Say Goodbye to ‘All Work, No Play’

October 2nd, 2015

Many banks today struggle with two concerns related to loyalty, both among customers and employees. Attracting and retaining talented employees, particularly among the younger and tech savvy set, remains difficult for many banks. Commanding customer loyalty is another key issue. What's known as "gamification," properly used, can help financial companies address these problems.

In practice, gamification uses techniques learned from video games to reward specific behaviors. Microsoft Corp.'s Xbox console has long rewarded players for their achievements, whether it’s completing a level in the popular Halo series or constructing a sword on Minecraft. A 2007 study by Electronic Entertainment Design and Research, a video game research firm, found that game titles with a greater number of possible achievements sold more copies. It's a tactic that can work for the banking industry, particularly those desperate to attract millennial employees and customers.

"'Gamification' is ultimately a very powerful methodology for increasing customer engagement and 'stickiness' to that institution," says Michael Yeo, a Singapore-based senior market analyst with IDC Financial Insights.

USAA.pngSan Antonio, Texas-based USAA is one financial services company that seems to have gone all-in. The bank's Savings Coach app rewards members, who earn points and medals for completing challenges, like skipping trips to Starbucks, and transfers the money that would have been spent into a USAA savings account. The standalone app uses voice command technology, and features an animated eagle named Ace, which ties to the company’s logo and military membership. Ace provides bits of financial advice to users. "He's sort of a stern-sounding dude who scans your transactions" to identify ways to save money, says Neff Hudson, vice president, emerging channels at USAA. Members have saved $400,000 so far through the app, which was introduced in July. In the near future, Hudson says members could earn rewards by using other USAA services, such as financial planning, that establish a more sound financial future for the customer.

Perhaps it's no surprise that other examples from the world of video games abound in the fintech sector. New York City-based online investing platform Kapitall makes investing a game, where users can earn points by completing educational quests, participating in tournaments or playing investment-related games. These points can be redeemed for items in Kapitall's online store. LendUp, an online lender based in San Francisco, rewards the good behavior of lessees that make payments on time or take education courses. Points earned by climbing "The LendUp Ladder" translate into a better rate for the borrower.

PaySwag.pngSimilar to LendUp, mobile payment app PaySwag rewards good behavior among a consumer base that may lack good credit and has a greater need for financial education. PaySwag was developed by Reno, Nevada-based Customer Engagement Technologies. "What we’re trying to do is completely change the concept of collections, and build that around a combination of rewards, 'gamification' and…education, to help really minimize defaults and get rid of the negativity around collections," says Max Haynes, the company's CEO. Intended for high-risk borrowers who may struggle to make payments on time, the white label app partners with lenders and other entities involved in collecting debt.  Users can earn points by watching educational videos or making payments on time. Those points translate into small rewards, like a $5 Amazon gift card. The program also allows some flexibility for the borrower to make changes to their payment plan. By using PaySwag, these organizations aim to establish good financial habits that help users avoid delinquencies—meaning PaySwag's partners are paid on time. One auto lender saw serious delinquencies of more than 30 days drop by 50 percent over a one-year period, says Haynes.

USAA works with Badgeville, a Redwood City, California-based "gamification" solution provider. In addition to adding savings games for customers, USAA is in the early stages of using similar methods to better engage and motivate employees.

According to Karen Hsu, Badgeville's vice president of marketing, the purpose is "to change behavior and motivate, really motivate people, and it’s to motivate to perform better year after year." She says video game techniques can help speed up the onboarding process for new employees, and continue training and education efforts. Employees can provide each other with positive encouragement and real-time feedback, and earn points for answering a coworker’s question or sharing educational materials, like an article. "It's hard to physically give everybody the time they need, and being able to give that instant feedback is really important," says Hsu. Employees can also be encouraged to develop skills and expertise in certain areas, or to meet specific criteria that help the institution's efforts to cross-sell products and services.

USAA has five projects in the works using video game methods, and more on the drawing board. "I really think we need to look at this as a set of tactics that can make the products that we offer our members and consumers better," says Hudson. As expectations change to meet the demands of younger generations, "gamification" could provide a strategic advantage to banks creative enough to use it.

emccormick

Emily McCormick is the Director of Research for Bank Director, an information resource for directors and officers of financial companies.You can follow her on Twitter at twitter.com/ehmccormick or get connected on LinkedIn.