Before the dawn of digital banking, customers were restricted to certain banks based on their proximity to physical branches or the location of ATMs. Today, they have thousands of financial institutions and banking services available at their fingertips, which makes it easy for them to select the best bank for different products. Consequently, if banks want to become the primary financial institution (PFI) for their customers, they must identify how they can capture consumers and nurture those relationships to build loyalty. However, becoming a PFI involves much more than persuading customers to open an account, says Zubair Ahmed, executive vice president and general manager of Middle East and Africa at VeriPark.
“It’s about building the emotional connection that makes an institution their trusted first point of contact for everything from savings and loans to longer term financial planning, such as mortgages and investments,” he explains. “To improve customer retention and increase profitability, banks must remain top of mind and become an invaluable daily resource for their customers. They must become an important part of a customers’ lifestyle rather than simply offering an app, website or venue where customers can go just to do their banking.”
This has become even more important in the wake of the Covid-19 pandemic, which has forced many people to reconsider how and where they access financial services.
“According to research into the ‘new normal’ for banking, more consumers than ever before intend to switch their PFI and leave their multi-location mega bank,” says Ahmed. “Before Covid-19, customers’ propensity to move from a mega bank was around 13 per cent but this has increased to 27 per cent, mainly because the pandemic has forced many people into digital banking for the first time. Now, it is no longer seen as just for millennials.”
Although banks may consider Covid-19 and other disruptive market forces as a difficulty or threat, Ahmed believes they should be viewed as a significant opportunity to expand existing service offerings for both current and new customers.
“Customers want fast, convenient digital experiences with self-service tools and more choice,” he says. “Yet, when they want to go deeper into a product, they value human engagement and expert advice – and they don’t want to have to wait around for it. One thing that has remained the same in the pre- and post-pandemic world is that people trust banks, but these institutions now need to exhibit their trustworthiness in both the digital and physical worlds to become PFIs.”
VeriPark’s research shows that when banks embrace the changing landscape, they can deepen their customer relationships, notes Ahmed. “In some cases, we’ve seen customer acquisition rates climb by up to 10 per cent and customer interactions rise by around 250 per cent. This can increase operating income by as much as 30 per cent.”
Ahmed recommends that banks wanting to reap the benefits of becoming their customers’ PFI should develop a single ‘super app’ for onboarding, payments, budgeting and planning, savings and investments, loans, insurance and more. VeriPark’s digital and mobile banking solutions can help with this.
“Digital customers are often seen as less loyal because they have more options, which makes it easier for them to change banks if their needs are not met,” says Ahmed. “Today, customers can manage multiple providers from a single mobile or laptop screen. However, they don’t want to have one app for their credit card, another for lifestyle discounts and a third for budgeting and planning. Instead, they would prefer to have everything they need in one super app.”
Once they are armed with a full understanding of each customer’s personal budgeting, planning and lifestyle goals, banks can then send offers, discounts and coupons at a time that is most relevant to individual consumers to help increase loyalty.
“All these functionalities come from lifestyle thinking,” says Ahmed. “In a nutshell, you have a super app that pulls together experiences, such as splitting restaurant bills with friends, into a single app where the functionality enriches as customers grow – from graduating and getting their first job to getting married or starting a business. It’s all about transforming from a transaction-centric to a customer-centric mindset.”
This article was originally published in the Spring 2021 issue of The Record. To get future issues delivered directly to your inbox, sign up for a free subscription.
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