02. 09. 2018
Digital sales: best practices a small bicycle shop can teach to banks
Banks that want to boost digital sales can learn a great deal from other industries. Believe it or not, best practices may come from department stores, utilities or even a one-man bicycle store.
Several records broke in the US retail industry during the last holiday season. Consumers spent as much as $108.2 billion online before Christmas, up by 14.7% from a year earlier, according to Adobe Digital Insights (ADI). And a whopping $36 billion was spent via mobile devices, accounting for 33.1% of total online revenue.
Why do these figures matter for banks? Because they say a ton about changing customer habits. The impact of mobile is ever-growing – not that banks didn’t know that already. But they can learn a thing or two about how to turn this surging mobile use into higher digital sales and better customer experiences.
The shift from online to mobile shopping is a direct result of the investment retailers and e-commerce giants have been making in going mobile and simplifying the shopping process, The Financial Brand says. And customers now demand the same experience when banking, instead of the countless steps needed to check their balance, make a payment or transfer money. Not to mention the hassle that comes with opening a new account.
Digital sales in banking: utilities offer a trick
Customers today are quick to ditch organizations that don’t invest in simplifying buying financial services. But how can banks copy e-commerce champions, big online retailers and leaders in other industries, and offer a smooth mobile and digital experience? First of all, they must better understand what their customers need.
Let’s see some useful findings from a recent survey by BI Intelligence. When choosing a bank, transfers rank as the most important mobile banking feature to consumers, whether it’s paying a bill, sending money abroad or making a peer-to-peer (P2P) payment.
But financial institutions can also find best practices in industries that have nothing to do with banking, like the utilities sector. Raconteur reports that the industry has long struggled to minimize leakage from water networks, with conventional methods failing to fix the problem. Capgemini has come to their rescue, working with customers and using predictive analytics.
“The application of advanced analytics combined with extensive integration of multiple data sources has enabled us to identify leaks up to three weeks before they would normally be identified,” Capgemini says. “The application of data solutions here is a classic example of a step change that turns a traditional reactive business model into a predictive one.”
Financial institutions can leverage their customer data, including payment history, phone transcripts and even social media accounts, and use predictive analytics in fraud detection. In fact, predictive analytics tools can be applied to any part of a bank’s operations to understand consumer behaviour.
Personalizing products: what a bicycle shop can teach banks
Digital customers today not only want ease and speed, they also crave personalization. They more and more expect the world to reflect their tastes and preferences, according to a recent study by Salesforce. No wonder that Amazon’s shopping recommendations or Netflix’s curated play lists have become so popular.
It shouldn’t come as a surprise to financial institutions that one in five customers would be willing to pay as much as 20% more for personalized products and services, and 22% would be happy to share some of their data in return for a more personalized customer service or product, Deloitte says.
Personalization can start with the digital banking interface. The customers of digital-only challenger bank Atom, for example, can choose their own brand logo and colour palette, and can even customize the bank’s name. This is more than just window-dressing, it’s a way of visually underscoring that every customer is unique, Salesforce points out.
Making each product unique has already done the trick for other companies outside financial services. Take the example of London-based Kennedy City Bicycles, which specializes in building made-to-order urban bikes. The design of each bike is done primarily by the customer on the company’s website. Clients go through a ’decision tree’, immersing themselves in the experience of creating the product from scratch.
Kennedy City Bicycles offers a truly seamless online experience from personalization to purchase. James Kennedy is the one-man operation behind the venture, who doesn’t actually run a brick-and-mortar store, only a workshop. Customers need to drop an e-mail to him first if they want to visit it. Kennedy says that he engages a slightly younger generation who are at ease with everything online, and this model is flexible enough for him to operate as a retailer.
Boost customer loyalty like a department store
Banks are sitting on a wealth of customer data, which could be used to improve personalization and increase loyalty. Take the example of big retail chains, which traditionally run loyalty programs. These programs have evolved from targeting customers with discounted offers based on purchase history to dynamic marketing based on a customer’s online behaviour and geolocation data.
By contrast, the retail banking industry has been slow to adopt similar personalized marketing services, according to consulting firm Elixirr. Retail banks could change their customer relationships from purely transactional to a more advisory-type service by analysing data to understand customer decisions and spending patterns. And banks could actually offer much more sophisticated loyalty programs than supermarkets.
Provisioning digital wallets, apps that combine payment with loyalty card functionality could help banks to close the gap on retailers. Elixirr cites John Lewis, a UK chain of high-end department stores, as a leading example. Its loyalty scheme has been built into its app, meaning that customers no longer need to carry around physical cards. For banks, this would be a major cost-saver.
Learn from the victims of digital disruption
Case studies citing the casualties of digital disruption show traditional banks what mistakes they must avoid in digital transformation. Retail giant Wal-Mart, for example, have issues with the digital revolution and Amazon is stealing its lunch. A recent story by Bloomberg about Wal-Mart’s challenges has reminded influential digital banking expert and advisor Chris Skinner of what’s happening in banking.
One example highlighted in the report was how Wal-Mart had been hesitant to let outside sellers list their wares on Walmart.com. The chain wasn’t willing to foster competition on its e-commerce site, and “it didn’t have the technological chops to support an expansive marketplace.” It only started adding third-party sellers in 2015, and although it now has more than 40 million products in its marketplace, the number is small compared with the 350 million or so items available on Amazon.
This cautionary tale from the retail industry underlines the importance of collaboration in banking. Digital leaders, from Amazon and Apple to Salesforce and Twitter, frequently join forces with innovative companies outside of their organization to deliver better services to their customers. Open banking and open APIs offer a similar opportunity for banks to team up with fintechs and other disruptors.
Banks that haven’t started exploring collaborative ventures need to act fast, according to a study by Salesforce. As many as 92% of respondents believe that if they are to survive beyond the next decade, banks must embrace open APIs and the opportunities they offer to perk up their customer offerings through partnerships.