6 Tactics to Win Customer Engagement

One topic that’s commonly discussed in financial institution boardrooms is how to serve customers and meet their expectations. This topic is especially pertinent now that consumer expectations are at an all-time high.

Bank consumers want delightful, simple customer experiences like the ones they get from companies like Uber Technologies and Airbnb, and they’re more than willing to walk away from experiences that disappoint. As a result, financial institutions are under immense pressure to engage and retain customers and their deposits. Bankers cannot afford to stand idly by and watch a generation of customers increasingly lean on fintechs for all their financial needs.

Fortunately, your financial institution can take action to win the battle for customer engagement — some are already doing so with initial successes. Incumbents like Bank of America Corp. use financial assistants powered by artificial intelligence to assist customers, and fintechs such as Digit offer an auto savings algorithm to help people meet their financial goals. These efforts and features bring the disparate components of a consumer’s financial life together through:

  • An intense focus on the user experience.
  • Highly personalized experiences.
  • “Do it for me” intelligent features.
  • The right communications at the right time.
  • Intuitively-built and highly engaging user interfaces.

How can your bank offer experiences like these? It comes down to equipping your financial institution with the right set of data and tools.

1. Data Acquisition: Data acquisition is the foundation of customer experience.
The best tools are based on accurate and comprehensive data. The key here is that your bank needs to acquire data sourced not only from your institution, but to also allow customers to aggregate their data into your experience. The result is that you and your customers can see a full financial picture.

2. Data Enrichment: Use data science to make sense of unstructured data.
Once your bank has this data, it’s critical that your institution deploys an enrichment strategy. Advanced data science tactics can make sense of unstructured and unrecognizable transaction data, without needing to add data scientists to bank staff. Transforming these small and seemingly unimportant bits of the user experience can have a huge overall effect.

3. Data Intelligence: Create personalized and timely user experiences from the data.
By consistently looking at transactional data, data intelligence tools can identify different patterns and deliver timely, unique observations and actionable insights to help consumers improve their financial wellbeing. These are the small, but highly personalized user experiences that fintechs have become known for.

4. Data Productization: Provide a user interface with advanced pre-built features.
One of the most difficult things for a bank to pull off is data productization. The right tooling and advanced, pre-built features allow banks to unite data and analysis and encapsulate it into intuitively designed digital experiences. This way, consumers can engage naturally with your bank and receive relevant, personalized products and services they need from you. Digital notifications can be part of your strategy, and many customers opt in to receive them; case in point is that 90% of the customers using a Goals-Based Savings application from Envestnet opt into notifications.

5. AI Automation: Utilize AI to enhance self-service capability.
Wouldn’t it be nice if you could ask someone to cancel a check at anytime? Or type in a question and get the answer on the spot? Tools like AI-powered virtual assistants with an automation layer make it simple for consumers to do all this and more, wherever they are. Financial institutions using the Virtual Financial Assistant from Envestnet have automated up to 87% of contact center requests with a finance domain-specific AI.

6. Trusted Partners: Leverage partner to compete.
Competing with fintechs often means, “If you can’t beat ‘em, join ‘em.” But leveraging trusted partners is a tried and true strategy. Your bank’s partner could be a traditional financial institution you’ve pooled assets with to create and embed financial technology deep into your experience. It could be a fintech focused on business-to-business capabilities. Or it could be a partner offering world-class data aggregation as well as analytics and innovative tools to enhance your customer experience.

Fintechs have done a phenomenal job at connecting the disjointed components of consumers’ financial lives through amazing customer experiences. Your financial institution can do the same. By using the right data and tools and partnering up, your bank can deliver the personalized experiences consumers expect, delight and empower them to take control of their finances and future.

5 Ways Banks Can Keep Up With Consumer’s Digital Demands

As technology progresses, more financial institutions will face scrutiny from consumers seeking features powered by advanced digital banking platforms.

