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Andrew Davidson 
Susan Menke 
Susan Wolfe 
Lisa Hronek Banking
Questions From Readers
The following is from the Q&A session of our most recent webinar entitled, “Trends in Banking Loyalty and Customer Communication.” To view a recorded version of the webinar, please click the link.
You mentioned that the marketing, especially on web sites, was getting more simple and streamlined. Are the products themselves doing that as well, or is it just the marketing?
The products are definitely getting more complicated, but the banks are working toward communicating about them in more simple terms. One example is the way that banks are communicating fees on the accounts. The banks have tried to get the fee information down to just one page of disclosures to easily convey the most important and common fees and conditions. With the packaging of products, customers must often meet more and more conditions in order to qualify for preferred pricing. That usually means maintaining a certain minimum balance or the requirement to utilize the product a minimum number of times each month.
Are product packages actually increasing loyalty? What stops customers from switching banks not on a simple product base but on an entire bundle?
The product packages that are based only on demand deposits don’t necessarily tie customers that strongly to the bank. For that reason, banks are focusing on rewards, self-servicing options and packaging loans and investment products with demand deposit products. One example of rewards is BankAmeriDeals. Customers earn rewards through the credit and debit card, but they must bank online to receive the rewards. The rewards are also available through the mobile app, which allows customers to use rewards at the point of sale. That approach effectively ties five products together. If the customer finds those rewards valuable, they are less likely to switch to another bank. In terms of mobile apps we’ve seen a lot of advancement in the functionality to make them more useful. One reason is just because of natural evolution, but another is because banks are trying to stay ahead of the competition. Providing a great mobile experience might not entirely prevent customers from leaving, but it might provide at least one reason to stay. Online bill payment would also fit into this category. More importantly; however, is that a lot of the packages now include investment or loan products. Those products are much more difficult to move, so packages that include them tie the customer more strongly to the bank.
Are discounts needed to encourage bundling?
The idea behind the bundling is that it provides customers with something they can’t get by purchasing the products individually. So, yes, discounts are needed.
Are there any moves among banks towards building an emotional/communal value offer?
Most of the offers we see are based on cash incentives or features and benefits such as ease, simplicity, control, and financial management. Emotional appeals are more frequently seen in investment offers, specifically retirement. We sometimes see communal messages in print or statement inserts. An example would be Chase’s Community Giving program. The bank communicates it in statement inserts and online, specifically through Facebook.
For the customer who is primarily self-servicing through remote channels, do you have any recommendations on how banks should communicate with them?
Banks need to consider communicating with the self-servicing customer when the customer has logged into online banking or the mobile banking app, possibly even within email alerts. This obviously needs to be done very carefully – if not done so, it runs the risk of irritating customers.
Roughly 30% of our customers don’t do online banking. Do you think banks should keep trying to convert them, or focus on the customers that are already doing online banking?
If a customer has been with the bank for a long period of time, and has received repeated communications about online banking and bill payment, but still hasn’t converted, it’s most likely that the customer won’t convert. Instead, banks should probably focus on getting new customers enrolled in online banking immediately.
It seems like a lot of messaging is done on the statement, or as statement inserts. But as the industry pushes its customers to receive paperless statements, how does that affect customer communication?
By pushing customers to paperless statements, banks lose statement inserts as a communication channel. That’s potentially a big loss based on how much customer communication is currently done that way. Banks generally provide online PDF versions of the statements and include all of the statement inserts, but it’s questionable as to how many people really read the inserts in the electronic format. Obviously banks need to evaluate other channels – online, email and mobile.
You talked about website redesigns. We all know that people are resistant to change. How do customers feel about website redesigns? Is a redesign a dangerous thing to do, because it runs the risk of confusing customers?
It’s well established that customers don’t like change, so any changes need to truly make navigation or some other immediately visable aspect easier for customers. The recent efforts by banks to redesign their sites were right on target though. The navigation is truly easier and customers aren’t bombarded by multiple marketing messages.
