By Gordon Hui, Strategy VP at design and innovation consultancy Smart Design
Remember the old saying that consumers were more likely to change partners than their banks? When it comes to younger customers this comfortable cliché no longer holds true. According to the Millennial Disruption Indexa third of US millennials believe they will not need a bank at all in the near future, while 73% claim they would be more excited about a new financial services offering from Apple Amazon, Google or PayPal than from their bank.
The brutal reality is that millennials favour social media brands over established bank brands. The average US millennial spends 26 hours a month on the Facebook app alone. This is not really surprising when you consider that millennials are digitally native and mobile first so they are more likely to trust brands with a similar profile. In addition, our research showed that Millennials are the Recession Generation, whose direct experience (or whose parents’ experience) of market volatility and job insecurity during the global financial crisis of 2007 – 2009, has impacted their finances and their trust.
So how can banks share some of the love that millennials have for social media brands?
One common sense strategy is to for banks to see what they can learn from how social media brands are innovating. Aware of the leverage they have with millennials and understanding their desire to transact in a different way from their parents, a number of social media brands are moving into payments: In the US, Facebook messenger allows Facebookers to transfer money for free while Snapcash does the same for Snapchat users. Meanwhile peer-to-peer payment appVenmo includes a social feed and also allows emoji-based acknowledgement of money transfers.
Initial signs suggest that banks are doing just that: Bank customers in Singapore will soon be able to exchange money on social media via Facebook or Twitter. Under a new service agreed by 20 Singaporean banks, all customers will need is a social media account – traditional account numbers and sort codes will no longer be required,
Payments through Facebook and Twitter are a good example of Conversational Commerce, a term coined by Uber’s Chris Messina to describe how social, messaging, and voice are connecting brands and services. Doing so in a way that is meaningful to consumers is key: it is arguably easier for brands like Facebook and Twitter to integrate payments into a social media context, then for banks to import social media into a banking environment.
So where do banks need to start? We have identified four key areas where conversational commerce could add value to bank’s existing services.
- Get to know your customers personally
Retail banks know a huge amount about their customers: Offering different channels for interaction such as chatbots or voice interaction allows banks to developa more personal relationship with customers with the added benefit of creating new CRM opportunities and providing new ways of obtaining more meaningful data about them. This is especially important given the trend for closing bricks and mortar branches and bearing in mind that millennials are in any case less likely to visit a branch than an older generation.
- Recommend new products to your customers
With millennials less used to transacting with banks via conventional channels, and wary of banks in general, offering a chat-driven interface could provide this group with additional advice and support around decisions about credits cards, savings and loans. There are lessons to be learnt here from retail where French cosmetics chain Sephora has launched a Kik messaging app that uses a survey-like process to direct customers to the right beauty product.
- Offer customers innovative ways of carrying out basic banking
Millennials want innovative products inspired by new multi-channel relationships. In fact, 92% of Millennials say they would make a banking choice based on digital services while 40% say they will use a Robo-advisor in the near future. Banks need constantly evolve their services and adding new features and functions in order to stay ahead of these needs Using messaging, chat, and voice platforms in a way that allows consumers to carry out transactions within a social context are all smart ways banks can get millennials to engage on their own terms. A good example of this is Capital One’s partnership with Amazon Echo which allows customers to use Amazon’s voice activated virtual assistant, Alexa to perform basic retail banking activities.
- Help your customers take charge of their finances
Treating customers fairly is important for banks seeking to build trust with millennials. Using smart technology to help customers gain insights into their own spending habits and save can help differentiate your brand from competitors whose interests appear to revolve around making money for the bank. There are plenty of smart apps the banks can look to for inspiration including Penny, a personal finance coach app that uses a chat-driven interface to understand people’s financial situations and Digit, which uses a chat based interface to automate savings, helping customers to save more.
To conclude, as social media brands make moves into payments and other areas traditionally the preserve of banks, bank brands are under pressure to respond by finding smart ways of integrating the social elements of social media, such as chat, into their services. Millennials like things to be authentic so it’s important for brands to stay true their brand while experimenting with new digital ways of engaging with this next generation. So chat bots need to be able to interact with millennials with a personality that is in keeping with the bank’s brand. The brave new world of social media represents a massive challenge especially for bank steeped in formality and tradition. However, the future of banking may well depend on them doing just that.