Consumers are actively searching for banks that value them by giving them remote, customized experiences. Many banks have seen record growth in digital banking usage in recent years, according to a Deloitte Insights report. While this might create a challenge to many financial institutions, it can also be an opportunity to further build relationships with consumers. Below are five things banks should do to proactively respond to customers’ digital needs in their next stage of growth.

1. Analyze Consumer Data
Gaining real-time insights from consumer data is one way banks can start improving customer experiences. Analyzing data allows banks to see how, when and where consumers are spending their money. This data is a gold mine for creating custom approaches for individuals or recommending products that a consumer could benefit from. This electronic trail of customer information can ultimately lead to more personalized financial strategies, better security features and more accurate insights as to what digital banking features will be needed in the future.

2. Humanize The Digital Experience
Financial Institutions are being given a chance to humanize their digital banking platforms. Banks can build and strengthen relationships with their consumers by customizing their mobile experience — right down to the individual. Listening to feedback and valuing a customer’s experiences can create productive and useful relationships. It is important to take a customer-centric approach, whether in-person or through digital platforms. Financial institutions can use consumer purchase history to create custom reward offerings — like 10% off at their favorite coffee shop or rewards on every purchase — that lay the foundation for a bespoke, valuable experience.

3. Understand Digital Trends
According to Forbes, 95% of executives say they are looking for new ways to engage their customers. Financial institutions that remain complacent and tied to their legacy systems can expect to fall behind their competitors if they do not keep up with advancing digital trends. Consumers increasingly shop around and compare account offerings and benefits; they are choosing customizable, digital solutions. Banks that don’t, or refuse to, keep up with digital trends will lose these relationships. As technology expands, so do the needs of consumers —it is up to banks to keep up with those needs.

4. Utilize Advance Card Features
Technology’s rapid advancement means that the digital features that banks can take advantage of have also advanced. Consumers want features that correspond with their everyday financial management strategies and spending. Virtual cards with state-of-the-art security features are just one of the many digital solutions available to banks. Adjustable settings, like the ability to block and unblock merchants, create family hubs, set spending limits for individuals and family members, are just a few of the ways that banks can differentiate their card programs.

5. Keep Evolving
Many banks use legacy systems that are outdated, expensive and difficult to uproot. This technology strategy holds them back from being on a level playing field with their competitors. However, partnering with fintechs that can integrate with their current systems is one way that banks can keep up with digital trends — without the upfront cost of installing an entirely new system.

According to a FICO study, 70% of U.S. bank customers report that they would be “likely” or “very likely” to open an account at a competing provider if that provider offered services that addressed their unmet needs. Today, consumers do not just prefer digital banking: They expect it. Banks that cannot provide their consumers with customizable digital options are at a disadvantage.

Why Embedded Finance Is the Next Area of Digital Revolution

The four decades after the internet made information readily accessible has led to inventions and innovations like smart devices, mobile apps and the ability to be constantly connected. Today, companies are focusing on harnessing technology to build smoother, richer and deeper customer experiences.

As the information age evolves to the experience age, the next digital revolution will be embedded finance. Embedded finance enables any brand, business or merchant to rapidly, and at a low cost, integrate innovative financial services into new propositions and customer experiences. Embedded finance is driven by consumers’ desire for more convenient and frictionless financial services. Several use cases that underline the demand for embedded financial experiences include:

  • Billing payments as part of the experience. Businesses are already using payment options, like buy now, pay later, to differentiate their offering, increase sales and empower buyers at checkout.
  • Growing popularity of Point-of-Sale financing. The volume of installment-based, flexible payment and instant credit options has increased significantly in the past five years, indicating a desire for instant access to short-term borrowing.
  • Mainstreaming of digital wallets. As more people use their mobile phones to purchase products and services, it makes sense that consumers want to access other financial services seamlessly within apps.

There is potential for embedded finance in almost every sector; in the U.S. alone, embedded finance is expected to see a tenfold revenue increase over the next five years. Financial institutions are in a position to provide branded or white-label products that non-banks can use to “embed” financial services for their customers. Banks must evolve rapidly to take advantage of this new market opportunity.