Ready to check-out? Let me get my iPod Touch…
I was at Nordstrom a few weeks ago. In the shoe department. If you’ve never been there it’s worth a visit. Not just for shoes, but for the overall experience, and if you are lucky, some comedy. One of the funniest lines I’ve ever heard was from a Nordstrom’s shoe salesperson. I was deliberating over a pair of boots and I happened to state, “I like them, but I’m not sure I NEED them.” He looked at me and was silent for a moment before he replied, “Lady. You’re in the Nordstrom’s SHOE department. Need doesn’t factor into it.”
I bought the boots.
I recently found myself at Nordstrom again, shopping for boots. Again. To survive a Chicago winter means that you really can’t have too many pairs of boots. Seriously.
Nordstrom’s customer service level is no secret. In fact, I think it’s so great, that if I could, I would do all my shopping there. Thinking about this, I walked into the shoe department, not realizing that it was their Semi-Annual sale. You may or may not know that Nordstrom has only 3 sales a year – 2 semi-annual sales and its Anniversary sale. Given their everyday prices, the promise of 40% off (or more) draws large crowds of shoppers. I walked into the shoe department and almost left.
Picture a sea of people and an explosion of shoes and shoe boxes. It’s not pretty.
I figured I’d NEVER get a sales person to help me, and I only had about 30 minutes. I was wrong, of course. One of the wonderful things about Nordstrom is that when they have a sale, they staff appropriately. Within 5 minutes I had a salesperson helping me and a stack of shiny new boots to try on.
Once I decided on my boots, the salesperson escorted me to the cashier. Ugh, I thought as I approached the cash register. More swarms of people. Who knows how long it would take? Was it worth it? Could I get home in time? How badly did I really want these boots? Was I spending too much money on them?
Those minutes of deliberation are a retailer’s worst nightmare. Giving the customer time to think about large purchases, and bail out is exactly what they are looking to prevent.
Nordstrom realizes this of course, and in the middle of the year it began quietly rolling out Mobile POS Devices, so customers don’t have to wait in line.
I was checked out in seconds.
To expedite purchases – and limit customer deliberation time – each sales person is equipped with a modified iPod Touch that has a merchandise scanner and a credit card slider, so customers can be checked out immediately. Customers can opt for a paper receipt or have one emailed. (I selected the email option.) The app also allows the sales staff to access inventory to check on sizes and colors in other stores without having to walk away from the customer.
From my perspective, it was customer service nirvana. I’m sure Nordstrom is happy too, because the process saved a sale that could have easily been lost at any point in the process.
Mobile POS checkout seems to be going mainstream more quickly than expected. Jamie Nordstrom, president of the company’s online division was quoted in USA Today, stating, “I believe the future of our point-of-sale systems is completely mobile,” he says. “It’s hard to know whether it’s in one year or five years because the technology is evolving so rapidly.”
Nordstrom certainly isn’t the first to roll out Mobile POS check-out. Apple has been doing it for years. The difference is that it’s now being used in stores that appeal to a wider and more diverse population base. Home Depot and Costco both use Mobile POS for “line busting” during peak periods to help manage the length of the checkout lines. J.C. Penney is moving to mobile checkout and hopes to get rid of traditional cashiers and cash registers by 2014. Kmart and Sears will have mobile check out in time for this year’s holiday shopping period.
So how does this relate to banking? Right now mobile banking is something that’s done by younger, upwardly mobile, slightly affluent banking customers. By placing mobile checkouts in stores that the general population frequents on a regular basis, it makes mobile payments that much more familiar. In turn, it should help mobile banking go mainstream sooner rather than later.
“Mobile Banking? P2P? What are you talking about?
I fear for the future of online and mobile banking. I recently emailed a friend of mine money that I owed her by using my bank’s P2P function. I’m trying to write fewer checks these days, mainly because if I do everything online I have a more accurate picture of the money I have left in my account. I know the “immediate withdrawal” of money from the online check register irritates a lot of people, but personally I like it.
Because of the industry I work in, I also wanted to see what my friend would do with the email. To give you some background, my friend is 35, has a smartphone which she is on constantly, has an iPad, does online banking, streams Netflix through her Blue-ray player…My point is that she’s relatively young and hip, and up on the latest technology. She’s a prime target for mobile banking services and the more innovative services, such as P2P payments, that banks are now offering.
