All banks should by now have discovered — some the hard way — that customer experience matters. What many financial institutions might not yet recognize is that customer messaging, a narrow subset of total customer experience, could be the most critical component of CX.
Customer messaging refers to the strategies and techniques a company uses to communicate with its customers across channels and touchpoints — ranging from email, SMS and chat; to in-app notifications and device-generated push alerts; to all types of social media. Today, banks face competition from challengers, both banks and digital newcomers, that often differentiate themselves by having a better understanding of what customers are doing in real time and using that knowledge to deliver relevant content in a consistent and useful way.
The challenge is, compared with other aspects of CX, getting customer messaging right demands not only different competencies but also a different mindset on the part of a financial institution.
Institutions in North America that want to raise their game would do well to consider the experiences of banks abroad, particularly in Latin America and Europe. Both regions, for different reasons, have much to teach North American bankers about messaging.
In Europe, financial services customers have been among digital banking and payments’ earliest adopters — in part because paper checks and credit cards have historically been less dominant there. Regulations such as the EU Payment Services Directive 2 have further accelerated fintech adoption by promoting open banking and encouraging competition.
Latin America, meanwhile, is in some ways a more competitive marketplace – which tends to drive innovation. There, the large population of unbanked and underbanked consumers has led to a high degree of digital banking experimentation. This test-and-learn culture has been backed by government initiatives, in places like Brazil, Mexico and Chile, that promote financial inclusion through digital means. World Finance ascribes Chile’s “robust financial inclusion framework” to its “whole-hearted approach to embracing new technology” – including simplified fee-free person-to-person payments and an omnichannel approach that allows customers to interact with their bank in ways that suit them.
So maybe your bank does have something to gain by looking abroad. Here are five mindset changes banking leaders in North America should consider adopting as they prepare to reset their approach to messaging.
1. Meet Customers Where They Are
North American banks can be reactive, creating the impression that they are disengaged from the customer’s reality. The classic case in point is the customer who signs up for a new service only to continue receiving messages urging them to sign up. Instead, banks should take a 360-degree approach, offering customers proactive services and solutions, and leveraging real-time data in ways that serve the customer.
For example, rather than simply deny a debit card purchase due to insufficient funds, a bank might instead invite the customer, via real-time message, to sign up for debit overdraft — a service common in markets that are accustomed to serving the underbanked. Another example: A New Yorker buys a plane ticket to Mexico and his bank texts him advice on getting assistance while traveling or offers a card without foreign-transaction fees.
As an aside, steps taken by Latin American institutions to increase financial inclusion have been working: World Bank data reveals that over the past decade bank accounts have been opened in Latin America at twice the annual pace they have been globally (6% versus 3%).
2. Be a Communications Maximalist
In 2021, in an effort to thwart fraud against consumers, El Salvador introduced a rule forcing banks to notify customers of every financial transaction via direct real-time notifications, far exceeding standards elsewhere. The regulation — extreme from banks’ perspective — proved popular. It seems that bank customers welcome doing business with an institution that can hold itself not just to a higher standard of informativeness but one that communicates a lot more in absolute terms.
The lesson is not that banks should immediately flood customers’ messaging apps and email boxes. But they might consider setting their default messaging frequencies higher and their alert thresholds lower. Onboard new customers with a commitment to notify them about everything immediately, and then allow them to adjust preferences from there.
When a customer presents a card to pay for a business dinner and it’s declined due to a fraud flag, the lack of advance communication has a deeply personal impact, and might harm the customer’s business. Why wasn’t a text sent in real time, when the fraud flag was raised, offering a quick link to clear the issue? (The quick link is critical: Too often the customer is forced to wade through a series of call-center menus before reaching the right representative — someone who can resolve a fraud flag — a task that’s hard to accomplish while the server waits with the check.)
In setting their intention to become communications maximalists, North American banks might also follow the lead of Latin America and Europe by expanding the mix of channels they employ. For example, banks in Latin America are already heavy users of Facebook Messenger and WhatsApp, because those platforms are popular in their markets. Adoption of RCS messaging (the rich media replacement for the SMS protocol) is gaining momentum in the U.S. and Europe, but banks in the U.S. are mostly sticking to SMS and iMessage. Decade-old SMS networks often can’t handle real-time messaging. By contrast, cloud-based systems are far more responsive to real-time cues and also can yield infrastructure and maintenance savings.
3. You Are What You Message
Messaging says a lot about your institution’s values and identity. According to research by Mastercard, innovative Latin American banks are succeeding by ditching “their long-held image as lofty, distant gatekeepers, preferring to be seen as being partners and helpmeets in their customers’ lives.” The best LatAm banks, the Mastercard research says, are using artificial intelligence to create more human digital experiences (in some cases going anti-maximalist, and moving from omnichannel to uni-channel).
The overarching idea is to build customer trust through better communications: Research into the neuropsychology of communication shows that this approach can in fact lead to better outcomes. For example, one study in the Journal of Monetary Economics found that making communications simpler and more relatable to people’s daily lives boosts understanding of key messages by 40%.
Conversely, banks sending customers messages that don’t reflect their values are wasting an opportunity to strengthen their connection. Those that send messages that aren’t relevant risk training their customers to ignore future messages and, as one study put it, leaving their customers exhausted. “Content and products that are personalized according to customer preferences can reduce customer fatigue and time in making choices, thereby decreasing their cognitive load,” according to a study published in the journal Psychology & Marketing.
Questions to ask: What does it mean that most of your customers use your mobile app to perform specific transactions, such as paying bills or transferring money, and then quickly log off? Should your company evolve from a transactional model to a digital journey model? Do your customers see you as selling products rather than meeting their individual needs?
The lesson is that banks sending messages that are on-point and on-brand sell more services and build more loyal relationships. The goal is turning every notification into a positive experience.
4. Don’t Be Afraid
U.S. and Canadian banks tend to be more conservative in deploying new technologies, fearing adverse impacts to core systems and the risk of creating data silos outside the bank’s central data management policies and platforms. But more evolutionary approaches to deployment are possible. Latinia invites clients to adopt middleware solutions that mediate data inputs and outputs, avoiding stranded datasets while ensuring the core stays synched. Latinia also encourages a phased ROI-based approach to deployment, so that each project justifies itself. Crucially, shifting from simply sending messages to providing compelling services to customers in real-time, allows banks to offer revenue-generating services that over time have been proven to add to bank profits. Think tank CGAP cites Brazil’s PIX instant payment system, which enables payments within seconds between banks and new players, such as fintechs. PIX has enabled 50 million people to make their first-ever digital payment and increased the usage of low-value accounts.
5. ROI May Be Larger Than It Appears
Any North American banker charged with overhauling a bank’s messaging approach might be put off by the potential cost. The good news is that banks in Latin America (where regulations are more varied) and in Europe (where they are stricter and have required tech investment by banks), have already upgraded their digital communications – and they’ve found that, in fact, such investment pays for itself.
A study by research and advisory firm Forrester found that banks using Latinia’s Real Time Decisions Engine solution produced a 162% ROI over five years, and that the investment typically paid for itself in six months or less. Forrester also found Latinia’s services led to growth in customers’ signing up for messaging services, further boosting revenues and improving the overall service experience. With many U.S. banks flush with profits as a result of higher interest rates, according to S&P Global Ratings, now may be the right time to rethink and reset.