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Urgent Advice: Leverage Payments to Win Digitally-Dependent Customers - Part 2

Deborah Matthews Phillips
Jan 1, 2017


If you recall last week’s blog post, the impact of this digital dependency has been indelible on our industry. For at least half of consumers, technology is a key factor in selecting their financial institution. More than half say mobile banking will change the way they bank in the future. But how will this impact your financial institution moving forward?

First, the bad news: tier-one banks are currently outpacing their smaller competitors in the digital arena. An average of 25% of larger bank digital transactions are conducted on a mobile device, while only 18% of transactions at smaller banks are mobile. “Digital convenience” has helped the top three banks acquire more new checking accounts than the next 17 largest banks combined. Those personalized, contextual features helped large national banks grow to 57% market share, up from 50%, over the past year – primarily at the expense of smaller community banks and credit unions. “Much of this shift in market share has been attributed to the advanced mobile capabilities of the largest financial institutions,” states banking expert Jim Marous.

This paints a cautionary picture for institutions that are not digital leaders or fast followers. While depository account relationships by themselves do not typically generate big margins, they are a vital gateway to establishing customer relationships. As the relationship matures, customers add profitable banking products like loans and interchange-generating cards. The average expected revenue over the life of an account relationship is more than $5,000. Clearly, competitive parity in digital banking and payments capabilities are crucial for community institutions to remain viable and win.

Now for the good news – community financial institutions can (and must!) level the playing field now by adapting to the changing marketplace and positioning their organization for future growth. There are two compelling factors underpinning the call to action.

First, what you have here likely won’t take you where you need to go, because of the transformation taking place in the payments arena. Up-to-date payment capabilities are important, because those everyday transactions are what “tangibalizes” your customer’s experience with your institution. If you own the payment channel, you own the customer relationship. A strong array of payments capabilities should be tightly integrated in your mobile banking app for a complete and seamless experience.

Surprising as it may seem, your customer’s number one financial pain point is completing routine personal banking tasks, such as making deposits and paying bills. Let’s face it – payments are complex, but consumers crave simplicity. Bill payment products and remote deposit solutions have evolved, becoming more intuitive and user friendly since their introduction years ago. It is imperative to offer the latest and greatest to keep your customers actively engaged.

Secondly, the demographic segment most likely to use the mobile channel also has the greatest risk of switching institutions for the best digital experience. Millennials are twice as likely to jump as other demographic groups. A staggering 92% of Millennials make a banking choice based on digital services. Why? Because mobile transactions are a daily habit for a burgeoning percentage of millennials. Millennials play a prominent role in leading adoption and use of consumer technology. As the largest segment of the population, Millennials’ digital dependency provides community financial institutions willing to invest in upgrading their digital offerings an unparalleled opportunity to grow their customer base, and ultimately earn the loyalty of a powerful, expanding force in the marketplace.

There are a few strategies that can help position community banks and credit unions as contenders:

  • Start at the top. Get executive buy-in and support for your vision and execution plan to modernize your institution’s digital capabilities.
  • Choose wisely. Select a technology partner that offers superior, customer-centric, innovative mobile solutions and a well-defined roadmap designed to keep their technology at the forefront of industry/consumer expectations.
  • Design matters. Differentiate your institution by investing in a contemporary mobile banking app that exceeds requirements for intuitive navigation, ease of use and robust features. A PointSource study found, “With all banks offering a relatively similar scope of mobile capabilities, the user experience – its ease, responsiveness and speed – can distinguish [one] from the rest.” The key is reducing friction so utilizing your digital solutions become a habit. Examples run the gamut from biometric authentication to simplifying the process of adding a payee.
  • Don’t settle. It takes more than an attractive solution to succeed. Expect more than a commoditized version – ensure your customers have access to highly desirable features like P2P, e-bill capabilities, cardholder controls and notifications that help consumers avoid missteps.

Once your technology platform is in place, focus on growth strategies. To attract new customers and retain your existing base, it is critical to boost awareness of the availability of your products that deliver the dual benefits of meeting their needs and a great digital experience. (They won’t come simply because you built it – you must remind them again and again!)

  • Create a strong marketing campaign for prospective customers. Spotlight your digital offerings, incorporating social media and word-of-mouth referral tools. Perception is reality – showcase your brand as contemporary and mobile-savvy in your marketing outreach to attract new, digitally dependent customers.
  • Remember the mobile banking novices. Encourage interest in your digital products among existing customers who have yet to try your mobile solutions via cross-marketing techniques. Effective key messages tout convenience, time-savings and the always-available, self-service aspects of mobile channels. Address security concerns for those customers who may hesitate to make the move to mobile. Eighty percent of consumers cited a financial institution’s ability to ensure the safety of their financial information as their greatest concern.
  • Target new customers with engagement campaigns immediately. The right technology partner offers a comprehensive complement of marketing services to support your institution. They can help create campaigns designed to stimulate active engagement in your bill pay, RDC and cardholder customer base, driving up both transaction volumes and satisfaction ratings.

These activities bolster your bottom line, too: Javelin reports successfully engaging new customers via a superior user experience boosts profitability $212 per customer per year. What’s more is that fully engaged financial customers own 2.7 times more accounts than inactive customers. Best of all, payments activity provides your institution with valuable insights and data about your customers. Gaining that 360 degree view of your customers is like diamonds…but that’s another story, for another time.

Deborah.Matthews.Phillips.png   As the Managing Director of Payment Strategy at Jack Henry & Associates, Deborah Phillips, AAP combines her expertise in payments industry issues, compliance, marketplace intelligence, product management and marketing to drive strategy and innovation. Deborah was the visionary behind SmartSight®, an interactive business intelligence tool designed to help financial institutions mitigate risk. This innovative solution was the 2013 recipient of NACHA’s prestigious Kevin O’Brien ACH Quality Award. Deborah has been actively involved in various industry councils, including serving... [Read More].

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