Consumer behaviors and expectations are shifting in ways that challenge retail banking providers to rethink their strategy and transform the customer experience.
Banks and credit unions that can deliver both a compelling new digital service model and retain traditional values around trust and service will be best placed for the competitive battleground ahead. This is the conclusion from a study fielded by Accenture encompassing nearly 33,000 financial services consumers across 18 markets.
The research identified the following five emerging trends based on three different types of consumer personas — rich with insights about how people want to interact with financial providers in future, and where digital innovation must play its part.
1. Data is the New Currency
Consumers are willing to share their personal data with financial institutions, but they want something in return. Globally, 67% of consumers in the Accenture study said they would give banking providers access to more of their data in return for additional benefits. That number jumps significantly in the United States, where 73% of Americans would swap data for more perks.
“Increased data sharing — both voluntary and involuntary — will create more concerns about the safety of personal and payment data.”
— AT Kearney
Yet at the same time, a significant block of consumers say they don’t want their personal data used to by marketers looking to “optimize” and “personalize” the experience. For example, a separate survey from McKinsey revealed that 61% of Americans don’t want companies to connect their in-store and online information.
According to Ipsos Public Affairs, the vast majority of U.S. adults (81%) feel that consumers are more susceptible to violations of their privacy today than they were five years ago, and more than half believe they are likely to be victims of a data breach in the next 12 months.
So which is it..?
Are consumers really willing to surrender more data? Or are they scared stiff that their data will be abused?
The answer is probably a little bit of both.
“Consumers want guarantees that their data will be safe and secure, and will be used for explicit purposes in ways that they can control,” says Jill Finger Gibson with Digital Clarity Group.
Accenture agree. They say that today’s consumers are savvy about the value of their data, and they expect those providers to whom they entrust it to deliver added benefits, such as a priority service, pricing benefits, or more personalized product, service or non-regulated financial advice.
Just be sure you’re drawing the right conclusions from the datasets you’re working with. If you crunch the numbers incorrectly or build a flawed automation algorithm, your data analytics strategy could backfire. According to another study by McKinsey, a quarter of consumers say they are irritated with faux “personalization,” for instance when marketers try to make online recommendations that miss the mark. Yes, consumers value such recommendations… as long as they are accurate and relevant.
2. Millennials Are Drawn to a GAFA Model
For many consumers — particularly Millennials and Gen Z — Google, Apple, Facebook and Amazon (collectively known as GAFA) are attractive alternatives to traditional financial providers. About 46% of U.S. banking, insurance and wealth management customers surveyed by Accenture said they would switch to the tech giants. That means GAFA could eat up to half of the market currently served by traditional financial institutions.
Two out of every five Millennial respondents in the Accenture study said they would consider banking with Google or Amazon. This is even higher in markets like the United States, where half say they would be willing to make this switch. 36% of Millennials would also consider buying insurance from an online provider like Google or Amazon.
Tech giants like Google, Apple, Facebook and Amazon should terrify the banking industry. While becoming a real “bank” is much harder than simply slapping a shingle with the words “Google Bank” or “Facebook Financial” on a website, the barriers to entry are lower than ever. Just look what neo-bank Simple was able to achieve without ever obtaining a banking license.
The truth is that the Googles and Facebooks of the world don’t need to become banks to impact traditional banking providers. If the dominant players in the digital space decide they want to offer mobile wallets or an integrated payment service (like Apple Pay), then retail banks and credit unions could lose access to one of their most vital data streams: payments insights.
But there’s a paradox: GAFA models present their own thorny issues surrounding data privacy. In a survey by AlixPartners, 81% of respondents said they trusted their primary bank with safeguarding their personal information compared to only 47% for Google and a mere 29% for Facebook.
Alan McIntyre, the senior managing director who heads up Accenture’s banking division says consumers expect their interactions with banking providers to be on par with the service they receive from GAFA companies.
“Banks need to create branches that provide an advanced digital experience combined with convenient locations, while also developing an online digital experience that can compete head on with the tech giants,” McIntyre said in a statement. “The vast majority of today’s consumers view their bank relationships as entirely transactional; in order to gain customer loyalty, banks have to be more assertive in using technology to provide tailored, personalized offerings when, where and how customers want them.”
3. Consumers Warming to Automated Robo Advice
In Accenture’s research, a very high number of respondents said they are open to a purely automated service and support experience, even when making more complex decisions around product choices. Consumers are now open to robo-advice to help determine which bank account to open (71%), which insurance coverage to purchase (74%), and how to plan for retirement (68%).
One quarter of all respondents said they found robo-services appealing because they view computers/artificial intelligence as more impartial and analytical than humans. The study revealed that the prospect of faster (39%) and less expensive services (31%) also increased consumers’ receptivity to robo-services. According to Accenture, Millennials and mass affluent consumers expressed the strongest interest in robo-services.
“Robo-advice has already gained significant traction in the wealth management industry,” says David Edmondson, senior managing director of Accenture’s North America Banking practice. “However, our research shows this trend is also picking up in retail banking. Consumers will continue to dictate how, when and where they want to interact, and banking providers have an opportunity to use intelligent automation and robotics to simplify and improve the customer experience.”
4. People Still Want That Personal Touch
Accenture cautions that it would be a big mistake for financial institutions to commit to a purely digital strategy — one built entirely around AI, robo-advisors, automation and algorithms. Their study found that nearly two-thirds of consumers still want human interaction in financial services, especially to deal with complaints (68%) and advice about complex products such as mortgages (61%).
