Only 28% of people turn to their bank when they need financial input.
Customers already have a strange relationship with banks. Mainly, customers need banks to keep their money safe so they can move it around (transact) or spend it somewhere (pay someone.) Or they need banks to borrow money from.
But the relationship is not a cosy one. Customers don’t feel close to their banks. They don’t feel like banks are on their side. Our Purpose-Driven Banking Survey found, in 2020, that of the people who sought help to deal with the financial implications of a life-changing event, only 28% turned to their bank.
After March 2020, the financial situation of many banking customers suddenly felt precarious. The pandemic caused many people to re-examine their relationship with money—and necessarily, with banks.
In 2019, 32% of customers had interacted with their bank’s website or mobile app in ‘the last week’. This year, it’s 50%—one third more. I’ve spoken before about how our old habits of going to shopping centres on a Saturday morning to do our weekly grocery run have been disrupted and even destroyed. Many of us will never go back to shopping that way again.
For decades, banks have tried to offer customers a better deal on fees and higher interest rates. Few have built relationships on being an ally and a support around money matters.
Think about credit.
Just the thought of applying for credit has most customers breaking out in a cold sweat. Even those who know they have a good credit score and who have good financial habits — in other words, customers who expect a ‘Yes’ to any credit application — are wary of being turned down by banks. The credit application process consists of filling in forms, often with the same information more than once; the decision process seems to take forever, and it’s completely opaque. Customers feel they can’t predict the outcome.
And it’s an emotional rollercoaster for customers. They need the money for something important, and their ability to get it is completely out of their hands. It’s very disempowering. If you wanted to design a process that injected fear, uncertainty and doubt into a customer’s heart, most credit application processes would get an A+ rating. It’s no wonder consumers’ trust in banks has taken a hit in the last ten years.
It’s no wonder too that fintechs have swooped in to innovate where banks have been unable to. In the credit space, ‘buy now, pay later’ services have sprung up.
In South Africa, MobiCred offers this service on hundreds of websites. To be fair, its credit application, while all on-line, is just as onerous and demoralizing as any bank’s process. But the promise of getting instant pay-later terms from their favourite online retailer has seen MobiCred become an important player. It’s a registered credit provider, but it’s not a bank.
This is a space which seems custom-made for traditional banks. With their clout and their intimate knowledge of their customers’ financial behaviour, they are perfectly placed to pre-approve buy now, pay later loans for online commerce sites.
Today, banks must find more empathetic, personalized and engaging ways of serving customers. Chip Conleys’ classic book, Peak, talks about driving evangelism when you meet customers’ unexpressed desires. Desires like buy now, pay later on that dishwasher from the online store.
We have a research report on how banks can reimagine the customer experience, and in future blogs I want to talk about other opportunities banks can capitalise on. You can read the EXR Banking Reimagined report here.