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Customer relationships and demographics are meaningless to Digital Banks, who just focus upon empowering digital communities

Having taken a gun to omnichannel and a meat cleaver to the banking system, today’s turn is the customer.

No, I’m not going to kill the customer – we love them and delight them! – but I do want to have a go at two other popular misconceptions.

Customer relationships and customer demographics.

On the relationship side, most banks talk about relationship banking.

They want to have a relationship with the customer.

They need to engage the customer in a great customer experience and all that.

It’s all very needy or worthy, dependent upon your view, but again it is misguided.

The key thing here is that I’ve heard this relationship thing for a long time too. 

It started when banks started discussing share of wallet and lifetime financial management. 

The whole idea is that the longer you could keep a customer and cross-sell to them, the more share of wallet you got and hence the more profitable you became.

It takes $10 to acquire a customer versus $1 to keep them.

A ten-year customer is more likely to have 3 or more products than a ten-month customer.

Yada, yada, yada.

In fact what really happened is that most banks in most countries – Germany and some Asian markets excluded – screwed the customer.

It wasn’t a relationship but a stitch-up.

Once we have the customer, we know you’ll be too lazy to leave (who switches accounts?).

Once we have you, we can start to cross-sell stuff without you knowing (packaged accounts, PPI, swaps).

We call this a relationship and yes it is: who’s the daddy?

OK, so not all banks are that bad, but it did become a case of banks feeling that they owned the customer which is why so many got uptight when mobile partnerships became important.

Who owns the customer relationship? was the battle cry.

Answer: no-one owns the customer relationship except the customer.

Y’see, through all these years of discussions of relationships, experience, engagement and delight, the banks – along with many other industries – over-looked one small, but significant, detail.

The customer has gone.

In fact, as banks applied historical technologies – think ATM, call centre and internet – the whole focus was not on customer engagement but cost reduction.

Get rid of high human in-branch costs by getting the schmucks customers to do it themselves.

So customers were happily ejected from branches and human service, to do it for themselves.

Now the banks are concerned about customer defection because they are so comfortable doing it for themselves that they are now using technology to by-pass and avoid dealing with the bank completely.

So please come back.

Please.

Pretty please?

This one will not be solved until banks realise that the technology has put the customer in control and all the customer wants is a fault-free, seamless, intuitive capability to manage their money. 

No, it’s more than that. 

It’s a fault-free, seamless and intuitive way of living and consuming, without having to think about the payment and money transfer.

That’s where the proactive, predictive, proximity based augmented digital banks will win.

It’s not about engagement or relationship, but purely ease and convenience.  

It’s about getting what you want faster and more easily, without thought of the payment or financial process.

Think Uber and Hailo, Starbucks and such.  It’s about getting to the theatre, not getting a taxi; it’s about drinking a super flat white with an extra shot, not paying for a coffee.

Mainline: digital banks are there to enable digital commerce, not get in the way of it.

Then we come to the other little bug-bear: demographics.

Good old ABC1C2DE.

Nice Gen Y, millenials, silver surfers and baby boomers.

Yep, you’re a post-ed professional WASPY with a six figure income and a house in the Hamptons.  YOU WILL DO NICELY!

Oh no.

What’s wrong?

Don’t tell me we got that wrong too?

Aw hell.

Yep, demographics is also up  its own rear-end with a brush as the world has moved on.

It’s no longer as simple as demographics, and hence I get pretty irate when we have discussions about bank marketing and the marketing reps go: ah, this is mainly for our Gen Y customer segment when they talk about apps and such like.

No it’s not.

It’s for your apps user segment.

And this is where the demographic debate goes wrong.

When we talk about digital banks and digital customers, it’s not a demographic.  It’s a psychographic.

It’s a mentality.

Some Gen Y’s have no idea about social media and such, they just want to talk to someone in a branch (yes there are some!).

Equally, some silver surfers have no interest in talking to a human, they just want to use their devices to serve themselves.

In other words technology deployment for digital customers is not defined by demographics but by attitude.

You can be a baby on an iPad or an octogenarian on an Android and, as far as the bank is concerned, you may both be as comfortable using the banks app.

Equally, you may be student on a grant or a millionaire on a plane and neither of you may feel comfortable with using financial services on a mobile.

Mainline: digital banks empower digital communities by being relevant to them, not by targeting a specific demographic segment.

Therefore, banks need to create digital services for segments undefined by age, geography and salary but defined by comfort, confidence and capability with technology.

Digital banks serve digital customers, branch banks service physical customers and some hybrid banks serve the customer that demands everything.

Work out which one you want to be but, just remember, you won’t have a relationship with any of them.

 

 

 

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Great article
    These days the customers are much more sophisticated and demanding, and armed with information and the internet have low tolerance for bad service or a bad deal.
    As for demographics – they seem so sold fashioned in this digital age.
    We should be targeting offers and products based on attitude and behaviour, which will also help to build that elusive relationship!

  • Miguel de Andrade

    “…you won’t have a relationship with any of them.”
    Don’t agree! I hope that ‘digital banks’ do offer a service and are keen to relate to my needs and therefore enter on a relationship otherwise trust will be nil. I think the element of trust

  • Chris,
    You are absolutely right. When it comes to Moven’s model we can’t care two hoots about demographics. It’s about low cost acquisition and great engagement once a customer signs up. Those metrics work across traditional demographic boundaries and the old demographics only apply if you are marketing the traditional way – we aren’t, so they don’t. That’s why our cost of acquisition is 1/50th of traditional checking accounts.
    Brett
    Moven

  • Urs Bolt

    Chris, good stuff, thought provoking.
    Now assuming you’re an existing full service bank. To follow your advice (and I agree with it) this bank would need a new client segment independent of the conventional demographic and financial criteria based segmentation.
    How would you start setting up and targeting a digital community?