The front-runners will be institutions that can offer digital real-time payments or instant credit with minimal friction and optimum convenience to customers. But providing this requires new core technologies, cloud capabilities and flexible application programming interfaces, or APIs and other infrastructure to support new business models. Banks will also have to become much more collaborative, working closely with fintechs that may own or intermediate the customer relationship.

Embedded finance allows nonbank businesses to offer their customers additional financial services at the point of decision. Customers can seamlessly pay, redeem, finance or insure their purchase. This can look like buying, financing, and insuring a TV from a store’s shopping app, securing a mortgage through the estate agent’s website as part of a house purchase or obtaining health insurance from a fitness app. This does not mean that every retailer or e-commerce business will become a bank, but it does mean that many more will be equipped with the potential to offer more financial capabilities to customers as a way to compete, differentiate and engage more effectively.

In May 2021, Mambu surveyed 3,000 consumers and found the following:

  • 81% would be interested in purchasing health insurance via an app, and almost half of these would pay a small premium.
  • 60% would prefer to take out an education loan directly from their academic institution rather than a bank.
  • 86% would be interested in purchasing groceries from a cashier-less store.

How these capabilities are delivered and consumed is changing constantly. Consumers want to use intuitive and fast financial services via online and mobile banking channels. Digitalization and cloud services are reinventing back-office functions, automating and streamlining processes and decision-making. At the same time, legislation, open banking and APIs are driving new ecosystems. These changing markets and increased competition make it more difficult for banks to meet evolving customer demands, prevent churn and sustain growth.

We are living in the world of the continuous next. Customers expect financial service providers to anticipate and meet their requirements — sometimes even before they know what they want — and package those services in a highly contextual and personalized way. At the same time, new digital players are setting up camp in the bank space. Tech giants are inching ever closer to the banking market, putting bank relationships and revenue pools are at risk. On an absolute basis, this could cost the industry $3.7 trillion, according to our research.

Incumbent banks need to adopt a foundation oriented toward continuous innovation to keep pace with changing customer preferences. Embracing innovations such as embedded finance is one way that banks can unlock new opportunities and raise new revenue streams.

3 Ways to Drive Radical Efficiency in Business Lending

Community banks find themselves in a high-pressure lending environment, as businesses rebound from the depths of the pandemic and grapple with inflation levels that have not been seen for 40 years.

This economic landscape has created ample opportunity for growth among business lenders, but the rising demand for capital has also invited stiffer competition. In a crowded market, tech-savvy, radically efficient lenders — be they traditional financial institutions or alternative lenders — will outperform their counterparts to win more relationships in an increasingly digitizing industry. Banks can achieve this efficiency by modernizing three important areas of lending: Small Business Administration programs, small credits and self-service lending.

Enhancing SBA Lending
After successfully issuing Paycheck Protection Program loans, many financial institutions are considering offering other types of SBA loans to their business customers. Unfortunately, many balk at the risk associated with issuing government-backed loans and the overhead that goes along with them. But the right technology can create digital guardrails that help banks ensure that loans are documented correctly and that the collected data is accurate — ultimately reducing work by more than 75%.

When looking for tools that drive efficiency in SBA lending, bank executives should prioritize features like guided application experiences that enforce SBA policies, rules engines that recommend offers based on SBA eligibility and platforms that automatically generate execution-ready documents.

Small Credits Efficiencies
Most of the demand for small business loans are for credits under $100,000; more than half of such loans are originated by just five national lenders. The one thing all five of these lenders have in common is the ability to originate business loans online.

Loans that are less than $100,000 are customer acquisition opportunities for banks and can help grow small business portfolios. They’re also a key piece of creating long-term relationships that financial institutions covet. But to compete in this space, community institutions need to combine their strength in local markets with digital tools that deliver a winning experience.

Omnichannel support here is crucial. Providing borrowers with a choice of in person, online or over-the-phone service creates a competitive advantage that alternative lenders can’t replicate with an online-only business model.

