The Branchless Customer Experience
A better customer experience is exactly what online financial services startups are striving to offer in their quests to lure customers away from brick-and-mortar banks. New York City-based Moven launched in February and offers a debit account that users interact with primarily through their mobile devices. Moven doesn't have a banking charter but rather partners with FDIC-insured banks such as The Bancorp Bank (Wilmington, Del.; $3 billion in assets) and provides the front-end account management tool to customers.
The company is targeting Generation Y customers, according to Moven CEO and founder Brett King. Account holders can use their iPhones to tap and pay at the point of sale at any store location that accepts MasterCard, send peer-to-peer payments to friends via Facebook, deposit checks with their phones and track their spending with a financial adviser tool. All these services are designed with a mobile experience in mind, King says. "Great service is no longer measured by a helpful staff. It comes from analyzing what the customer wants and making it simple -- removing barriers," he says. Moven, for example, collects its users' purchasing data and delivers real-time financial advice through a "spending assistant" feature in the Moven app.
With a better-designed customer experience, Moven can reduce the service issues that lead customers to visit branches or contact a call center to begin with, King says. For example, many banks still receive account balance inquiries through their call centers, but Moven designed its smartphone app so that customers' account balances pop up as soon as they log in. And when customers make purchases with their phones, they can get receipts in real time and their purchases are classified according to spending categories that they've set up in their budgets in their Moven accounts. "We take a different design approach," King says. "We're focused on being customer-friendly instead of forcing [interactions] into the branch."
Convenience will be the major factor in deciding where customers deposit their money, King predicts. "When the Web and ATMs came out, everyone was worried about security. But then in the end ease of use always trumps security," he says.
The market for accounts such as Moven's will grow to about 45% of the U.S. population with a mix of providers that includes banks and tech startups, King predicts. Eventually, most banks will offer mostly digital services, and more nonbanks will enter the market, he forecasts. "Once you remove the need for physical branch networks, you greatly lower the cost of entry for nonbanks," he notes.
Don't Count Branches Out Yet
Despite the momentum that nontraditional digital competitors such as Moven have gained, not everyone is convinced that bank branches will disappear. Many customers will still feel some comfort knowing there's a branch location nearby, says Erich Litch, division president for digital channels at financial services technology provider Fiserv. Customers will always prefer to have certain interactions occur face to face with a representative in a branch, he says. "If you experience fraud, and you're dealing with your institution, it's best to sit down at a branch. There are just those situations where you know if you have experienced them, you want to talk with someone face to face," Litch says.
[Requiem For The Bank Branch?]
Digital banking accounts serve the relatively simple needs of younger customers, Litch acknowledges. But as those customers mature and require more complex financial tools to manage their daily lives, they'll find traditional banks -- and their branch networks -- more useful, he contends. Financial institutions specializing in digital accounts eventually will have to offer a wider breadth of capabilities (like the real-time financial advice that Moven offers) through digital channels, he predicts. Once customers start looking for products and services beyond a savings or checking account, the idea of a one-stop-shop bank for all their financial needs might be more appealing, according to Litch.
Moven recognizes that its current services don't compare to the complex portfolio of services mature banks provide, King says, but contends its forward-thinking approach to customer experience will change the way customers view complex financial products. "We're already seeing a pushback against complex products," King declares. "The more complexity [the bank] pins to a mortgage, the less you're buying a home and the more you're negotiating with the bank. Digital platforms like Moven will put pressure on this."
Ultimately, banks that can offer more complex digital products and services and integrate them with basic offerings will have the edge in the digital banking world. Traditional banks are already losing younger customers on the wealth management side, says Chris Psaltos, VP of product management at Scivantage, a provider of online wealth management and brokerage products.
Psaltos' firm aims to help banks integrate their online banking and wealth management offerings to create a seamless online banking experience. He says that banks have been failing to offer such experiences, leading customers between the ages of 25 and 30 to flock to online brokerages that offer better online wealth management tools. But, he believes, banks can win back those customers if they offer better digital products seamlessly integrated with their online savings and banking accounts.
To create that seamless experience, Psaltos advises banks to improve their money-transfer capabilities among accounts and provide a single view of all the customer's accounts once the customer logs in. "Think of it like you're inviting the user into your home and showing them all the rooms," he explains.
In effect, move your one-stop shop -- or as much of it as possible -- from the branch to the digital space. If banks can do that and improve the online customer experience, they can offer a better and wider range of products and services, and they'll be ready to compete in a digital banking world.