You can see where this is going, right? Unfortunately I didn’t see it until I got her email. Her email reply was three short words, “What is P2P?”
Seriously. It’s been almost two weeks and she still hasn’t clicked on the link in the email to accept the money. We use the same bank, so security isn’t even a concern.
There’s no shortage of surveys on consumers’ interest in mobile banking services. The problem is that they tend to survey the general population. And to be honest, I don’t really care about the general population. I care about smartphone users who are somewhat tech savvy, but not early adopters. I care about those people, because right now that’s the target market for mobile banking. It’s not my father who still doesn’t use online banking and doesn’t even own a smartphone. And it’s not my mother who does online banking AND has a smartphone, but really doesn’t know how to use the phone other than to call or text. It’s also not the recent high school or college grad who doesn’t have any money to really “manage” and is still learning how to use a bank account.
To better understand what I consider the “target” audience for mobile banking, I polled my co-workers. Another friend of mine – I’ll call her Miss Statistically Significant – questioned the methodology and therefore the validity of my survey. But she once polled her Facebook friends and used it in a presentation, so I’m not giving her objection much weight. I, at least, used Survey Monkey, and all responses were confidential. That trumps a survey through a status update on Facebook. Obviously.
Anyway, I polled my co-workers mainly because of their characteristics: almost all of them are Smartphone owners, they range in age from mid-twenties to mid-thirties (although there are a few outliers age wise), and most are tech-savvy, but not necessarily early adopters. It’s mobile banking’s dream audience.
Among my results: 87% have downloaded their bank’s mobile app. Of those that haven’t downloaded the app, the reasons are fairly predictable: security, don’t see a need for it, concerned it will be too complicated, and one person doesn’t yet own a smartphone. So much for theorizing that the entire Millennial generation can’t do anything without their smartphone. Although the results were anonymous, other than my father, I only know one other person in the world who doesn’t have a smartphone. Okay, two, but that other person doesn’t work here.
One person downloaded the app, but has never used it. Why?
“No need. I do everything on my computer. The screen is bigger, it’s easier to read and there has never been a banking transaction that is so crucial that it can’t wait until I get home. The only time I can even imagine thinking to use the phone’s mobile app is if I was traveling and some transaction had to be completed right away. But even then, if I had a laptop with me, I’d use that. I’m not really sure why I even downloaded it. Curiosity, I guess.”
My survey also asked mobile banking users what feature they like most. Mobile deposit was the most popular, with 30% of the respondents stating it was their favorite feature. Users also felt that remote deposit made the service unique. One respondent stated, “I can use a computer for all of the other stuff, but remote deposit makes the app unique.” Person to person payments was the second most popular, with 19% selecting it (tied with checking account history or balances), but it was also the feature that respondents were most passionate about. One respondent stated, “Paying friends and roommates for bills, lunches, bar tabs, etc. is so convenient it’s scary. I have proactively talked to my friends to switch to Chase so we can QuickPay each other.” Another respondent admitted that they don’t use mobile banking very often, but stated “I do like the quick payment feature.” A minority of respondents paid bills with the mobile app (7%), or transferred money with it (4%.) One lone respondent is looking forward to using BankAmerideals, anticipating using the app much more frequently to load new offers.
But just when I was starting to feel better about mobile banking, I found myself in a meeting with some of my survey respondents. Although we were meeting about something unrelated to mobile banking, the subject of BankAmeriDeals came up. Not only had she never heard of statement rewards, she hadn’t heard of BankAmeriDeals, didn’t realize you could automatically load offers on to your debit or credit card through online banking, let alone that you could use the mobile banking app to do the same. Oh, and did I mention she’s a Bank of America customer?
Truth be told, I have my bank’s mobile banking app downloaded, but I don’t use it a ton. Would I have downloaded it if I didn’t work in the industry? Probably. For various reasons I get a fair number of checks, and it takes me forever to get them deposited at the bank. I find the remote deposit to be very handy. I’ve also used the app a couple of times to check my balance and find an ATM. While these functions are mission critical, they are immensely helpful to have them when I need them. And isn’t that really the point of mobile banking? Few people will probably ever exclusively bank via mobile apps in the near future, but they do help make life easier at critical points in time. In turn, that might make customers like their bank more and stay loyal.
