It’s 9 o’clock; do you know where your customers are? Honestly, where are the banking customers? No longer is it common place for people to be lifetime customers at some small town bank. In-person banking is quickly fading away. Over the course of this past generation, we have experienced quite a unique myriad of changes to the banking experiences of millions of people. Not to mention, a dramatic shift in consumer trust of financial institutions. Gone are the days when people trusted their personal banker.
The most recent blows to consumer confidence revolved around the recent recession and a series of class action lawsuits against bank overdraft fees which has changed the landscape for the fees a financial institution charges. Customers have sent a loud and clear message that they want more financial power over their money. Recent Gallup Poll data shows that 67% of Americans think banks have too much power. Banks have felt and heard that message, but have those financial institutions done enough to keep their customers during this post-recession era?
Most banks have recognized the need to reach their customers, and potential customers, through social media outlets. The importance of keeping in touch in this Mobile App Age keeps increasing. Customers are turning more to social media to obtain their news and keep in touch. Social media now serves as the main form of customer service for the average consumer who does not have any pressing needs. No one can ever argue against using social media as a tool to reach the customers, especially the ones who rarely seek in person transactions. But is social media enough? Considering the loud message customers have sent; the answer is no. That Gallup Poll indicating the majority of American’s thought banks had too much power was just one part of the message.
Mobile apps have been embraced to get on-the-go account information. Other personal finance management (PFM) tools utilize third-party websites such as Mint.com and PageOnce. As the winner of the 2011 Best Online Personal Finance Software Award, Mint.com is like having a free personal financial adviser. Grouping all of a client’s financials from multiple locations into one account, it enables its users to access free financial advice, financial planning and the status of all accounts in an easy to understand format. PageOnce is very similar, but it has more of a personal secretary feel to it.
By some estimates, there are roughly 60 million people who use online banking. Of those people, about 5 percent, or 3 million customers, are utilizing PFM tools. It seems like a small percent, but when you look at the evolution of PFM tools the market is ripe for that 5 percent to jump. Consumers need to overcome their fears of identity theft. Third-party PFM tools, no matter how much security they claim to have, still makes millions of potential users nervous. People want the power of knowledge and control over their finances, and they’re willing to embrace it, if someone makes them feel more secure about it. So what can banks do to retain their customers and integrate more personal financial management tools into their customers’ experiences?
Third-party tools have filled the need people have to feel control over their money. They no longer have loyalty to just one singular institution. Consumers have shopped around for deals which mean they can have accounts with multiple financial institutions. Banks should be taking notice of the PFM tool trend as opportunity to bring more of their customers’ business back to one bank. Recognizing the need to give people what they want, banks should be looking to integrate personal financial management tools into their customer’s secure online experiences. Empowering people to feel like they belong to a community of financially savvy customers with an online financial advisor is one of the first steps. People need that “personal banker” role re-established in a way that’s relevant to the Mobile App Age. It needs to be done in a way that eliminates the feeling many people have of “I’m not credit-worthy enough”. With higher credit score limits for any type of financing, those who are trying to overcome the obstacles from the recession need to feel like they are not financial losers at their bank. It’s a harsh reality, but that is how customers with credit challenges feel. Financial institutions should be understanding of its clients’ barriers to financial freedoms and integrate that into positive, empowering personal financial management experiences. Helping customers track and compare spending habits to other customers would be a huge step in building up a sense of community and support.
Adopting an intuitive PFM tool experience will help banks gain numerous advantages over their competitors. They will learn their customers’ spending habits, which can guide the bank on which types of credit services would best fit a customer’s profile. They can become more competitive in helping the customer consolidate all accounts into one financial institution. The bank can even track consumer trends more economically, which in turn will help them offer more relevant customer rewards. In the end, PFM tools help to create more loyal customers and more revenue from those customers. In a study conducted by Cisco Internet Business Solutions Group (IBSG), it was found that banks can increase their revenue by 5 to 10 percent just from embracing more PFM tools. Pointing to the Gen X and Y markets, the study showed that the younger generations embrace online tools and are more willing to seek the social advice of others for any types of financial help.
It is time to take a good hard look at what else banks can do to address the needs of its customers. Blaming the economy, lawsuits and such is over. No more adversity. With adversity comes opportunity and technology has helped create the opportunities needed. The question is: will the banking industry lead the way with these new opportunities or be slow to catch on like they were when online banking first appeared?
Lydia Saad, “Americans Decry Power of Lobbyists, Corporations, Banks, Feds”, Gallup
“Banks adding online financial tools”, The Associated Press, MSNBC
“Top 10 Reasons Young Consumers Will Transform Retail Banking”, Cisco