Bank Director | Product Offerings Archives

It’s Past Time to Treat Customers as Individuals

Posted on January 5, 2023 at 12:01 am.

As we welcome winter, the industry stands to remember a timeless lesson from nature. A snowflake’s form evolves as it journeys through the air; by molecular composition and physical structure, no two will ever be the same. While our naked eye may see snow as unremarkable white specks, it’s amazing that even two flakes floating side by side will each go through their own experiences to create a shape that is indeed unique.

People are no different. While certain financial or generational patterns certainly emerge, the timing and circumstances create small and vast variations. These can make a difference between a timely, well-received communication from a customer’s bank — or an ill-timed, inappropriate one. Much like snowflakes, which are differentiated based on their evolution through air and time, people’s financial journeys are as unique as each person’s individual’s life — and should be treated as such by their bank.

According to Gallup, 83% of consumers would consider their institution for their next product or service when they are both “satisfied and fully engaged.” That means fully engaging account holders on an individual level is an imperative. Account holder loyalty leads to their retention and fuels revenue growth and profitability.

Current customers make up the most significant foundation for a bank’s profit and growth. Established account holders can appear satisfied, but that does not necessarily mean that their relationship with the bank is robust or growing. In fact, do the banks even know how to assess or measure customer engagement? Meanwhile, customers that have a relationship with a bank that is secondary or worse relative to other institutions also present an excellent opportunity for nurturing and growth.

Seeing and treating either kind of customers as individuals means crafting tailored and personalized communications that pay heed to the timing and moments of customers’ unique financial journeys. Communication like this should translate into tangible relationship growth with existing account holders that is highly impactful and profitable. Happy consumers return to their financial institution for all their banking needs and freely share their experiences with their friends and family.

But not all engagement solutions are created equal, and banks must choose wisely. Consumers are inundated with communication, so engagement is not just about an increased quantity of communication. It’s actually quite the opposite: It’s about constraining communication to what is meaningful. Quality over quantity really matters when it comes to growing engagement. According to a recent survey, 51% of consumers want more help from their financial provider, but 40% of those who have received communication from their provider were unhappy with the generic advice they received.

More than half of financial marketers continue to homogenize their messaging, instead of personalizing the content to match the customer. With a 40% engagement opportunity, figuring out how your bank can engage customers uniquely and meaningfully — at scale — is a huge, wasted opportunity. Banks with a retail focus need to choose technology with platforms that utilize deep data and artificial intelligence-driven insights that help them engage individually and personally to scale. That technology needs to help these institutions uncover customers and invite them to apply or purchase a specific financial service.

Every bank customer is going to be the perfect target for a fee-based service or loan product at some time. When those current account holders are ready, they will either get these loans or services from their existing bank — or they will get them from some other financial institution. What they do depends on how and when they have been communicated with.

Account holders are such valuable assets for banks. Like crystallized snowflakes renowned for their uniqueness, each account holder is also a unique individual who deserves to be recognized and understood as such. When reaching out and communicating with customers, banks that make the effort to use what they know about their customers to ensure that they are genuinely connecting will be rewarded. Determining the right communication, with the right offer at the right time, increases customer engagement, the bank’s value proposition, customer loyalty and a greater wallet share. It provides the best path for them to become their customers’ primary financial institution.

Banks Are Missing Out on America’s Most Financially Active Demographic

Posted on September 22, 2021 at 12:01 am.

Written by Tricia Lesh

Despite continuous setbacks, women are more economically powerful in America than ever before. This is a prime opportunity for banks to capitalize on women’s unique banking demands, both as customers and in terms of employment.

Women were disproportionately impacted by the coronavirus pandemic, causing a further growth in gender financial disparities. Unemployment among women increased compared to men, according to a study by the UN Capital Development Fund; additionally, millions of women left the workforce to prioritize caregiving responsibilities.

The pandemic comes in the midst of what is expected to be the greatest wealth transfer in history that is expected to occur in the next decade. More than $30 trillion of wealth could be passed from baby boomers to their children and heirs. Women’s share of private wealth is expected to grow dramatically.

Additionally, women own and operate two-fifths of small to mid-sized businesses — yet 70% of them still have unserved or underserved credit needs, according to a recent IDB Group study. And more than two-thirds of female entrepreneurs are opening businesses because they see clear business opportunities, not just out of necessity.

The economic tables are turning. Women are now the primary breadwinners in the United States and now earn the lion’s share of household income overall compared to any other banking demographic. Nearly two-thirds of mothers last year were either breadwinners or for their families. More that 40% of women are working mothers whose income makes up at least half of their family’s total income.

For women in America, one size does not fit all. Financial inclusion — which extends far beyond a bank account — leads to economic empowerment. But “bank accounts can be powerful tools in the hands of women who are determined to take more control over their lives,” says Greta Bull, former CEO of the Consultative Group to Assist the Poor. So, let’s start there.

How Banks Can Capitalize
How well do the current banking conditions look, given that women control of more dollars than ever before? As the new default users of financial products and services, women are making spending decisions — lots of them.

