Using tech to build relationships

Happy consumers come back for their future banking needs, and they refer friends and family to their financial institution. Consumer polling in part confirms this age-old banking wisdom, but polling reveals another thing as well: Banks and credit unions miss nearly 40% of opportunities in their relationships with consumers.

How do they miss so much?

Data and polling show that it’s because they focus solely on satisfaction, rather than on a combination of satisfaction and engagement. That said, increasing engagement comes with risks and practical barriers that hamper success in high-ROI channels. While these challenges are surmountable, institutions seeking high performance in 2023 will dig deeper than just buying technology to boost engagement.

Most banking customers hold multiple products and services at any one institution. The typical household comprises several consumers, who together use about 10 products and services. At the highest-performing financial institutions, the average consumer uses more than four products and services (not including “go with” services such as debit cards).

To increase households’ usage, institutions must identify the factors that prompt consumers to expand the relationship. According to polling of some 9,000 financial services consumers by Gallup, engagement is the missing link that when addressed increases consumers’ interest in buying additional products from their institution.

Gallup found that 45% of consumers who were satisfied with their banking relationship also said they would consider their institution for their next product or service. But when they said they were both “satisfied and fully engaged,” the ratio rose to 83%.

Full engagement holds the keys to growth—and of the most efficient kind. With a possible 40% increase in product usage on the table, engagement becomes much more than a marketing “nice-to-have.” Industry polling by Total Expert shows financial institutions are investing to engage. About 80% are implementing new technologies, 73% are adding new processes and procedures, and 51% are working with vendors to improve and increase their engagement. Nearly half are adding new team roles to support new engagement tactics.

The road to greater product and service usage might be paved in gold, but it’s not lined with roses. Consider the bigger picture. “Fully engaged” customers are a boon for institutions, but what does “fully engaged” mean? Do consumers want more engagement, or better engagement? We are all consumers; we intuitively know the answer—we want better engagement, and we want more engagement only when it is better.

Providers that reach full and satisfied engagement win the cross-sell game. As competitors set higher standards, consumer expectations will follow suit; they will choose banks that meet their expectations. When an institution gets consideration 83% of the time, its competitors get less and less.

Banking institutions must take on a host of improvements as they seek full engagement. Their first and biggest enhancement challenge, though, is ensuring the project isn’t doomed from the beginning.

When polled by Total Expert, banking leaders reported that providing value to each consumer segment—not to mention each person individually—presents a scale problem. When leaders self-categorized their institutions, the majority said they had just begun using contact data, banking data, segmentation and digital engagement.

In that category, personalization faces serious challenges from manually maintained and disjointed data and an absence of automation. Only 10% of respondents in this category leverage data from multiple sources to segment. Some 52% send the same message to all contacts, and 70% still manually leverage data. No wonder most consumers don’t value their engagement; their providers don’t have the tools that make valuable engagement possible.

Financial services providers must dig deeper into what it will take to fully engage consumers in ways that are valuable to them. Identify data to create meaningful segments, determine which education and advice is most valuable to consumers, and plan consumer experiences across staff actions, emails, print marketing and SMS. Then, vet platforms to determine which offer the know-how—meaning what’s already coded into the software—to provide value to depositors and borrowers.

James White is banking principal at Total Expert.

For more on the trends we see playing out this year, we encourage you to download the BAI Executive Report, Addressing banking’s key business challenges in 2023.