At the same time, consumers’ increasing level of comfort with online financial engagement and advancements like mobile remote deposit capture are eroding the advantage once held by large branch networks. Digital media has leveled the playing field and provided tremendous opportunities for first- movers to step in and exploit the intersection of data and digital media. In fact, technology has advanced to the point where banks lack the power to prevent other players from entering the market. Intuit's Mint, for example, is helping the consumer rationalize their finances across all of their financial service providers. Groupon and Yelp are taking their knowledge of consumer interests, desires and location to connect products and offers to the consumer in a very relevant way. Google and PayPal are both launching mobile wallets intended to bring the financial transaction directly into the intersection of consumer engagement. These firms are creating value for the consumer and in turn diminishing the value of the traditional bank; they could essentially relegate the role of payment transaction products like checking accounts, debit cards and credit cards to that of a commodity processor. In this new age of data and digital, the competitive advantage now resides in the ability to understand, influence and measure individual consumer behavior on a mass scale and the banks are at risk of falling woefully behind.
But why aren’t banks addressing this paradigm shift in marketing? For one, the common structure of bank marketing departments works against progress. In most banks, no one "owns" the engagement with the customer, and marketing groups tend to be product focused, separated into distinct brand and direct marketing units. The direct teams tend not to understand the capabilities of digital media, and the brand teams don’t have the necessary understanding of data and have little desire to rush toward the accountability of data-driven marketing.
The current design of bank marketing is still aligned to the old realities. In the short term, an organizational change must be championed to design new strategies that exploit both universal brand and individual engagement by integrating key insights from both offline and digital media channels. In the long term, however, the challenge to mitigate the co-optation of customer engagement by third parties in the evolving commerce ecosystem is far greater. To ensure that they are meaningful players in the development of these new services, banks need to put greater focus on understanding the customer and the household rather than product and account. Banks should proactively engage with partners in the market to become active participants in this digital revolution. For banks, becoming customer-centric and digitally engaged is no longer an option or an opportunity for financial institutions -- it's a necessity.
Will Bordelon is the vice president and general manager of the Financial Services Group at Merkle.