Rumors (some of them true) continue regarding the potential that Google, Amazon, Facebook and Apple might move into the financial services space. In fact, talk of this potential is so common that the 4 have been abbreviated to an acronym that strikes fear in to the hearts of many banking executives – GAFA.
In reality, they all are engaged in financial services to varying degrees already. An example is Amazon’s announcement that they will be partnering with Bank of America for small business lending. While making headlines, Amazon Lending has been making small business loans since 2011.
For Amazon, it is all part of a grander plan to expand into services that support business growth, especially in areas where the customer experience is less than optimal. Amazon CEO Jeff Bezos has a very simple concept for his business, which he calls the ‘Amazon Flywheel’.
The tech giant has always been focused on maintaining a strong growth outlook, and the starting point for that growth is delivering an unmatched customer experience. The retailer’s superb customer experience drives increase in traffic through returning customers and new customers acquired through word-of-mouth.
That traffic then allows Amazon to attract more sellers to the site. The more sellers there are, the better and more diverse the selection of goods and services for the end customer. This in turn improves the customer experience, thus setting in motion the flywheel to drive growth.
This growth in turn spreads any fixed costs across a higher number of transactions, which allows Amazon to have a much lower cost structure. That structure delivers lower prices which improves the customer experience. So, if you can find what you’re looking for at the lowest possible price, and have a frictionless customer experience, why would you go anywhere else to do your shopping?
Amazon’s growth has been truly spectacular, becoming the third most valuable company after Apple and Google, with a market value approaching $1 trillion. So how else do they keep their place at the top? Aside from Amazon’s revolutionary yet simple model, there are three practical lessons that today’s retail banks can learn from Bezos’ model.
1. Be Willing to Treat Different Customers Differently
Sales experiences are different for each customer. Amazon invested in “One-Click” – the ability for its customers to store payment and delivery details for reuse, enabling a purchase with a single click of a mouse. One-Click was so revolutionary that Amazon got a patent for this concept, and Apple now pays a royalty to Amazon every time a one-click purchase is made through iTunes.
But Amazon recognized that One-Click wasn’t for everyone. While it’s perfect for one-off product replacement purchases like chargers or headphones, the traditional and more familiar shopping basket may be a better option for large, multiple item purchases (like birthday or Christmas gifts). Having both shopping options readily available allows customers to create the experience which is most convenient and comfortable for them.
Similarly, in the world of consumer banking, there are many different paths to purchase. Some customers want a high-touch experience from their bank. They want the traditional guidance, complete with a needs analysis, product recommendations and guidance through the application process.
Other customers just want a quick and easy ‘checkout’ – they have done their research and know exactly what they need. Banks need to recognize that there are different paths to purchase for banking products and cater to all scenarios. And for those that know what they want already, the path to purchase better be seamless and not require visiting a branch to complete the process. Also, if they need to provide detailed information that can be filled in automatically, expect abandonment of the purchase.
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2. Abandonment Provides Excellent Experience Opportunity
If a consumer starts the shopping and purchase process online or with a mobile device and the purchase is not completed, it doesn’t necessarily mean they no longer wanted what they started shopping for. In fact, this may be the warmest lead your organization can get.
If a shopper put something in their Amazon cart, but does not complete the purchase, Amazon almost immediately generates reminder emails as well as targeted advertisements with the ‘abandoned’ product, which reminds the shopper that what they wanted is still available. They understand that there is still a great ROI on ‘sales in process’.
Applying for financial services takes time (sometimes way too much), and everyone is busy. So, if a customer takes the time to begin an application and goes to the trouble of filling out their name, email address and phone number, recognize that they are interested. If they don’t complete the application, they may have gotten distracted, lost connectivity, experienced a dead battery, etc. – you should still consider them a lead and follow up. This follow-up may be a WOW moment for the potential customer.
As opposed to just sending an email, it is even more powerful to make a personal call. Don’t let the potential customer go to a competitor. Because you never know when the prospect may abandon the purchase process, it is important to collect the name, mobile phone number and email up front. This allows for immediate connection.
Avoka’s proprietary data shows significant success for banks that have followed up on applications that were abandoned or saved and never completed. One bank that followed up on abandoned Personal Loan applications achieved a 40% conversion rate. Life gets in the way – an incomplete application doesn’t necessarily mean that the customer was not interested.
3. Embrace Continuous Experience Improvements
Amazon has software and processes dedicated solely to continuously improving their customer experience through every channel that their platform can be accessed on. These processes are completely separate from any back-office systems used for supply chain management or inventory management, allowing for rapid and agile changes to the customer experience.
The amazon.com site is constantly evolving, and they continually tweak little things like the shape, color, text, icons and fonts on the Add to Cart / Buy Now button. All of these experiments are designed to make it easier for people to complete a transaction. They monitor where and when consumers may abandon a purchase and make improvements to their digital platform to eliminate steps that may cost revenues.
It’s vital that banks take note of this approach and separate their client facing CX such as digital account or loan applications from their core systems (core system changes will never be rapid). Too often, banks build their digital experiences directly on top of core back-office systems. This inadvertently chains the CX to the core and imposes core limitations on the digital experience.
Customer experience experiments require full regression testing all the way through to the core system, which strangles the life out of agility. A dedicated layer in the technology architecture focused on customer experience will enable safe experimentation in the CX without fear of introducing bad data in to core systems.
Considering these three strategies, it’s easy to see the (not so secret) secret of Amazon’s success. By creating an individual and convenient customer experience, banks will put themselves way ahead of competitors. Customers’ lives are complicated enough, so banks must do something radical to make doing business with them easy! After all, it’s the hallmark of Amazon’s success and growth.