Answers to Readers Questions
The following questions are from our most recent webinar: “The Evolving Canadian Banking Experience.” If you would like to view the webinar, please click here: http://bit.ly/Comperemedia_evolving_canadian_banking_webinar
How are consumers thinking about “mobile banking”? Do they think of it as something different and distinct from other banking activities or do they think of it as part of the new normal way of doing things?
I don’t think that mobile banking is considered the new normal just yet – it’s still too new. It’s certainly something that is more appealing to younger bankers because they’re more accustomed to using mobile apps to run their lives. But our research also indicates that younger bankers and investors don’t use mobile exclusively. In fact, they’re slightly more likely to go into a branch or call than older banking and investment customers. That’s probably due to the fact that they’re still learning about financial products and money management, so they need a little more hand holding. Across generations; however, mobile has become another channel for customers to utilize. To put it simply, they want to be able to bank the way they want to, in the way that makes the most sense, regardless of the time or place. I think we’re still a ways away from mobile banking being the new normal, but not that far.
One question, Scotiabank has bought ING Direct Canada, do you have thoughts on this and is this significant?
The ultimate impact of this will depend on how Scotiabank integrates the ING accounts. Currently, the bank is pledging to keep the accounts the same, and not change the name of the bank for 18 months. Despite this, ING customers have already expressed concerns that their high-interest, no-fee accounts will disappear. Keeping things the same; however, has the potential to anger existing customers who are paying for their accounts and earning lower interest rates. The challenge will be to establish different value propositions for the different types of accounts and continuing to appeal to a different kind of customer than the typical Scotiabank customer. If the bank can do that, it can potentially appeal to a larger base of customers than ING did, because it has the ability to attract customers who want the name brand of a Canadian bank behind their accounts.
You talked about the challenges of the Millennial and GenY generations. What do you think banks need to do to reach this group?
Banks need to talk to them in relevant and appropriate ways – basically in their language. Too often, the offers that go to these groups are the same offers that go their parents. It’s also about providing the right services and resources – things like mobile banking and personal financial management tools.
If mobile banking is another channel, that is part of the overall banking experience, how should banks position it in their marketing?
They should position it that way. We used to see a focus on just the mobile banking app or site in the marketing. We’re starting to see a shift to position mobile banking as just another way to bank. In that shift, banks are promoting online banking, online bill pay, text alerts, email alerts, customized ATM option as all the different possible ways that customers can bank on their terms.
In the Amex example using Red laser, does the customer use points at the store – meaning the store accepts the points as payment – or is the order fulfilled through Amex membership rewards?
The order is fulfilled through the Amex membership.
How do the statement rewards work between the bank and the retailer. You mentioned that they were merchant funded, but I’m not sure I fully understand what that means.
The reward is essentially a coupon that the retailer issues. Retailers bear the cost of the coupon and only bear the cost if the consumer actually uses it. Since the retailer is bearing the cost, the program is significantly cheaper for the banks to implement, compared to traditional debit reward programs.
You mention the importance of enterprise loyalty. Can you share which banks in the U.S. or Canada that you think are doing a good job with this, any why?
Bank of America is currently doing a great job with enterprise loyalty, through its Platinum Privileges Program. US Bank and Fifth Third have good programs that tie together mortgages, deposit products, and credit cards.
What do you think will be the most important functionalities to be available through Mobile Banking in the next year?
Mobile banking needs to expand beyond what I call “me-too” banking, which is just replicating anything the customer can do online, at the branch, or the ATM. Incorporating remote deposit and ATM locators is a step in the right direction. I really like some of the things that City Bank Texas is doing. They’re incorporating a rewards tracker and the ability to turn the debit card on and off.
With so many new players in the daily deals arena, do you think this market will be oversaturated, leading to customer disinterest?
That’s always a concern. I think by having deals through the customers’ bank can help to overcome that. It avoids situations where the customer is trying to keep track of different rewards through credit cards or multiple retailer loyalty cards.
To view the our recent webinar that prompted these questions please click the link:
http://bit.ly/Comperemedia_evolving_canadian_banking_webinar