in being tethered to a physical branch.
2. Relationship banking teaches us that other customers want to see the human side of their bank.
As a counterpoint to that last lesson, there are still plenty of consumers who do want a personal touch when it comes to banking. For many people, personal finance invokes anxiety and uncertainty – address those feelings by embracing the personable, trustworthy style of relationship banking.
Relationship banking can come in many forms, from getting branch staff more involved in their local communities to incorporating coffee shops into your retail locations. These strategies encourage customers to feel personally connected to the individuals and institutions managing their money. Although relationship banking targets a different kind of consumer than online-only banks, research indicates that 58 percent of your customers want to be seen as a person so be sure to deliver on that need.
3. Play areas for children teach us that customers want banking to feel less like a chore.
Local banks have been offering coloring books and quiet waiting room toys for decades, but it’s only recently that branches around the world have started committing to this idea with designated areas for children to play. Not only does this free up parents to learn and engage with your bank’s services, but it removes a lot of the stress that parents feel about taking their children to run errands and provides an outlet for energetic youngsters who might otherwise be disrupting your customers.
There’s also something to be said for making your branches a family destination – other banks have found success with savings accounts for minors and developing early relationships with future consumers can lead to lifelong customer loyalty.
4. Cash-free banks teach us that customers rely on banks for insights and advice, not just financial services.
Similar to online-only banks, cash-free banks take a trend (the proliferation of cash-free customers) and drive it to its extreme. This is particularly prevalent in Sweden where, according to The New York Times, “[a]t more than half of the country’s biggest banks … no cash is kept on hand, nor are cash deposits accepted.” Without the need to keep cash on hand, why invest in physical branches at all?
Even cash-free consumers want to be able to access financial advice and services easily and conveniently. If rebuilding consumer trust is important to your institution, consider cash-free banks a reminder to refocus your attention on the quality of your insight
In all areas of life, consumers want convenience. That can mean different things for different types of customers, but it overwhelmingly means that banks must pay attention to the choices their target customers are making and invest in ways to address the needs that traditional retail banks just aren’t meeting. By learning from some of the unconventional banking platforms and styles that are proliferating right now, you can better understand and commit to your bank’s future.