I was asked this question today and, after thinking about it a while, I think banks are moving towards being lifestyle choices rather than payments processors.
Historically, we chose a bank because it was physically local to our home. It didn’t matter what they charged or how they priced, as all banks are the same. We didn’t care much about their branding, and purely wanted to see if we liked the people in-store.
Over the years, as banks retrenched and sent us packing our bags out of the branches to do things for ourselves, they have become even less differentiated. Now, most folks are picking their banks for the same reason as in its physically local (over 60% of new account openers still make the decision based on the branch being near) but, once opened, they never want to go there again.
Soon, as the dynamics of the role of the branch shift and becomes of less import, customers will stop opening accounts due to the proximity of the branch and will move towards more lifestyle choices. How does the bank reflect my personality, needs and goals? Do they share common ethics and values with me? Do they fit my lifestyle and outlook?
These questions rarely impact today – after all, when the headlines about Barclays fixing LIBOR hit, everyone said they would close their accounts but the proportion of customers who did was miniscule – but they will become more important tomorrow, particularly as we see more confident and competent customers, digitally native, immersing themselves online.
This is when banks will see a new relationship. One that is screen-to-screen rather than face-to-face. A screen-to-screen relationship is very different and will see customers demanding a contextual relationship. A contextual relationship relates to you through your devices, chips and lifestyle, not just through data analytics and push marketing. A contextual relationship will use the internet of things to sense when to make you that credit or loan offer, but extends further and deeper than this. A contextual relationship will be customer intimate by using deep data analytics to track our digital footprints, but will only relate to us on a permissions basis and will focus upon the context of the relationships, not just the permission.
It would be easy to push a credit offer at me ten times a day, but the contextual relationship will know just when that offer is good to be made. A contextual relationship will sense my needs to recognise when is a good time to talk. A contextual relationship will deep drill down kind of things I buy, connect me with people who buy like me and will support me in purchasing more of the things I buy. But the real lifestyle choice bank goes one step deeper than all of this, and connects to me with relevance to my lifestyle.
These banks will be truly differentiated as they will recognise that I want more than just to be marketed to in order to increase my share of wallet. These banks will recognise that the new bank, the lifestyle choice bank, shares common views and is relevant in the context of the relationship.
What is a relevant bank?
A relevant bank is one that informs, educates and empathises with me through communications in the place I’m at … namely my social space. Most banks talk about social media as a marketing thing – well, it is media isn’t it? – rather than as a customer connection process. That is where the really differentiated banks of tomorrow will sit: providing relevance in the context of where the customer sees the relationship, and relationships are in the social space, not in the branch.
We can already see banks in early days developing social context to be relevant as a lifestyle choice, with the leading name in this space being Fidor. I often talk about Fidor’s experiments with Facebook to gain Likes for example, but the reason I do this is because they were the first bank I saw using the social space as their main space to build lifestyle relationships.
It is this thinking that will become the differentiated lifestyle choice for customers selecting banks. It won’t be brand or size or branch, but do they fit in with the way I think? That’s what Fidor does when it’s liked. It talks to customers in an adult way about money; it’s what ICICI Bank is doing in India with their social outreach program; and it’s what many banks will be doing downstream.
Banks will become social beasts, providing social outreach to gain social relationships in social spaces. Customers will choose their banks based upon their social outreach and relevance and synchronisation with their lifestyle views. It’s just a matter of time.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.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...