It’s not enough for banks to use targeted marketing that features bright-colored content and fancy font types. Those and other stereotypically feminine marketing strategies are never going to work, especially when it comes to banking.

The problem isn’t that women aren’t being exposed to attempts from banks to acquire new customers. From my personal experience navigating the banking industry as a female customer, I can say it’s actually very much the opposite. I am constantly bombarded by the same cookie-cutter attempts to draw my attention to the same untailored banking products or services over and over again.

The problem is that banks aren’t offering anything that meets the needs and preferences of the female demographic. They need to systematically rethink their banking practices and how they address the users of their banking services.

It’s estimated that more than 3 million women are seeking restart opportunities. Several consultancies focused on restarts — such as Après, iRelaunch, and reacHIRE — have launched in the last few years. These companies, and others, help financial institutions and other organizations develop restart channels within their inclusion programs and help identify candidates. Banks are also launching financial products and services tailored to the specific needs of women entrepreneurs, as they increase the quality of their portfolio while having a social impact.

“What [these banks] offer ranges from women-targeted loans for working capital and investments to credit cards, housing loans, programmed savings, checking accounts and insurance products. This offering is further complemented by non-financial services including networking events for women entrepreneurs and training programs,” the IDB Invest wrote in a piece about how banks can attract more female customers. “Given women’s comparatively better savings behavior, demonstrated loyalty to banks and lower credit risk, many banks aspire to be the financial institution of choice for women in the region.”

These banks are on the right track. Women won’t enjoy doing business with any financial institution that considers men their default user. It is time to change the dynamic between women and banks. It is urgent that banks act on this as soon as possible if they desire the greatest return from investing in diversity and inclusion programs. They need to embed actionable plans that create more financial inclusion for women as part of their long-term business strategies.

A ‘Call to Action’ mindset will drive diversity within firms to showcase more tech innovations and increase productivity. The more that women work, the more economies grow. Simply put, women’s economic equality is not only right — it’s good for business.

Reimagining Small Business Checking

Posted on May 25, 2021 at 12:01 am.

Written by Tricia Lesh

If you could start your own bank and design it from the ground up, what would it look like?

And if you’re a business banker with a focus on small business clients, how would your reimagined bank, and its core product offerings, differ from your current ones?

This is the challenge plaguing banks today. For the most part, business banking products have become a commodity — it’s virtually impossible to differentiate your bank’s offerings from the ones being sold by your competitor down the street. For that matter, it may be hard to draw meaningful differences between your various accounts, such as with your retail and commercial offerings. That’s one reason why 27% of business owners rely solely on a personal account. And it’s also why only 38% of small to medium business owners believe that business banking services offer extra benefits compared to their personal account.

One way for banks to break out of this current dilemma may be to shift their focus. This approach is already working for fintech challengers. Instead of focusing solely on transactional products or in-person services, they worked on understanding customer workflows and solving digital pain points. In the process, they have captured the imagination and the pocketbooks of small business owners.

If your bank has prioritized small business customers, or plans to, the best way to make this shift is by focusing on the business owner. Start with this simple question: What do you need from your bank to make meaningful progress with your business?

Their response likely won’t have anything to do with your existing products or services. Instead, they may share a problem or pain point: I need help tracking which customers have paid me and which have not.

There’s no mention of products or account features like fees, balance requirements and e-statements. A response like this reminds us of the quote popularized by Harvard Business School Professor Theodore Levitt: “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole.”

In our case, it goes something like this: Business owners don’t want a list of transactional ranges, fees or digital banking tools. They want to know if their bank can help them better track and accept customer payments, so they can maximize their time running their business.

Increasingly, the process of accepting payments is moving from in person to online. But when small business owners turn to their financial institution for assistance, the bank lacks a simple solution to meet this fundamental need.

This leaves the business owner with four options for moving forward — options that require either minimal involvement or no involvement from a bank.

If a small business decides that it’s not worth dealing with cards, they can simplify their receivables by only accepting cash and checks, closing themselves off to customers who prefer to pay in other ways.
If a small business decides to accept credit cards, it can accommodate more paying customers, but must now track payments across bank statements (for checks) and external payment tools (for credit cards).
If a small business relies on external invoicing or accounting tools, it can invoice and accept digital payments, but must now track payments across multiple platforms and reconcile those funds back to its bank account.
If a small business consolidates all of its financial needs with one provider like a fintech challenger, they can resolve the complexity of dealing with multiple tools and/or platforms but lose out on the expertise and high-touch support of a business banker.

The two middle options involve a bank at the outset but can often lead to reduced deposits over the long term. Over time, fintech challengers may disintermediate banks by offering similar, competing products like integrated deposit accounts. The fourth option, born out of frustration, removes the bank entirely from the relationship.

Clearly, no option listed above is ideal. Nevertheless, it is still possible to help the business owner make progress with accepting digital payments. And, even better, there is an emerging solution for small business owners that may lie with your most straightforward business product: your small business checking account. Watch out for part two to learn more.