I’m sure you know the quip about how a consultant is someone who takes the watch off your wrist and tells you the time. As much as it launches me into defensive mode whenever I hear it, this is sort of what I’m going to do in this post. But hey, at least I’m not charging you for it!
For over a decade now, I’ve been looking under the bonnet of businesses in the financial services arena in all corners of the globe. Mostly to find new and better ways for them to ramp up digital engagement and, ultimately, revenue.
And let me tell you: for retail banks, the exact time now is “stop pushing products and start looking out for customers” o’clock.
Never let a good crisis go to waste – especially if you’re a bank
The World Bank reckons that the global economy is currently facing the sharpest slowdown after a post-recession recovery since 1970. Eurozone countries have hit the doldrums amid skyrocketing prices, aggressive monetary policy moves and weak growth prospects, as per the European Central Bank’s November 2022 Financial Stability Review. The outlook for the United States and China, the world’s other two economic powerhouses, also remains uncertain.
As do households’, which are becoming more and more vulnerable in the face of soaring gas, electricity and grocery bills. In the UK, for example, households’ energy bills went up by 54% in April, eating away both their purchasing power and ability to repay loans. Here’s the thing though: this slump, too, shall pass. What might haunt the banking sector long after, however, is consumers’ sentiment about whether or not their banks had their backs when the going got tough.
We’re not off to a good start either.
Steering back to the UK for a sec, nearly half of British bank customers don’t trust their banks to help them manage their finances in a recession, as pointed out in GFT’s freshly published Banking Disruption Index. In another survey, 64% said they don’t think banks and financial institutions are doing enough to help their customers in an economic downturn. Forty percent also want to see banking products and services that are better tailored to their needs.
Their US counterparts seem to feel the same way. According to Forrester, Millennials across the pond would appreciate personalised financial help, regardless of their income brackets. Examples include alerts if they don’t have enough money in their current accounts to cover an upcoming expense, a financial wellness scoring tool to help them better understand their financial situation or insights on their spending habits.
Banks need to stop obsessing over hitting sales targets and start “obsessing” over customer expectations and how to consistently exceed them. Looking beyond the next best offer and focusing on the next best interaction instead is no quick fix to industry players’ current sustainability and profitability woes. It’s better actually: a potential long-term solution – and a driver of customer satisfaction and market share gains.
Earn customers through trust, not products: easier said than done?
Not necessarily. In the most recent edition of the World Economic Forum’s Chief Economist Outlook, Gulf International Bank’s Rima Bhatia shared some very inspiring reflections on how businesses, banks or otherwise, have to rethink their priorities so they can weather the storm of the year ahead, and whatever comes afterwards. Making the most of this opportunity, the economic adviser says, might be the recession’s silver lining for them.
Investing in delivering the personalised experiences customers crave is where banks should start. The reason why customers crave such experiences is because, thanks to big tech, that’s what they’re used to now. If they don’t see relevant product recommendations, 47% will bounce from your website and go where they know they will get them: Amazon. In fact, 91% are more likely to shop with brands who take the effort to personalise offers for them.
Banks are very much included. So here are some areas where financial institutions should be looking to strengthen their capabilities – now more than ever.
1.Show how to budget when money is tight – and keep doing it
- Actively educate customers on the importance of creating budgets and how to stick to them, recession or not
- Send users alerts and reminders based on their transaction history to help them stay on track and on top of their finances
- Sort expenses into categories to show customers what their money is spent on and how their expenses change each month
- Using affordability analysis and outlier detection, offer buy-now-pay-later schemes to cover the purchase of high-value items
2.Help improve credit scores and untangle debt obligations
- Create tailored offers and repayment plans to consolidate or refinance existing loans from any lender using transaction enrichment
- Show customers where their money comes from and what they could do with it, including income from gig work, pension, benefits and so on
- Monitor loan repayment and income risk to identify customers who are in financial distress well before they default
- Help borrowers manage credit card repayments and improve their credit scores by calculating which instalments should be paid and when
3.Offer financial relief and reduced fees for customers in need
- Analyse customers’ transaction history and let them know if they qualify for lower fees on any service or subscription they have
- Highlight duplicate or unusually high charges and prompt customers to take action, for example, by offering to initiate the dispute process
- Based on peer comparison, make suggestions to customers which subscription they should change or cancel to shave off costs
Would you like to explore how Finshape’s digital banking solutions can help deepen customer relationships and build trust in good times and in bad? Let’s connect – and talk.