Clients’ emotions have a huge effect on customer experience and satisfaction, trust and even brand loyalty. It’s time to embrace them.
“They say money talks, but all mine ever says is ‘goodbye’,” goes the witty internet adage and it hits home for many banking customers. A new survey by CompareCards, a popular credit card comparison website that helps people make better financial choices, found that 7 in 10 Americans have actually cried over their money problems before. “Even in generally good economic times, there’s an awful lot of people who have debt,” Matt Schulz, chief industry analyst at CompareCards points out. “Anyone who’s ever had debt knows that when you feel like you can’t get rid of it, it can be an overwhelming feeling,” he adds.
And American consumers have exactly 13.3 trillion reasons to feel stressed out. That’s the level overall consumer debt reached in the fourth quarter of 2018 according to consumer credit reporting company Experian. And what makes them happy and optimistic? Money, for a change (pun intended). In a 2018 research by Milwaukee-based financial service provider Northwestern Mutual, financial security emerged as the first and foremost component to a positive outlook on life. In fact, 87% of respondents downright said that nothing made them happier or more confident than feeling that their finances are in order.
“The formula is simple. Financial security creates options, and options empower people to curate the life they want – both in the present and the future,” says Rebekah Barsch, vice president of planning at Northwestern Mutual. This single comment alone shows how the connection between psychology and banking is becoming a growing issue these days. Enter emotional banking, the concept of “moving away from thinking feature sets to thinking of customers’ feelings,” according to digital banking specialist Duena Blomstrom.
Needs and habits
For starters, let’s have a look at customer needs in more detail. Several levels in Maslow’s Hierarchy of Needs are connected to money. Still, people don’t actually need loans. Or current accounts. What customers do have are physiological, safety and self-actualisation needs, which these products satisfy. “It is time to become more empathetic and dig deep into our customer’s hierarchy of needs and build an emotional experience,” Blomstrom points out. But bankers need to do a much better job stepping into the shoes of their customers.
They “imperatively need to analyse how they feel themselves, and translate those feelings to a desire for digging into others’ relationship with their money as well.” Understanding the customer’s emotional experience should come before product development and setting up customer service units. And digital tools can be of great help when it comes to understanding and dealing with their clients’ emotions, bringing intuitive digital experiences that deliver the financial well-being and guidance customers are looking for.
Size doesn’t matter
We’re not only talking about milestone-type financial decisions here. “Financial well-being is not exclusive to those ‘financial moments’ when consumers make purposeful decisions on their finances,” EY Global Banking and Capital Markets Deputy Sector Leader Jan Bellens says. “It is driven largely by everyday behavior and decisions — some big and binary (such as deciding to get a college degree), some small and gradual (such as going to the gym).” But, when added up, these ‘mini milestones’ can make or break a customer’s financial health.
Using advanced data analytics, banks can explore each and every customer’s financial persona and help them live a healthier financial life through expert advice and care. The beauty of this is that banks “typically have all the information they need to develop tailored recommendations”, MasterCard’s Senior Vice President, Grayson Clarke points out. Spanish banking giant BBVA, for instance, has created dedicated apps to help customers analyse their own financial situation and benchmark themselves against other anonymous customers of similar financial standing.
AI: a digital contradiction?
Financial institutions can improve customers’ emotional connection with money by offering digitally-inspired experiences that blend the human touch with smart automation and artificial intelligence. By combining sentiment analysis with big data, for example, banks can identify trends in clients’ social networks and among their influencers. AI offers powerful predictive insights that drive top- and bottom-line performance.
Contradictory as it may sound, advisory tools can combine machine intelligence with human emotion. Morgan Stanley, for example, has equipped its advisors with algorithmic assistants that send multiple-choice recommendations based on variables, such as market changes or customer life events. They hope that their “next best action” project will provide better solutions for wealthy families than “mere software allocating assets for the masses”.
This post was originally published on 29 November 2017 and has been updated to include recent developments.