“An obvious way for a bank to keep their customers and attract new ones is to keep their prices low. It’s a bit like if there were two restaurants next door to each other with exactly the same menu. If you had to choose which to eat in you’d probably go for the cheapest right?” writes Bank of England in a KnowledgeBank (good one!) article on the importance of competition in the financial services arena.
Now that’s a solid argument – but not the whole story by a long chalk. And if you’ve read Tamás Braun’s recent two-parter on the twisted paths of human decision-making (find Part 1 here and Part 2 here), you know exactly what I mean.
Price-based competition is, and will always be, a losing battle. First of all, as the Bank of England also points out, you can’t lower your prices ad infinitum or you’ll bleed money. Second, the biggest downside of a purely price-based market strategy is that there can only be one winner. You either have the cheapest mortgage rates or you don’t. You either offer the best interest rates for savings accounts or you don’t.
But just because you can’t win the price war doesn’t mean you shouldn’t fight. My advice? Focus on the battle for customers’ hearts and minds instead.
That’s what tech giants do and it’s high time banks followed their lead. Let’s take Apple, the OG emotional brand, as an example. Ever since its foundation in 1977, the consumer darling has put empathy at the core of everything they do, from design to sales. And people respond to that, to say the least (overnight queues, anyone?). Their products delight, engage and deliver because they’re built with an understanding of what the user wants to get done, research on Apple’s clout has found.
Building an emotional connection between your brand and your consumers is a winning strategy because, in a sense, it eliminates competition altogether. Your success will not depend on what other banks do. It will depend on how well you know and treat your customers, full stop. And the more they feel that their needs are understood and addressed, the harder it becomes for other brands to break into their minds and win them over.
Money matters are a far cry from iPhones, you might argue. People reach for their gadgets to do things they enjoy, like chatting with their mates, playing Angry Birds or listening to their favourite podcast. On the other end of the spectrum, all banks seem to fill people with is dread. In the UK, for instance, money is the biggest cause of stress that 27% of adults get anxious about on a daily basis, a recent financial wellbeing survey has concluded.
But if there’s anything that the growth of neobanks has taught us, it is that it doesn’t have to be this way. Set on delivering frictionless, hyper-personalised banking services, they’ve given rise to a new breed of banking experience that has every potential to strike an emotional chord with customers. One that’s overwhelmingly positive, I mean.
I can’t stress enough how key personalisation is to this strategy – or how close banks are to making this strategy a reality.
They’re sitting on a goldmine of data that a personalisation platform could translate into meaningful insights, both for them and their customers. Then these money insights could be used to get customers in better financial shape through tailored budgeting advice, payment reminders or tips on savings opportunities. In the end, banks could also throw banking products into the mix, helping customers make smart investment choices, find the right home improvement loan and access deals and rewards. All the while driving a trust-based connection that’s impossible to put a price on.