Lacking glamour or any emotional pull, purchasing financial services is, for most, a dull necessity; the boring part of moving house or taking a holiday.
Research shows that consumers feel a disconnection with the banking products they are being offered. In 2016, Facebook Inc. published a white paper which found that 92% of millennials expressed distrust of banks and that the majority also felt “banks do not understand and thus fail to acknowledge their needs”.
Couple this with the fact that banking isn’t seen as an integral part of our lives and you cannot fail to acknowledge that the industry has a growing problem. An engagement problem.
Consumer lifestyle products remain separate from financial products
Threatened by what are now global initiatives and regulations around Open Banking, the industry is trying to address the growing challenge of marrying relevancy with customer appeal. Most banking incumbents are fast-following in the steps of challenger banks, but we could question whether even the latter are creating true engagement or an emotional connection – as opposed to just doing traditional banking better at lower cost.
Customer journeys are predicated still on the idea that banking is an isolated set of products that stand on their own, rather than designed from the perspective that banking and finance are enablers and facilitators of lifestyle experiences, therefore being de-facto embedded in almost every consumer product out there.
Lifestyle services appeal to consumers because of an aspiration to achieve certain changes in ourselves, like becoming more adventurous, athletic, or socially-conscious. This is why platforms such as Instagram are successful – they allow us to associate ourselves with companies whose brand attributes we seek to emulate. However, because banking products don’t appeal to these lifestyle aspirations, they often hold little interest to consumers; unless, that is, they are repositioned.
We are transitioning from an asset-centered world into an experience-driven world. From a world where traditional work, stable and predictable, is changing rapidly to being more entrepreneurial – with increased risks and volatility but with more flexibility and the potential for higher returns. Banks are being left behind, without a relevant brand and without the services to mould around these changing lifestyles.
In this new world, lifestyle user journeys must be created, and the people who are best placed to do so are not necessarily bankers – they sit too close to their banking products – but the actual consumers since they are now connected in ubiquitous networks and both customers and co-creators. The strategic imperative for banks is, therefore, to create the right ecosystems that enable the discovery of the right, end-to-end customer-journeys, bundling various banking and non-banking experiences as and when required.
Appealing to consumer lifestyle needs
Despite finance being embedded in virtually every product in this world – since every experience is a function of payments, cost-benefit-risk analysis, planning etc.-, when it comes to customer engagement and intimacy, it is not the banks that are capturing the user attention. This is because traditional banking is independent and generic, built with products designed on high level segments such as geography, age buckets, or retail vs. SME. This isn’t enough. Consumers need to feel that their products are tailored to them individually, making them feel understood (and creating an affinity with the brand). But more importantly, banks need to help their customers to get access to the complementary services that help them to prosper through change.
Take Trezeo, for example. Their platform supports self-employed workers (such as freelancers, gig-platforms workers, consultants) with volatile incomes to pay themselves a steady paycheck and have recourse to credit and other financial solutions if and when they need them. It allows this audience to naturally manage their complex financial affairs from a personal perspective such as setting aside money for contingencies, holidays, retirement etc. as well as from a business perspective i.e. tax returns, as well as manage their operating expenses e.g. repairs. Other examples include solutions which support landlords, or companies operating within specific industries such as Stoke Inventory Partners who offer lending solutions for CBD-related businesses.
But lifestyle solutions don’t have to be focused just on financial management or needs. Look at group holidays. ABTA Holiday Habits Report 2017 reported that as many as 26% of people go on holiday with friends or extended family. Solutions such as GroupMe which includes their Collect Money feature, are great for gathering funding from a group for accommodation costs, or requesting compensation after the fact. However, functions like this can be cross-sold or embedded through other holiday related products, perhaps when booking flights or training plans to get fit for a holiday
Looking at the banking landscape through this lens, there is growing evidence what Dharmesh Mistry, Chief Digital Officer at Temenos, calls bifurcation – between the mass market and the increasingly specialized experience providers, where banking is embedded. For banks that are in the gray space, successfully creating and offering products which resonate with consumers from a lifestyle perspective is a possibility: it just means taking a different approach to product and marketing, one that embraces design-thinking and radically improves user profiling. And gamification holds the key.
Bridging the gap to support the full lifestyle journey
The principle of gamification is to apply fundamental game-design principles and mechanics to engage and motivate customers to perform specified activities or change the behavior of a target group. It offers a fresh approach to banking and its utilitarian approach because it appeals to natural human impulses and desires. It can be used to attract target consumers through ‘light touch’ marketing with through simplicity, fun, entertainment, social interaction, reward, competition or even subconscious education. Reaping all these benefits, customers become emotionally attached and, consequently, get engaged.
The obvious pitfall here is that most bankers therefore perceive that the purpose of gamification is to simply enable better cross-sell and up-sell opportunities, but in reality, the real value of game-design principles is understanding and profiling the user, in order to setup the rules of engagement and ultimately provide value relative to each individual profiling.
A game-design approach to banking is about understanding the user and creating an engagement based on profile motivators. This is a key step in transitioning from generic banking towards specialized, niched, end-to-end lifestyle journeys underpinned by finance and banking.
The Moroku platform can be used for an infinite number of potential use cases, but one where we have enjoyed repeat success is in getting kids to save. Parents set the children chores around the house for which they receive pocket money. It’s fun, but along the away it helps kids to understand how money works and save towards goals.
In addition, through this ‘non-typically’ bank related interaction, it provides a positive reinforcement of a banks brand. Banks historically have made money through customer inertia – but this is a dying strategy in the paradigm shift. The value moves to more frequent and tailored user engagement, which means stronger retention and greater up-sales opportunities. But ultimately, when combined with offering products that appeal on an individual level, it has the opportunity to bring a bank and its products into the realms of the lifestyle experiences. In doing so, banks wouldn’t just overcome inertia, but probably their platform rivals too.