Ben Thrasher, Strategy Director at Design Bridge and Partners
For a long time, banks had enjoyed loyal customers with minimal effort. Whether it was out of habit or convenience, people rarely bothered switching, ensuring their bank of choice played a central role in all financial experiences.
But now, digitalisation, open banking regulations and tech giants like Apple and Google are reshaping financial behaviours and fracturing these long-standing relationships between banks and customers.
This should raise alarm bells for banks in their fight to recruit and lock in lifelong customers early on.
The introduction of tools like Apple Pay and Google Pay have made payments faster, easier, and more integrated into customers’ daily lives and have in essence removed traditional banks from this equation. Today, transaction experiences often bypass the bank entirely, as people complete payments with a simple tap of their smartphones or smartwatches.
Today’s young customers offer insight into how the future of the bank-to-customer relationship might shape up. Convenience and innovation are expected as standard by this audience and the market is ripe with competition from all angles to own points of experience along the financial journey. In such an environment, the battleground of differentiation is primarily based on the brand experience.
So how can banks leverage their brands to reclaim a central position in young people’s financial journeys?
Reclaim the friction of finances
The proliferation of digital wallets means that people are rarely even looking at their bank cards to complete a transaction, let alone visiting their local branch in order to get money out.
With banks being squeezed out of the moment of transaction, the first (and most pressing) challenge to overcome is redefining their immediate role where they can add the most value.
This is particularly acute amongst younger generations. A Kantar report found that over half of both Gen-Z and Millennials use digital wallets, this drops to 35% of Gen-x and just 18% of Boomers.
It’s unlikely that banks can dislodge the tech companies’ choke hold on the moment of purchase, with their mastery of premium user experience (UX) particularly hard to overcome. Instead, their efforts should be focussed on reintroducing themselves as a central figure to the transaction in a new way.
This means going beyond the practicalities of the transaction. The tech company can claim responsibility for facilitating the ease, but banks need to remind customers that they are the cornerstone of financial transactions, enabling the actual flow of money. Reinjecting their brand into these everyday moments of financial activity is key. This can be achieved by introducing brand experience elements such as reward programs, personalised feedback or even sensory cues to enhance the customer’s experience.
Visa has already rolled out a scheme along these lines which reassures its consumers of a completed transaction with a unique haptic queue. While this may seem gimmicky, 83% of people polled by Visa say that the sound cues positively impacted their perception of the firm’s brand. And the trend is catching on. Mastercard has also introduced haptic logos indicative of the impact that tangible and sensory reinforcement have on the customer’s experience.
The point of transaction represents more than just an opportunity to signify the bank’s critical role in completing a successful exchange though; it also offers a prime opportunity to highlight the bank’s unique value proposition. What does it mean for a consumer to choose one bank over another during a transaction? A bank can differentiate itself by offering features such as round-up savings tools, cash-back rewards, or similar incentives tailored to younger audiences that reinforce its holistic brand value positioning.
Distinguishing through value
The second challenge is uncovering a distinguishing factor between each of the different banking brands. The rise in disruptor banks – offering seamless digital experiences – has meant the traditional banks have upped their game in this sphere now too.
Convenience is no longer something one bank can leverage reliably to boost their offering over a rival, as, by and large, such features are becoming relatively standardised. Transferring money to friends is as easy on the Revolut app as it is on the Natwest app. Similarly, accessing different savings accounts is just as straightforward via Santander and Monzo.
This is a challenge that the major mobile network operators have been battling through too. Most of these operators offer fast internet speed and reliable coverage as standard.
These organisations aren’t just relying on price to differentiate themselves in the crowd. Take EE for example, who have created distinctiveness by becoming a brand renowned for going beyond traditional mobile connectivity but creating an innovative platform that helps to demystify the connected world. Similarly, Giffgaff stands out by fostering a sense of community within the brand itself. It actively involves customers in shaping the brand and its products and creating a collaborative and inclusive identity.
Each banking brand could have its own unique proposition to stand out from the crowd with. One bank might choose to focus its value proposition on financial literacy, offering a compelling package to young adults as they first embark on financial independence. Another might hone in on green banking, developing packages that lean into environmental investments and initiatives. Another alternative could be to develop an identity associated with unlocking the world of investments. All these value propositions are distinct and substantial enough to enhance a brand through, but also offer compelling cases to younger generations.
Ultimately, Banks are at risk of being displaced by the tech giants – when it comes to recruiting lifetime customers, they need to do a better job of articulating their ‘why’ – so they stand out beyond the transaction in the mind of the next generation. But there are ways that banks can unlock a refreshed relationship with its customers that fits in this new digital-first and customer-conscious landscape. By honing in on what the brand stands for and what it wants to be for customers, banks can put forward a compelling argument for its service that appeals to the differing needs of today’s youngest financial customers.