A best-in-class customer experience is equally critical. Business customers’ expectations of convenience and service are often shaped by their experiences as consumers. They need a lending experience that is efficient and easy to navigate from beginning to end.

It will be difficult for banks to drive efficiency in small credits without transforming their sales processes. Many lenders began their digital transformations during the pandemic, but there is still significant room for continued innovation. To maximize customer interactions, every relationship manager, retail banker, and call center employee should be able to begin the process of applying for a small business loan. Banks need to ensure their application process is simple enough to enable this service across their organization.

Self-Service Experiences
From credit cards to auto financing to mortgages, a loan or line of credit is usually only a few clicks away for consumers. Business owners who are seeking a new loan or line of credit, however, have fewer options available to them and can likely expect a more arduous process. That’s because business banking products are more complicated to sell and require more interactions between business owners and their lending partners before closing documents can be signed.

This means there are many opportunities for banks to find efficiency within this process; the right technology can even allow institutions to offer self-service business loans.

The appetite for self-service business loans exists: Two years of an expectation-shifting pandemic led many business borrowers to prioritize speed, efficiency and ease of use for all their customer experiences — business banking included. Digitizing the front end for borrowers provides a modern experience that accelerates data gathering and risk review, without requiring an institution to compromise or modify their existing underwriting workflow.

In the crowded market of small business lending, efficiency is an absolute must for success. Many banks have plenty of opportunities to improve their efficiency in the small business lending process using a number of tools available today. Regardless of tech choice, community banks will find their best and greatest return on investment by focusing on gains in SBA lending, small credits and self-service lending.

The Key to Creating Transformational Financial Products, Services

Banks need to offer products that address unmet needs of current and prospective customers to gain a meaningful competitive advantage and retain market share.

But upgrading the “front end” experience is just one piece of the puzzle when it comes to competing in this increasingly crowded financial services landscape. Still, this can often be a nearly impossible step for banks with legacy delivery and core systems; these dated technologies typically don’t enable banks to customize products and services or have the combination of capabilities that they require to meet niche needs of customers.

To truly launch impactful products and services, banks must first fully understand who their customers are and where the gaps lie. This doesn’t just mean creating generic customer segments, such as Generation Z, urban dwellers and mass affluent, among others. It means determining niche groups based on their unmet needs. It’s time to look beyond traditional demographics like age, household income, gender and life cycle to uncover narrow customer behaviors.

Executives can ascertain such insight from mining many data sources, including the bank’s delivery channels, payment systems and core banking systems. However, it’s often necessary for banks to identify and use previously untapped data sources as well, such as payroll, assets or even health insurance. To effectively do so, banks must have the proper infrastructure and technology in place. But facing existing challenges like constraints on resources and tech talent shortages, many financial institutions instead rely on trusted fintech partnerships to collect, organize and analyze the data.

Once banks or their partners analyze the data, they can form niche groups based on what unique user needs are not being met with traditional financial services. This segmentation gives banks the opportunity to provide new value for those customers by offering meaningful, relevant features or products that can fill the gaps. This is a stark contrast to the generic mass mailing offer for a debit card or auto loan that some institutions send out on a regular basis.

For example, some customers value sustainability as one their core principles. These customers might drive hybrid cars, only shop at small businesses or prefer organic produce. Banks can use this insight to create empathetic products and services that support these customers’ lifestyles and beliefs. Maybe the bank decides to provide loans for purchases that directly support clean energy. Such innovative products and services show that the bank understands and shares their customers’ values, building stronger customer relationships.

Or, consider that a bank uncovers a niche group of young adults that tend to take advantage of buy now, pay later (BNPL) services. To meet this group’s specific needs, a bank might develop a feature within its digital banking interface that notifies the user when a new BNPL charge appears on their statement. The bank could provide a more holistic view of the customers’  BNPL purchases and upcoming payments by tracking and categorizing each purchase. Or, perhaps the bank could recommend credit cards to help build the user’s credit instead of using BNPL programs. In these scenarios, the bank is offering products and services that meet this niche group’s specific situation and needs.

