Banks have an opportunity to grow loyalty and profits by pushing the boundaries of digital experiences. However, banks must first overcome several impediments preventing them from creating experiences which are truly coherent and impactful.
Peloton lets you find friends on Facebook, and video chat with them while you ride. The at-home gym company’s digital tools also emotionally connect users to an army of upbeat coaches with progress tracking.
“Insanely great” is how one editor at a technology publication described Apple Card. The application process is fast, simple, and seamless. Transaction reports leap to life with animated and interactive shapes, while the digital card changes colors to reflect cardholder behaviors. It’s a far cry from the static statements that have been around for decades. Cardholders also get a beautiful titanium card.
Consumers are increasingly willing to pay a premium for products with feel-good, connective experiences. Peloton’s immersive experience, more than the bicycle, motivates over half-a-million fitness fans to part with 2,000 US dollars for its equipment, plus monthly membership fees. By wrapping a fast and beautifully animated digital experience around what is essentially a typical credit card, Apple and Goldman Sachs convince affluent people like Steve Wozniak and David Heinemeier Hansson to sign up.
Similarly, banks have an opportunity to grow loyalty and profits by pushing the boundaries of digital experiences. Powerful possibilities exist to better integrate digital and human interactions for an entirely new way of achieving financial wellness and managing economic stress.
However, banks must overcome a short-term approach to innovation, fear of cannibalization, and siloed, risk-averse organizational structures that impede the creation of coherent, impactful experiences.
Banks take a table-stakes approach to innovation
For decades, bank executives have taken a table-stakes approach to innovation, making small bets resulting in “me-too” offerings.
Banks could have leveraged their payment-processing expertise to introduce real-time digital payments. Instead, they trumpeted remote deposit capture as their hallmark innovation, when really it is at best a transitional half step centered on the printed check; itself around since 1762.
Incremental improvements to product are no longer sufficient. Our world is shaped by Amazon, Apple, and other companies with legendary cultures of innovation and fanatical focus on delighting customers. These contenders have set their sights on the most profitable parts of banking.
Banks would do better to empower their product, marketing, and operations teams to take bolder steps to orchestrate product innovations rather than relying on profits from existing products until regulators intervene.
Banks follow knee-jerk, discordant approaches
Banks must be wary of reactive approaches to what others are doing. Innovations must be rooted in a relevant customer strategy.
Consider Zelle. By 2016, mobile apps like PayPal and Starbucks had become so popular they held more customer cash balances than most banks and were integrated into the core strategies of those brands. Launched to be an exciting alternative to Venmo, PayPal and other P2P services, Zelle continues to struggle with the clunky chains of its origin.
With only 1,160 or 23 percent of banks signed up to participate, Zelle only works if both the sender and recipient have an account with one of its participating banks. To use Zelle, customers have to first search through a list to see if their bank shows up.
Bank departments, often at odds when promoting innovation, do battle over “owning” the customer and defending profit centers. The biggest losers in these tugs-of-war? The customer.
By introducing countless friction points to minimize perceived risk or defend profitability, something as simple as transferring money has turned into a grueling affair. Customers are asked to wade through a perplexing maze of fees, daily limits, and cutoff and time restrictions on wire and ACH transfers, bill payment, and P2P services.
More focus is needed to meaningfully package and communicate the tangible and intangible value of these services to customers. Yet, organizational barriers often impede focus.
Be wary of introducing digital services from silos
Banks must also be careful about introducing digital services from silos, jeopardizing any real chance of an integrated, satisfying customer experience.
Today, automated and AI-driven money savings tools are all the rage. Some banks have smartly accelerated real innovation by incorporating these tools to help their customers save, set financial goals, cancel subscriptions, clip coupons, or acquire better spending habits.
Even useful tools get rolled out as stand-alone initiatives with no connection to an underlying brand promise or product suite supporting customers’ financial well-being. They often exist alongside long-standing bank policies and punitive practices like overdraft fees, minimum balance charges, and ATM fees. Banks must breakout from tradition-bound structures and risk tolerances with bolder initiatives. This can occur in three ways: either by separate ecosystems conducting practical prototyping; outside partnerships, or mergers.
They should feel confident to lead the way in specific areas of innovation where they can leverage their knowledge, scale, and long-standing customer connectivity while recognizing that consumers don’t know what they want until you show it to them.
Finally, like Peloton and the Apple Card, banks must pay continuous attention to the experiential and social dimensions of their offerings. The innovation journey must begin with human-centered design teams addressing user experiences that deliver tangible and intangible value and make customers willing to pay. Henry Ford famously said, “If I had asked people what they wanted, they would have said faster horses.”
