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Brian Campbell
Brian Campbell
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How to Win the Digital Banking War

Customers think in terms of solutions, not products.

Since the financial crisis, primary bank relationship “churn” has drastically decreased among financial institutions. This means there are fewer customers looking to change banks, which limits actual growth. Banks are now focusing on attracting new customers from groups that have not been a focal point in the past -- namely, younger, more technologically savvy consumers. To meet the needs of this segment, banks are relying on robust online functionality, particularly mobile technology, to generate awareness.

Today, 90% of US adults have a mobile phone and 58% have a smartphone. Apple recently announced it had sold more than 10 million new iPhone 6 models, a new record, just three days after the launch on September 19. As consumers continue to adopt mobile phones with ever-changing technology at an accelerated growth rate, there is a huge opportunity for banks to capture new customers via their smartphones and tablets.

How banks can find equilibrium between physical interaction and digital account management
In the face of an ever-changing customer landscape, banks are striving to find ways to drive more business from existing customers while generating an ongoing stream of new customers. Banks must continue to improve mobile and online interfaces while redesigning branches to better serve customers.

In the first quarter of 2014, 36% of all search queries on Google were conducted on either a mobile phone or tablet -- a further shift from desktop. Consumers are using online functionality and employing mobile devices to research and investigate options for bank products. However, it is important to encourage new consumers to visit a branch, which drives home the new relationship and branding of the bank through the physical amenities of the brick-and-mortar locations. Having a strong mobile channel without a strong branch channel simply won’t do anymore. Chase has indicated that its mobile apps are used by 41% of customer households, up from 14% four years ago, and this trend is only going to continue upward.

Attracting and retaining young, mobile customers has become a highly competitive environment
Millennials are 77 million strong and make up 24 percent of the US population. Younger customers are becoming the main earners in the US economy with $25K median income for younger millennials (18-27) and $48K for older millennials (28-37).

While attracting new, younger customers is key to growth for most banks, it is also critical to maintain the current relationships of the older, affluent customers to fund the growth of the less profitable (for now) younger relationships that haven’t had the time to mature yet. While millennials may not yet have the assets and deposit balances that their more mature counterparts do, they are typically lower in cost to maintain and serve. They are heavy users of mobile and online applications and have high adoption of bill pay and person-to-person payments, which generally correlates with high “stickiness.”

However, mobile apps have to be reliable, available 24/7, and work as advertised. This generation will not tolerate a lack of functionality and will quickly switch to another institution to serve their high expectations.

While millennials utilize robust technology to facilitate their relationships, many still don’t have the knowledge of how to manage money and are looking to banks to provide guidance. Banks that are making advice and education easily accessible through mobile, social, and online channels build more loyalty with this group, which should lead to less attrition.

Banks are continuing to improve mobile interfaces to better serve customers
Customers use mobile for quick answers and expect mobile apps to support the full functionality of a branch. Lack of consumer patience and need for instant gratification and simplicity means mobile apps will need to deliver more sophisticated tools. Personal financial management modules integrated with banking functionality within mobile banking apps provide customers with “informed” banking at their fingertips -- fast, secure, and empowered.

As more new-to-bank primary relationships are opened via mobile, there is still a need for advice via in-branch interactions. Half of millennials are in the market for financial advice. Banks are solving for this need by creating an opportunity to “schedule an appointment with a banker” via online and mobile apps. This capability has been gaining ground among top national banks and has proven to be the ideal means to facilitate in-person branch appointments for the mobile customer who needs a conversation prior to opening a new account or completing a transaction.

Customers think in terms of solutions and not in terms of products, so banks must position the practical uses of these products that make the customer’s life better through speed, convenience, and security -- all practical concerns of today’s banking customer. Bringing mobile capabilities up to speed is crucial to acquire new-to-bank primary relationships, especially among those of the younger generation, who tend to be most comfortable with online and mobile banking.

— Dawn deClouet, retail bank industry senior strategist at Merkle, co-authored this article.

Brian Campbell has experience across many lines of business with great depth of knowledge in debit and credit card marketing strategy, acquisitions and portfolio direct marketing programs, loyalty product development, and payments strategy. Brian joined Merkle from Chase ... View Full Bio

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