Finding ways to engage customers effectively across multiple channels has become a critical challenge for financial institutions. Often overlooked, SMS marketing is an effective tool for cutting through the noise. With open and response rates much higher than email, SMS offers a direct line to customers, delivering real-time, personalized information.
Because financial marketers have direct access to consumers, intentionality still matters, especially when developing customer relationships. “At First Horizon, we are strategic and purposeful in our client communication to ensure that every interaction adds value,” Jeff Iles, SVP of client experience at First Horizon Bank, tells The Financial Brand.
SMS isn’t just about blasting generic messages; it also needs to be another path to building trust, delivering personalized experiences and creating the kind of positive engagement that translates into lasting customer relationships.
Here’s how banks and financial institutions can start viewing SMS and text message marketing as a key part of an engagement strategy.
The Power of Direct Communication for Building Trust
With our phones rarely out of reach, SMS provides a way to reach consumers instantly. According to the 2024 Consumer Texting Behavior Report from EZ Texting, 84% of consumers check their texts within 15 minutes with another 77% responding in that time frame. The speed and immediacy of text messages make it an ideal channel for time-sensitive communications.
“While SMS is not currently a core component of our engagement strategy, we recognize its potential for delivering critical time-sensitive notifications such as security alerts where immediate attention is paramount,” Iles says. Using SMS strategically for high-priority communications can help leverage the channel for alerts, transaction confirmations, and two-factor authentication, ensuring customers stay informed and secure.
For consumers, SMS has trust-building power, especially in high-stakes moments. “SMS isn’t just a messaging tool; it can be a trust-building mechanism. In banking, trust is everything. Real-time SMS updates — particularly for security alerts or fraud prevention — create a psychological contract with customers,” Tim Peters, chief marketing officer at Enghouse Systems, a global enterprise software solutions firm, tells The Financial Brand. “Every time customers receive a security alert via SMS, they are reminded that their bank is watching out for them, which strengthens loyalty in ways email or other channels cannot achieve.”
In banking, trust and vigilance are key. Personalized communication through text helps demonstrate a bank’s attentiveness to customers, catching potential issues and red flags before they do. By including real-time direct notifications as part of an SMS strategy, banks can use text messaging to build trust and loyalty, reinforcing customer engagement.
Dig deeper into SMS tactics:
- In the Battle Against Bank Fraud, The Very First Login is Critical
- 7 Things to Do (And Avoid) with SMS/Text in Bank Marketing
A Strategic Tool for Targeted Engagement
However, SMS isn’t just about speed. It’s also a way to deliver personalized and relevant content to customers. That’s something more banks need to recognize: “Many in the financial services industry view SMS as just another touchpoint for sending transactional alerts or promotional offers, but they’re underestimating its real power,” Peters says.
Just as banks can drive personalized email communications with data, the same focus on can apply to text messages. Consumers today expect tailored experiences, and personalized messaging helps banks and financial institutions in a direct and impactful way. With access to customer data, banks can send targeted messages that align with individual preferences, making communication feel personal, not transactional.
“At First Horizon, we strive to use data intelligently across all communication channels to ensure our messages are as relevant and personalized as possible,” says Iles. “By leveraging data-driven insights, we can make every SMS interaction meaningful, timely, and valuable to the recipient, ultimately strengthening our relationships with both current and prospective clients.”
This data-driven personalization helps banks deliver messages that resonate with customers more deeply. “Using a text message to make an existing customer aware of a new product or service that they’ve shown interest in can be a great way for a financial services firm to demonstrate that they understand the client’s interests,” says Dan O’Neil, managing director, Head of FinServ Industry Team at Further, an enterprise solution focused on helping businesses use data, cloud, and AI to grow more effectively. By tailoring content to the recipient, banks show they’re listening, building better customer relationships.
When banks use customer data to personalize based on their behavior, it can build more trust and long-term customer retention. “Personalized SMS campaigns based on real-time customer data, like sending proactive notifications based on spending patterns, have shown to increase customer retention by over 30%,” Peters explains. “The irony is that what may feel intrusive in one sector — such as retail — actually increases trust and engagement in banking because it demonstrates vigilance.” Attentive’s SMS Marketing Benchmarks Report found 79% of marketers surveyed use SMS because it drives retention with another 73% saying it drives incremental revenue.
When done right, personalized SMS goes beyond promotions and alerts. It shows customers that the bank understands their unique needs and behaviors, helping create more meaningful and relevant interactions with them. “Our goal is to enhance engagement by aligning with evolving consumer expectations and preferences,” says Iles. Finding the right balance between frequency and relevance is key to maximizing engagement.
“We learned early on that there’s a delicate balance — sending too many texts can fatigue customers, but the key is relevance,” says Peters. “Alerts for things like low balances, large withdrawals, or fraud concerns have extremely high engagement because customers see the value in those interactions.”
Learn more about fraud mitigation:
- What U.S. Banks Must Know About UK’s Bold Plan to Tackle Fraud
- Beyond Plastic: How AI and Fraud Threats Are Reshaping Credit Cards
A Movement Towards Multi-Channel Strategies
SMS is a powerful tool for urgent notifications. However, marketers shouldn’t ignore its potential to integrate with other marketing channels and build broader engagement. “SMS works well as a stand-alone channel or as a complement to other marketing channels like email, chat, social, and more,” says O’Neil. This flexibility allows financial institutions and banks to weave SMS seamlessly into broader customer engagement strategies.
Peters agrees: “We’ve seen that SMS works particularly well when integrated into a broader multi-channel engagement strategy, especially when linked with email and in-app notifications.” He notes that the immediacy of SMS, often leading to higher open rates than email, can act as a trigger, prompting customers to explore more detailed content or complex actions within an app or email.
When integrated effectively, SMS can improve the continuity of customer experience by guiding users through different channels in a way that still feels natural and seamless. It helps ensure customers stay engaged across multiple touchpoints, improving overall engagement and satisfaction. Customer service is another channel where personalized, real-time texts can be very effective.
For example, one of O’Neil’s clients at Further used SMS to provide real-time updates on application statuses, including links to status pages with more information. “By communicating the application status proactively, the company was able to reduce inbound phone calls by nearly 30%,” he says. It streamlined the customer service experience and freed up other resources, allowing for faster application processes and higher close rates.
Integrating SMS with other channels isn’t just about efficiency — it creates a more cohesive and personalized customer journey. Leveraging customer data helps banks use text messages to deliver timely and relevant prompts that guide customers to the information they need or actions to take across different channels and platforms. That helps make interactions feel more seamless.
The Long-Term Value of SMS
When used strategically, SMS marketing offers banks and financial institutions a direct, personalized, and timely way to engage customers. Today, texts can go beyond generic updates by leveraging real-time customer data to deliver messages that strengthen trust, improve customer relationships, and drive long-term engagement.
Liz Froment is a financial services writer based in Boston. She specializes in banking, lending and wealth management with an interest in technology. Her work has appeared in Business Insider and The Motley Fool, among others.