3 ways to deepen engagement and improve customer experience
Image credit: Sensibill
Deeper, contextual data is more critical than ever as banks and credit unions aim to better serve their customers and members in 2021 and beyond.
Providing excellent support to customers and members has always been the priority, but this year required banks and credit unions to step up like never before – and in new ways. The fallout from the pandemic caused severe and unexpected financial stress and uncertainty, as people across the globe searched for ways to make their money go further.
With stay at home mandates and the need for physical isolation complicating matters, institutions had to quickly determine how to provide the necessary support and tools to their communities digitally, a challenge many weren’t prepared for.
Stark gaps in financial services were also exposed this year; there is a critical need for better and more targeted service for the unbanked and underbanked, and there is a greater threat than ever before for relationships to be disinter-mediated by non-bank competitors, especially among younger generations.
If financial institutions head into 2021 knowing one thing, it’s that there’s much work to be done to proactively support their customers and their financial wellbeing. Those that prioritize personalization, helping customers better manage everyday spend, and engaging with new market segments will be best positioned to succeed.
It’s time to (finally) get personalization right
Financial institutions have recently been criticized for being more of a utility rather than providing true service to their customers, something neobanks are trying to leverage to gain the upper hand. These alternative competitors have tried to become much more service-oriented, partnering with fintechs to advance paychecks and offer microloans daily – all at a lower interest rate. Sometimes this is all the motivation needed for someone to move their banking relationship away from their traditional bank or credit union.
It’s time for banks and credit unions to fill this gap and boost the level of service they can deliver by offering products and services that are uniquely tailored to their customers’ financial needs. To accomplish this, more banks and credit unions will start looking to alternate, contextual data points – those that go beyond the surface-level data that’s traditionally been relied upon – to really know and understand their customers.
For example, SKU-level data found on receipts can reveal behaviors, life stages, brand affinities, and timely financial needs, creating opportunities to quickly present personalized recommendations and advice based on individuals’ spending patterns and behaviors via digital channels.
Managing everyday spend
The pandemic has proven that while personal finance management (PFM) tools can be beneficial, most people don’t plan in years but rather in weeks and even days, with the overwhelming majority living paycheck to paycheck. Planning for retirement is a luxury, not reality, for most. Consumers and businesses alike need tools and capabilities to better plan and manage their money, starting with keeping track of everyday expenses.
Most institutions today fail to proactively offer advice around how to make customers’ money go further, but they can and should. Insights gleaned from alternate, contextual data points can be used to make meaningful recommendations, such as around managing subscriptions, transaction matching, and how to prepare for the 2021 tax season. These are real, actionable tips that can help consumers’ and businesses’ hard-earned money go further – a critical imperative in the current environment.
Capturing new market segments
Now more than ever, there’s a great need to help the unbanked and underserved, especially when it comes to extending fair and accessible credit. Traditional credit models contain inherent biases toward certain groups and can even encourage bad financial behavior. It’s time to look beyond traditional criteria and evaluate alternative data points to determine creditworthiness.
Information including bill payment history as well as contextual, SKU-level data like rent and utility payments, cell phone bills, and shopping history are much more reliable and fair indicators of an individual’s creditworthiness. In the next phase of recovery, institutions must provide more assistance to those who are in trouble, leveraging alternative data, and partnering with fintechs to offer fairness and accessibility for all.
Younger generations also remain an area of opportunity. Most institutions have yet to figure out how to effectively engage with Millennials, even though a good portion of this generation has already reached financial maturity. This begs the question: what about the next generation of customers? Gen Z and younger have grown up around GAFA; it’s nothing for them to trust Amazon’s recommendations or provide Apple with their sensitive information. It’s critical to find ways to engage with this segment, and soon. Institutions should offer more beyond traditional banking, becoming a place where young customers can learn about financial management, the value of savings and habits in a way that’s engaging and interactive.
2021 will be about winning the hearts and minds of people by offering financial support and management. If they fail to do so now, traditional institutions might find themselves in very real trouble 10, even five years down the line.
While financial institutions have stepped up significantly to help small businesses during this time, there’s still more work to be done. Economic relief efforts such as the Coronavirus Aid, Relief and Economic Security (CARES) Act, Paycheck Protection Program (PPP), Economic Disaster Loan (EIDL) will change the way businesses file in 2021.
Tax season was already painful for small businesses but with so many additional variations of the applications for Covid-19-related relief programs, it will be even more of a burden for them to document and ensure they’re adhering to all requirements.
Banks and credit unions can help businesses easily track and manage their expenses with tools like digital receipts, allowing them to decipher between personal and business expenses, without the hassle and time of digging through and organizing paper receipts. Every little bit helps during what will be an incredibly complicated tax season.
2021 can be the year your customers are fully engaged with your FI’s solutions
2021 will be all about financial wellness, and how financial institutions can help their customers work toward this goal. Financial wellness should be for everyone, but the reality is that it’s not – at least not right now. Banks and credit must step up, offering tools for their consumers and businesses – of all ages and backgrounds – to proactively plan and manage finances as well as share financial insights based on their data. The new year will challenge institutions to become more than a utility but a true, meaningful service, holding themselves accountable for the value proposition they were built upon.