Let’s say you’re a bank marketer. Where do you find your new customers? Embracing the new marketing paradigm can look a bit like Alice in Wonderland, where everything is upside down. But that can be a good thing. Executives charged with growing a bank’s business have probably heard enough about fundamental threats to the banking business to send them permanently to the analyst’s couch. Paypal, Google, Apple, Samsung, Square, Starbucks, BitCoin, retailers uniting around MCX, the telcos who own the lines, you name it, all taking a bite out of banks. And from the other direction, there are the regulators unleashing the next round of caps on debit and credit transaction costs.
It’s hard to simply grow out of this. Marketers know only too well that client acquisition is costly, ranging from about $200 to $300 per customer. Furthermore, with the rise of a growing number of new social ecosystems out there, it’s increasingly evident that by sticking to the tried and true, i.e. mailings and the branch, banks are looking for customers in all the wrong places. But by being ready to radically change the way they look at marketing and customer acquisition, the clouds can lift off this picture.
Banks don’t have to go the way of the land line, the compact disc or traditional travel agents, who have almost completely been supplanted by online aggregators such as Travelocity and Expedia. If there’s that sinking feeling that banks might be missing the boat, that obsolescence is setting in, taking the Alice in Wonderland view, the solution could be about looking behind a different door. And while the answer clearly lies in innovation, maybe one of the things we’re missing is that it may not necessarily be about banks innovating, but about banks tapping into the innovation of other networks.
Which brings us to this: these new networks, when allied with financial organizations, can do the acquisition for banks, can open the doors to hitherto untapped ecosystems of customers, and moreover, can provide new types of revenue streams. Considering that there hasn’t been much innovation in banks since the introduction of the ATM in 1969, this can all sound quite heady.
The new players, present company included, are creating new ecosystems of customers who are transacting, searching, sharing, traveling and getting rewarded within those systems. Differentiated models are evolving to realize this type of convergence and also fit into the specifics of geography, demography, economic and social environments. These new businesses are being built on the notion that mobile commerce is about much more than replacing the payment card. It’s about the mobile device being the place you go to search, compare, share, and transact, in the course of living your life. Paying is only a part of it, and when you’re using the ubiquitous mobile device for everything else, that’s when it becomes less convenient to pull out a card.
Banks, by allying themselves to these networks, can have access to brand new customers – for example, what if any new member of the network was auto-enrolled as the bank’s customer? What if there was a system of revenue sharing, so that all the customers of a particular merchant provided a stream of revenue to the bank? What if the ecosystem enabled the bank to provide new products and services (micro-loans and peer-to-peer lending, forex, etc.) to a mass audience? What if there was a way to share infrastructure and services, offering access based on individual requirements, personalizing networks and tailoring packages for particular organizations or sectors?
When the bank is part of this type of ecosystem, not only does its cost of acquisition vaporize, but the members of the network – including, now, the bank – also benefit by sharing revenue generated through the growth of new revenue streams. In effect, the bank could receive a revenue share on all purchases that network customer makes with merchants, even outside the banking system, because the network could potentially share with the bank. That being the case, the bank actually receives a revenue share on all purchases that each newly acquired "network customer" makes outside the banking system, i.e. with merchants. That’s how some of these networks are designed to run.
This is the power of taking micro finance up to the macro level -- small ripples have a derivative effect several inflection points away. Members of a network like this are bound neither by bricks and mortar nor by virtual borders – they gain access to a global audience. Or, when it comes to peer-to-peer payments, banks can now re-intermediate themselves, having been taken out of the loop by players like PayPal. By tapping into these social networks, banks can now get transaction fees for cash-based peer-to-peer transactions. This was not previously possible, and it represents another possible new revenue stream. So when the apple farmer delivers organic cider and apple pie to my door and I send him $20 through my phone, the bank can now get a piece of that transaction.
When the bank leverages the power of outside networks, the opportunities multiply – whether it’s travel rewards or that the loyalty program costs are shifted. Suddenly the bank is looking at an entirely different way of acquiring, engaging and retaining customers. Cost centers become revenue generating centers, and the customary equation wherein a new customer equals big cost outlay, gets turned on its head.
Leveraging the expertise of someone else’s highly targeted sales and marketing platform enables the bank to build their customer base – and this brings the cost of acquisition way down. It also allows those new customers to buy more banking products and services.
You’re probably thinking this all does sound like Alice in Wonderland. But this upside down world is made possible by the collision of digital transactions and social ecosystems, which is going on all around us. These new ecosystems are acquiring new customers in the tens of thousands. By looking at this new category of transaction ecosystems as social networks for customer acquisition, and allying themselves to these businesses, banks can find new ways of staying in the path of the transaction, while taking an active role in a wide array of the new products and services of which members of these ecosystems will avail themselves.
Amy ter Haar serves as the CEO of Flow, Inc., and has previous experience working in IT, financial services, e-commerce, retail and manufacturing.