Banking sector, high fives everywhere.
You have truly delivered solutions that customers use and love. Every month in the UK, millions of people log on to mobile banking.
In June 2022, traditional banks had more than 30 million active users and neobanks around 10 million.
People feel comfortable with the services and move seamlessly between apps and banks when managing their day-to-day finances.
In fact, many people have become very sophisticated and adept at finance in ways that simply wouldn’t be possible if their bank wasn’t on their phone.
Take, for example, a very good friend of mine. A single mom with three children who juggles work and family and frankly does an amazing job with both.
I was talking to him about future finances. She had no idea about investments and pensions. It would be easy to consider her a beginner in finance. However, she then started talking about how she handles her day-to-day finances and how they are all handled through her cellphone. Mobile banking makes it easy to balance day-to-day accounts. It gives him control.
She also explained that her children were her priority in life. About how, from the moment they arrived on the scene, she had focused on making sure they had money available to them in their early adult lives to give them a shot tomorrow. She had always prioritized saving for THEIR future at the cost of not thinking about her future finances (insight horn alert).
What was fascinating were her descriptions of how she educated her children about money and finances and how she used mobile banking apps to do so. For example, she had created a NatWest Rooster account for her son and was able to manage it, including permissions.
She recently created a Monzo account, welcoming her to the world of adult banking.
So, rather than being a finance rookie, she’s a day-to-day spending pro and demonstrates a very sophisticated approach to bottom-up management, i.e. setting permissions.
In other research I’ve done at my “kitchen table”, Monzo comes up repeatedly. But either way, I’ve found that Monzo customers have kept their existing “legacy” relationship and use Monzo for day-to-day spending.
In reality, what has been fixed is to make transaction banking services better and more accessible via mobile. The tools to manage are there. If people feel their bank isn’t giving them what they need functionally or experientially, they find one that does. They download an app, open an account and withdraw money from their main account. But that doesn’t mean ending their existing relationship.
So if you’re a bank, how do you capture what’s going on and make sense of it? Take the example of Monzo versus traditional banks. “Active users” is often cited as a critical metric by banks. However, this hides the fact that Monzo sees more activity during the month than traditional banks. A much better metric is “retention,” which is how often a service is used after the app is downloaded. The average phone has 80 apps, of which only nine are used daily and 30 monthly, so the road to app success is littered with unused apps.
Getting customers to use a service more frequently should be an aspiration for most banks. From what I’ve seen in my research, I think Monzo might be the best performer on this metric.
Revolut pops up in my threads sometimes, but people seem to associate Revolut more with forex and crypto. This got me wondering about their retention levels as the crypto winter set in. Are they more associated with cryptography, so not used as frequently?
Going back to my friend’s experience, she has a huge gap in her knowledge and understanding and needs help beyond the day-to-day. How does his bank handle this? It seems not. Again, it’s a theme. Banks are making money here and now, but struggling to support their customers in other ways.
I believe this is the next wave of innovation and invention that will begin to appear in digital banking solutions. I recently saw Personetics present with Santander at the Finovate conference in London. Personetics is used to generate hyper-personalized information for Santander customers through their Money Manager proposal. According to Santander, this resulted in not only engagement, but also NPS.
Bringing hyper-personalized content to customers really seems to work.
So how do you start?
This first step is vital. The company must agree that it wants to get closer to its customers and build this bridge with them. Without making customers a real priority, it’s probably not worth the investment to get it right.
Have a data strategy
Banks will need to look at customer data and ask themselves how they can get the most out of it, perhaps augment internal data with third parties to make it an offer with real vision for that customer.
The new frontier is to match content with bank intent and behavior. Rather than relying on banner ads that no one sees.
Banks should consider introducing content to their digital banking platforms in formats that customers are familiar with, for example on TikTok, Facebook or Instagram. This means proactively producing engaging videos, podcast clips/links, dynamic tools and wizards that guide people through the bank’s product journey in a very smooth, personalized way based on their data.
Test and learn
In all of this, banks will have to set rules, test, learn and ultimately get an accurate picture that shows when customers are most likely to engage with them in a relationship that goes beyond the transaction.
Setting up a test and learn framework allows a bank to test hypotheses based on combinations of content, timing, repetition, etc.
Bankers these days view technology as the most important piece of the digital transformation puzzle, around which everything else hinges.
However, banks need a mindset shift – think 30% technology and 30% operations rather than 90% technology and 10% everything else.
There is so much room for improvement. Banks and fintechs have led the way in creating digital experiences that people can use. The challenge for the industry is how to go beyond what they have and provide platforms beyond transactional.
About the Author
Dave Wallace is a user experience and marketing professional who has spent the past 25 years helping financial services companies design, launch and scale digital customer experiences.
He is a passionate customer advocate and champion and a successful entrepreneur.
Follow him on Twitter at @davejvwallace and connect with him on LinkedIn.