The ongoing seismic shift toward digital technologies poses significant challenges for retail banks and credit unions. Financial institutions are accustomed to interacting with consumers in brick-and-mortar branch environments. These days, they must adapt to a new generation of consumers who manage their banking relationships in a mobile-first world. To cultivate strong relationships with consumers, retail banking providers must find new ways to deliver a positive experience.
But how do financial institutions deliver superior customer service when engagement is almost purely digital, and they no longer have an opportunity to “meet” the customer in-person?
Based on the evidence from companies that have successfully navigated this challenge, including leading financial institutions, strong relationships between digital brands and their customers are often built on these three pillars:
- Creating an emotional connection
- Delivering a great user experience
- Using data to improve products and services without encroaching on privacy
1. Build an Emotional Connection in Digital Channels
While technology enables extremely efficient transactions, it is essential to take the relationship beyond the purely transactional level to create emotional connections with consumers. Practically speaking, the emotional connections between a financial institution and a customer tend to become embedded in the customer’s memory, and can have a significant influence on buying decisions. In fact, “gut feel” drives 90% of purchasing decisions, according to social psychologists. Rational support for a decision comes after the fact to justify the purchase.
Part of creating that emotional connection is to engage consumers even when they are not in the midst of a transaction. This may be as simple as sending them a “happy birthday” message that does not contain any product or service promotion — just a friendly greeting. Or it may entail providing useful information that is relevant to the customer’s decision-making process, such as financing alternatives, including grants and scholarship information for students entering college.
Maintaining a conversational tone in transactions is also important. For example, when communicating with customers via e-mail, text, or chat, simply asking “How are you today?” can go a long way in establishing a connection.
“To forge emotional connections, look beyond behavioral targeting to the psychographic motivations of consumers.”
A good example of a non-financial business that got the emotional connection right is 1-800-Flowers. The company used psychographic research to boost its Mother’s Day sales. The research revealed that customer segments included those who felt obligated to send flowers, and those who only did so at the last minute. Another category popped out, however — so-called “just-because gifters.” These were people who simply took great pleasure in the act of sending flowers. To connect with these consumer, 1-800-Flowers created a campaign using e-mail, website promotions, digital ads and social media (especially “mommy bloggers”) to encourage them to send flowers to “all the mothers in their life.” The result was an increase in new customers, higher sales from existing customers, and a triple-digit rise in mobile orders.
The lesson for financial institutions: To forge strong emotional connections, look beyond simple demographic or behavioral targeting and understand the psychographic motivations of consumers.
Improve UX by Decreasing Jargon and Complexity
Of course, no amount of friendly conversation will compensate for a poor user experience (UX). It’s essential that the user interface for any digital financial product be simple, intuitive, and easy to navigate. The fewer questions required to get to a solution and the less financial jargon, the better.
Several financial service product sites address the issue of jargon head on, making fun of the complexity to create a connection with the customer. At Citigroup, government-mandated questions, such as ethnicity, were called “Questions we Have to Ask,” so it was clear that this wasn’t part of the process from the bank’s perspective.
Password complexity can undermine the user experience. Until recently, LendKey prohibited the use of common words in passwords, even in combination with numbers or symbols, requiring customers to devise complex passwords. This led to a high level of potential customers “dropping off” at that stage of the application process. Introducing a simplified password protocol — albeit one that was still robust from a security standpoint — helped increase the conversion rate of new customer accounts.
User experience also should take advantage of technology to give customers more personalized choices — recommending products that are likely to meet their needs and allowing them to compare options. In lending, for example, this might entail displaying credit products with a variety of features, such as fixed and variable interest rates, different loan terms, and showing how different products impact interest costs or monthly payments.
3. Use Data, But Use it Responsibly
Many banks, credit unions are now beginning to analyze data to tailor products and services to a customer’s income, credit record, lifestyle, preferences, and past shopping/buying patterns. Citigroup, for example, created a program to cross-sell home equity credit lines to credit card customers when they called in. The bank used not only data about consumers’ debt level and borrowing capacity, but also predictive models to determine their likelihood of being in the market for a home equity line in the future.
However, given the privacy concerns of many consumers, and their sensitivity to the way companies use their personal data, financial institutions must proceed with caution. It is important to employ big data to enhance the customer experience, but in a manner that will not be perceived as a violation of privacy.
A number of student loan refinancing companies allow applicants to get a free quote to find out how much they can save versus their existing loans without impacting their credit score, information that is extremely useful but not overly intrusive. A further data best practice, which reassures potential borrowers, is to not require them to provide Social Security numbers to obtain the risk-based free rate quote.
Creating an emotional connection, delivering a great user experience, and using data to tailor products and services to customers’ needs can help banks and credit unions replicate some of that sense of personalized interaction that was the strength of branch-based interactions even as more and more consumers interact digitally. The combination of convenience, ease of use, and an emotional connection provides the basis for enduring customer relationships.