From the first drive-through teller windows to mobile money accounts on feature phones in the developing world, innovations in banking have created efficiency for consumers and lowered costs for providers. As banks leverage technology to drive down costs and customers save time by making transactions directly from the comfort of their cars, their living rooms, or from the palms of their hands, it’s easy to conclude that everyone wins when money and transactions are digitised.
However, the most innovative and aware banks recognise that something is lost when a customer no longer comes into the branch. Although it now gains access to a vast set of personal data as customers leave daily digital evidence of priorities and preferences, the bank no longer has a relationship with the customer. Increasing reliance on technology to drive down costs and better serve customers actually drives the customer further and further from real, human relationships with his/her bankers.
Forty years ago when my parents lived in small towns in the midwest United States, the typical American would consult his banker for every major life decision –
I’m thinking of changing jobs; how will that impact my financial life?
I’m considering getting married; how will our joint finances change things?
I want to make a major purchase, a car or a house; what’s the best way to plan for that?
Bankers weighed in as counsellors and gained valuable relational capital with customers as they chatted about daily life or discussed a major decision. Today when a young couple decides to buy their first home, they consult a website such as mint.com to evaluate their finances. They can get pre-approved for a mortgage online and may never consult their primary bank for advice or information. They then make payments online, and never meet anyone from the bank where their mortgage originated. The bank and the customer are two parties in the financial transaction, but it is no longer accurate to call it a relationship.
In this increasingly digital age, banks will need to solve a complex problem: harnessing technology to drive down costs and increase efficiency – things that both consumers and providers want – while at the same time still creating rich and meaningful relationships with customers. For the majority of customers in the world who have long been banked, the digitisation of their financial transactions will result first in a decrease of loyalty to the provider and, ultimately, will lead to the commoditisation of financial services.
For the newly-banked, particularly in emerging markets (EMs), the problem takes a different form. The newly-banked have a particular need for post-account opening support to guide the process. Many millions are adopting formal financial services for the first time in their lives, as technology has enabled access – even in remote areas – to mobile money accounts and mobile banking. This newly-banked population is making the huge leap from paper money to digital money, from informal systems for managing their finances to formal accounts, and into new technologies – all at once. These transitions are psychologically and emotionally complex and the statistics show a pervasive adoption and engagement problem.
Account dormancy rates for the newly-banked range from 60%-90% depending on the market. The reasons for this dormancy are varied and complex, and have not been easily solved by one-way marketing campaigns design to educate and motivate. One mobile money deployment in East Africa had success in creating an outbound call centre to connect with customers directly over the phone to discuss their onboarding questions and concerns, build trust and drive usage. This worked, but only after incurring the incredible cost of hiring, training and retaining good call centre employees.
In partnership with South American bank Bancolombia, the largest commercial bank in Colombia, our company had success reducing dormancy and increasing usage of a basic mobile savings account. Using our proprietary design and technology, we conduct mass-customised, automated, two-way short message service (SMS) conversations with the bank’s new customers.
These conversations build trust and relationship, ease issues related to onboarding or complicated technology and solve customer service questions – all with an automated SMS platform. They are designed by a team leveraging the latest in behavioural economics and the psychology of habit formation, and rely on our own extensive primary research on how people think and feel about their money and their financial service providers.
Our own experience and research makes us sure that the financial institutions that will consistently win in this digital age will be those that manage to leverage technology not just to drive down costs, but also to develop deep, rich, and meaningful relationships with their customers. Through these relationships, customers feel supported in their financial lives, develop deep loyalty to their providers and increase engagement with their valuable financial services.
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