In both examples, the new products and services resonated with customers because they demonstrate the institution’s empathetic understanding of the niche group’s unmet needs. These are the types of digital transformations banks need in order to remain competitive in a landscape full of disruptors. Those banks that are carefully evaluating their data, launch products and services designed for niche groups and are tapping trusted, proven consultants and fintech partners for analysis and development when needed will be well positioned to increase wallet share and increase and deepen customer loyalty.

nCino IPO

nCino, a cloud-based technology and lending platform for banks, navigated the challenges of going public while working remotely. The firm’s success story speaks to the critical importance of digital transformations to the survival of any company, especially as the pandemic has changed consumer mindsets about delivery and the way banks approach their business.

nCino CEO Pierre Naudé virtually sat down with Bank Director CEO Al Dominick to share the lessons he took from the IPO experience and maintains the company culture now that it’s public. Banks can also hear about how nCino strengthened its board, and managed communications in the remote environment.

Bold Leadership Required: Innovating From the Outside In


In this video, Thomas Jankovich, a principal at Deloitte Consulting LLP, outlines four aspects of a successful approach to innovation, including bold leaders who can make the decisions required to transform the bank and shepherd the organization through the process. He also explains the key mistake that institutions too often make.

Banks Face the Imperative to Innovate


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I’ve seen enough to believe there are no barriers to innovation in banking. Certainly, there are speed bumps, gate crossings and rumble strips that banks will encounter on the road to innovation, but nothing that flat out prevents them from getting there. Indeed, there are a growing number of banks, including community banks, that have made important achievements that serve as good examples of innovation. (For a great list, see the Best of FinXTech Award Winners announced at Nasdaq this week.) Some innovation projects have been quite ambitious, others more modest, but they all spring from the same source—a recognition that banks need to begin simplifying and speeding up various aspects of their businesses to keep pace with (or at least, not fall too far behind) where the customer is heading.

Where is the pressure to innovate coming from? The popular boogeymen are fintech companies that compete with banks in payments, lending and personal financial management. But companies in that space are simply reacting to a much deeper trend, which is the profound way that technology is changing our lives. Banks must do the same, and a growing number of them seem to realize it.

On April 26, Bank Director hosted the FinXTech Annual Summit at the Nasdaq MarketSite in New York. The event brought together 200-plus bank executives, directors and fintech executives to explore how technology is changing the industry. Underlying themes were innovation, the opportunities for partnership between banks and fintech companies, and how banks can move forward.

I believe that most bankers understand the imperative to innovate around key aspects of their business, whether it’s payments, mobile in all its many permutations, lending, new account onboarding or data. What many of them lack is a roadmap for how to innovate. Actually, a “roadmap” is probably the wrong metaphor to describe what they need because innovation is really a process rather than a destination—something you do rather than a place that you go. So maybe bankers need something like a yoga chant (Om!) to help focus their energy as they stretch to innovate.

There are several issues that need to be dealt with, starting with a vision of what projects to undertake. They can’t change everything at once, so where should they start? Here are a couple of questions they should ask. What are the greatest friction points within their most important businesses? Where are they seeing the greatest competition, and how would digitalization tilt the competitive balance more in their favor? What has the greatest potential to positively impact their profitability?

Innovation costs money, so they will have to budget for it. Based on my conversations with bankers that have begun to automate key parts of their operations, they should expect their innovation projects to cost more and take longer than originally estimated. Innovation can be messy, so perseverance and patience are important. They also have to make sure that their bank’s culture will embrace change. When I say “culture,” I really mean people. Banks must ensure that their employees are open to new ways of doing things, because innovation will change job descriptions, processes and work habits, and many of their staff will feel threatened by this. It’s not enough that executive management teams and boards commit to a large project like a new automated underwriting platform for small business lending and allocate the necessary resources to make that happen. They will also have to sell this change to people in their organization whose buy-in is critical.