“While financial institutions may benefit from internal cost reductions by providing customers with a ‘robo’ option, our research found that consumers also expect first-class human interaction,” explains Piercarlo Gera, a senior managing director with Accenture Financial Services.
63% of respondents in Accenture’s study said that data-sharing had better yield a more personalized banking experience. 40% of banking customers say they the ability to ask a real, live human being a direct question is “extremely valuable.” And nearly half of all consumers (48%) want banking providers to play a supporting role in the purchasing process for non-banking products, such as a house or new car or services related to those purchases (i.e. insurance products, assistance with the sale and/or closing process). Consumers indicated that banks could assist with these important decisions by sending helpful information based on consumer location data, price range and other personal preferences.
“Tailored advice related to product selection and asset allocation are key to a successful relationship between customers and their financial providers,” Accenture wrote in their report. “Individuals increasingly expect interactions to be personalized and relevant to their financial needs and objectives.”
5. Banking Consumers Are Channel Omnivores
The majority of consumers in Accenture’s study said they are less and less likely to care about which channel they use to interact with their financial services providers. Their primary concern is that they can get what they need quickly and easily.
“Consumers seem open to new forms of technology and advice, and are seemingly more comfortable interacting with robots for certain types of financial services, their reliance on branches continues,” says Peter Kirk, head of distribution and marketing services at Accenture in the UK. “Banks need to recognize that for many consumers, including the younger generation, the shift toward computer-generated services cannot be at the expense of access to human service at their local bank. The demand for branches seems set to continue.”
Accenture’s Gera says successful financial services firms will therefore need a what he calls a “phygital” strategy — “one that seamlessly integrates technology, branch networks and staff to provide a service that combines physical and digital capabilities and gives consumers a choice.”
Three Emerging Consumer Personas
Three distinct consumer personas emerged within Accenture’s research findings, each with specific characteristics linked to what they value most from their financial providers, what drives their loyalty and how they would like their providers to embrace digital innovation. The varying needs and priorities of these groups provide insight into how financial providers may need to reshape their proposition, both to secure the loyalty of existing customers and to reach out to new consumers.
1. Nomads. These are digitally active consumers, ready for a new delivery model. Nomads are not tied to traditional financial services providers — 78% said they would use a tech firm such as Google or Amazon for banking services. They value digital innovation and embrace new ways of interacting with providers for accessing services and support, and they are comfortable with fully-automated services.
2. Hunters. This group is looking for the best deal on price — 83% say it is essential for banking. Human advisors remain important to them because they don’t feel they can get everything they need without them. They want to use traditional financial services providers — none of them would consider using a GAFA company for banking.
3. Quality Seekers. These consumers want high-quality, responsive service and digital data protection. They want financial services providers who they can trust to protect their personal information — 53% say this keeps them loyal to their banking provider. They demand a high quality and responsive customer service, with 49% also saying this keeps them loyal.
How Financial Marketers Must Respond
Accenture says the shifts in consumer behavior identified in their study send some stark messages to the financial services sector.
Consumers are in control… get used to it. Financial institutions used to control the customer relationship, but now consumers do. Retail financial services is no longer “business-to-consumer,” it has become “consumer-to-business”. Consumers want to engage providers whenever and however they like. Accenture’s study shows consumers increasingly want to help shape future products too. In a world where consumers are in control, providers need to show every day that they are committed and passionate about delivering great service. This will entail developing new propositions, transforming the distribution network and creating models for sustainable growth.
Seek out new opportunities from data. By implementing centralized data warehouses, advanced analytics engines and sophisticated CRM solutions, providers can obtain a 360 degree view of their customers in real time. Access to real-time data is key to promoting more customer interactions, and interactions that add value. More targeted marketing and sales activity will be possible as a result, as new opportunities for cross-selling and upselling emerge.
Provide a suite of personalized products. Tech giants such as Google, Amazon, Facebook and Apple have become masters of tailoring their services to the customer’s individual needs. Financial providers need to learn from this experience, and provide a suite of products and services that are relevant to the customer’s stage of life or immediate financial needs. Accenture says this requires two sets of capabilities: advanced analytics to understand people’s needs in real time, and the ability to build-out an ecosystem of in-house and third-party services that are tailored to consumers’ needs and can be targeted to the right segments at the right time.
Simplify the customer journey across channels. Omnichannel has become the new way of life for today’s consumers. In Accenture’s survey, 57% of consumers said they do not mind which channel they use… as long as they can get what they need. However, only 20% of consumers in the study feel the customer service they receive is of the same quality across all of the communication channels they use with their financial providers. Accenture stresses that delivering a smooth customer journey is now vital to attracting prospective customers and preventing existing customers from switching. Processes that have previously required physical interaction will need to be rethought as they are transitioned online.
Download the Complete Report
You can download the complete findings from Accenture’s report, “Financial Services Global Distribution & Marketing Consumer Study” exploring the transformation of retail financial services by clicking here. For the report, Accenture surveyed over 30,000 respondents in 18 markets including the United States, the UK, Canada, Australia, Ireland, Brazil, Hong Kong, France, Germany and Spain. Respondents covered multiple generations and income levels. The survey was fielded in May and June 2016.