Digitization innovations in banking that once were big advantages, are now simply run-of-the-mill for just about everybody.
How to get back on the horse and really kick it.
In Prisma Campaigns we strongly believe that the main purpose of digitization and personalization in marketing for banks is to create a relationship with customers as trusted advisors who understand individual needs, which, theoretically, leads to customer retention and loyalty.
The latest Boston Consulting Group (BCG) study shows that there are direct economic benefits for those banks that implement effective digital strategies.
The BCG claims that a 5% increase in customer retention typically brings a 25-95% increase in profits and that banking providers can expect a 10-30% increase in revenue from personalizing the customer journey to the customers' satisfaction.
From our experience with clients, we came to the conclusion that the actual pressure in financial marketing trends to digitize have pushed most banks to level up in regard to services such as online and mobile self-service capabilities, or to add enough marketing automation for financial services that they can run their call centers and provide a reasonable service with a smaller operations staff and at a lower cost. But these kind of innovations in banking that were once big advantages, are now simply run-of-the-mill for just about everybody.
BCG has monitored technology in banking across 100 key performance indicators, factoring in differences caused by local regulations, competitive dynamics and consumer behavior influenced by cultural patterns. For example, US banks are permitted higher fees and commission rates than many banks in other countries, especially in the EU.
The available degree and quality of connectivity in a country also affects the digital banking experience. BCG's Retail Banking Excellence Benchmark (REBEX), also finds considerable differences between local banks operating in the same regulatory climate.
BCG, therefore, divided the banks it studies by region and found that the majority were actually somewhere along a continuum of transformations to digitization, usually spending more on the process than they were actually getting back in returns because, as BCG says, they are digitizing for cost and not for value. In bank marketing, to earn more, revenue per customer by increasing retention has to be accomplished, according to the BCG, through a re-invention of the customer engagement model. That means improving as quickly as possible both personalization and continuous delivery.
Personalization and customer retention because of its success is, according to BCG, higher at banks that understand customers' financial needs and which have learned to interact with their customers in ways that reflect their preferences. Improved data analytics, AI marketing and machine learning help banks meet their customers' increased expectations by individualizing offers. By extension, the banks that succeed with this degree of personalization will become better at retaining their customers who, inevitably, will show in the bottom line.
Delivery means a 24/7 availability and always a variety of options, especially when paying for services or goods. To be this flexible, banks need to build sophisticated routing platforms that ensure continuous delivery. By paying close attention to global tendencies and local needs in bank tech, all of Prisma marketing strategies are set to go in this direction.
The forecasting unit of BCG, BCG Banking Pools, forecasts a 5.3% annual rise in global retail bank revenue between now and the end of 2021, which is faster than the fastest growth recorded in the past decade. Obviously, for regulatory reasons, the gains will be faster and larger in some regions than in others. Asian banks' revenue is expected to grow by 8% per annum for the next few years and the region is expected to surpass that of North America by 2021 as the region with the highest banking revenues. Somewhat lesser growth is expected for Latin America and Africa, since both regions are in need of adoption of banking services for a large segment of their respective populations. North American banks will probably get help to improve their margins from higher interest rates and greater customer interest in investment products. The European banks, however, are facing a slower rate of growth due to unfavorable regulation and lower interest rates.
The pay-off, according to the BCG study, is that the top-performing banks—the ones that developed personalized marketing—now have cost-income ratios that are 19% better than their nearest competitors, and that margin is growing annually.
Is not that a situation to be wished for by all banking and financial institutions?