For most banks—and particularly community banks with a finite amount of money to spend—innovation isn’t something they can do by themselves, so banks will have to work in partnership with fintech companies that can help achieve their objectives. This is more complicated than it sounds, because banks and fintech companies have very different perspectives when it comes to how they do business. Banking is a highly regulated industry, so they need a partner who knows how to work within a prescriptive environment that has lots of rules. Fintech companies that have experience working with banks understand this and have learned how to manage change in an ecosystem that tends to discourage it.

The innovation imperative is real, and banks must act upon it. Their world is changing faster than they realize, and the longer they wait to embrace that change, the further behind they will fall.

Buying Bank Technology: If Not Now, When?


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FoMO, or the Fear of Missing Out, isn’t just a pop culture buzzword created to describe our obsession with social media. It’s an actual, scientifically proven phenomenon described in scientific literature as “the uneasy and sometimes all-consuming feeling that you’re missing out—that your peers are doing, in the know about, or in possession of more or something better than you.”

That feeling probably sounds very familiar to bankers these days. In the press, in blogs, on podcasts, and at every industry conference, bankers are hearing that the time is now to make big technology changes in their organizations. Everyone seems to be busy innovating, and many bankers are left wondering if they’re the ones being left behind.

In this case, the answer may be “Yes.”

We are facing a set of once-in-a-generation circumstances that will determine the winners and losers in banking for the coming decades. And this separation of the “haves” from the “didn’t act fast enough to be among the haves” is already in motion.

Here are the four big trends that have converged to create the opportunity—or threat—of a lifetime for banks.

1) Tech Spending Neglected
A great deal has been written about how antiquated much of the banking infrastructure has become. Some concerns about legacy systems are overblown, but there is undoubtedly a marked difference between the digital experience customers have with their banks and what they encounter in most other parts of their lives. Banks still handle debits and credits as well as ever, but when compared to the Amazon, Netflix or Gmail experience, the gap is widening. Banks cut all spending following the financial crisis, and have been slow to replace those vacated technology budgets in the face of new regulations and shrinking margins. The result is wide swaths of banking technology that haven’t been upgraded in 10-plus years.

2) Expected “windfalls” from regulatory and tax reform
In our interactions with banks, there has been a sudden change in mood. Bankers have shifted quickly from the glass being half empty to half full, in large part because of the outcome of the November elections. Banks now see the potential for big windfalls, in the form of tax relief and regulatory reform, with a recent Goldman Sachs piece suggesting that industry earnings in 2018 could increase by 28 percent over current estimates if the chips fall just right.

3) Interest rates (and margins) are rising
In addition to those windfalls, banks are also getting a long-awaited earnings boost from rising interest rates. The Federal Reserve has increased overnight rates by 0.75 percent, and long-term rates have followed suit, with 10-year Treasury yields up more than 1 percent from their 2016 lows. Deposits rates have been slow to follow along, resulting in margins that are finally improving after years of painful compression.

4) Game changing technology is plentiful and accessible
Finally, in the decade since most banks have been actively in the market, the number and quality of technology solutions has exploded. Computing power, high quality data sets and cheap storage are contributing to a renaissance in enterprise software, and banks now have multiple possible solutions for just about any conceivable business need. You are no longer beholden to your core provider to sell you everything, as the new generation of tools are better at integrating, easier to deploy and easier to use. On top of all that, most of them are also incredibly cheap for the value they are providing, making them accessible to banks of all sizes and shapes.

When you combine these four factors, you see why there is so much hoopla around innovation and fintech. Many bankers are viewing the next few years as their one big chance to completely revamp the critical pillars of their business. Due to the long gap in meaningful technology investment, they are starting with a blank slate, and because of the recent improvement in profitability trends, they have sufficient budgets to make substantial changes. They are approaching the market and finding plentiful options and are excited by the opportunity.

Some will choose wisely and win big. Others will choose poorly and will not fare as well. But FoMO is real: If you simply stand on the sidelines and do nothing, that is also a choice. Your competitors will leave you behind, and soon your customers might just do the same.

If you’re not willing to make some changes in this environment, when will you be?