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White paper September 2012
Daoud Fakhri
Senior Analyst Retail Banking
I joined Datamonitor as an analyst in 2009, having previously worked in market research, and I specialize in the retail banking sector. The succession of bankingrelated events over the last few years have made this a very interesting field to work in, and I have written numerous reports on topics such as the prospects for new and non-traditional entrants in the sector, the future of branch banking, developments in online and mobile banking, and the vexed issue of consumer trust. I have also spoken at several industry events, including a Financial Services Forum seminar on the future of branch banking, a Digital Banking Club presentation on meeting customer needs in digital banking, and a Marketforce panel discussion on the customer experience and digital banking. I have also spoken on BBC radio about the recent service failure at Royal Bank of Scotland Group. If you have questions about the research, data, and findings within this document you can put your questions directly to the analysts. Simply email your questions to askfs@datamonitor.com. To find out more about Datamonitor Financial contact us at: email datamonitor_fs@datamonitor.com phone +44 20 7551 9437 Visit our website: www.datamonitorfinancial.com Or follow us on Twitter: @DatamonitorFS
DISCLAIMER While every care is taken to ensure the accuracy of the information contained in this material, the facts, estimates, and opinions stated are based on information and sources which, while we believe them to be reliable, are not guaranteed. In particular, it should not be relied upon as the sole source of reference in relation to the subject matter. No liability can be accepted by Datamonitor, its directors, or employees for any loss occasioned to any person or entity acting or failing to act as a result of anything contained in or omitted from the content of this material, or our conclusions as stated. The findings are Datamonitor's current opinions; they are subject to change without notice. Datamonitor has no obligation to update or amend the research or to let anyone know if our opinions change materially.
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The Financial Customer Intelligence framework presents eight mega-trends that help us to understand the needs, preferences, and demands of consumers. It is vital to understand the attitudes and behaviors of consumers in order to design products and services that align with these demands.
Source: Datamonitor. Report: Marketing Strategies for Rebranding Financial Services, June 2012
This document will focus on the Digital Lifestyles mega-trend. Digital Lifestyles is one of the eight mega-trends that Datamonitor has identified as being a significant driver of consumer behavior in relation to the purchase and use of financial services and products.
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The convenience, flexibility, and immediacy associated with the Internet have helped to make this the dominant channel for day-to-to-day banking across most of the world. According to Datamonitor's 2011 Financial Services Consumer Insight (FSCI) Survey, for example, 79% of global consumers view online banking facilities as essential in a current account, and 72% use online as their main channel for checking their balances. With retailers leading the way in the provision of online and mobile services, banks are under huge pressure to ensure that their digital capabilities keep pace with rising consumer expectations.
Source: Datamonitor. Report: Marketing Strategies for Rebranding Financial Services, June 2012
In order to accommodate the evolving requirements of consumers in the digital sphere, financial providers have to make sure that consumers not only have immediate and ever-present access to the information, products, and services
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they need, but that they are able to conduct all manner of payments and transactions as, when, and where they want.
Datamonitor's Financial Customer Intelligence framework summarizes these two Digital Lifestyles trends as Always Connected and Digital Consumption. This white paper will use current case studies to illustrate how each of the sub-trends is now impacting on the financial services industry.
Information is no longer something that consumers need to wait for; they have access to vast quantities of realtime information online and through their mobile phones and tablets. Providers need to ensure that consumers have all the relevant information when they want it.
Personal finance managers (PFMs) are digital applications that link with consumers' bank accounts and other financial holdings to provide them with a fully integrated, holistic view of their finances.
Strands Finance, a US-based provider of PFM solutions to banks around the world, has taken the concept to a new level by offering several new features. These include:
The ability to customize the online interface to display the most relevant information.
A timeline view of historic expenditure.
Sophisticated budgeting tools.
Personalized product recommendations.
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The facility to compare financial activity against peer groups.
There is considerable pent-up demand for such services, with Datamonitor's 2011 FSCI Survey finding that globally, 43% of consumers who bank online want the ability to analyze their spending. This rises to 51% among those aged 18–24.
Simple, a new "virtual" bank in the US, prides itself on its innovative approach to banking. One of its biggest selling points is its "Safe-to-Spend" balance feature, which provides a forecast of a customer's available balance after factoring in scheduled payments and planned expenditures, using a complex set of algorithms. Used properly, it should help to reduce customers' chances of going overdrawn and incurring charges, and is a great example of how a bank can provide information that is transparent and easy to understand.
Source: Simple (2012)
The opinions of online peers are highly valued by consumers, as these are seen as an extension of their direct network of friends and family. The influence of online peers and social media is set to grow, with the 2011 FSCI Survey finding that 57% of global consumers visit social media sites at least once a day. These are therefore highly influential channels, and providers need to find effective ways to harness their considerable power.
This means that providers need to harness these channels and meet consumer demand.
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American Express (AmEx) has one of the highest social media profiles of all financial services providers. As of August 2012 the card provider has over 2.5 million fans on Facebook, which compares favorably to around 570,000 for MasterCard. Amex is also represented on other sites such as Twitter, YouTube, Foursquare, and LinkedIn.
Source: American Express (2012)
In order to maximize customer engagement, Amex created its "Sync" initiative that allows card holders to link their cards to their social media accounts and gain access to special discounts and offers. On Twitter, for example, sending tweets that include special offer "hashtags" will result in offers being directly loaded onto synced cards. Similarly, customers who connect via the "Link, Like, Love" Facebook application will receive personalized offers and deals based on their Facebook likes and preferences.
Complementing this interactive approach, Amex has created a Facebook-based application called Nextpedition, through which consumers can answer a series of attitudinal questions to create a unique profile, and then purchase a customized mystery holiday based on that profile.
This concerted strategy by Amex to engage with its customers has set it apart from its competitors by adding value to what is generally regarded as a commodity product, and should help to boost usage and improve retention.
Although Commonwealth Bank in Australia was relatively late in establishing a presence on Facebook, it had amassed over 100,000 fans by its first anniversary in January 2012, and more than 218,000 by August 2012. This
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compares favorably to its rivals, with NAB scoring 62,000 likes, ANZ Australia just over 10,000, and Westpac less than 5,000.
Commonwealth Bank has achieved this success through running a number of interactive campaigns on the platform, including "Community Seeds," where customers were invited to vote on how a A$125,000 donation was to be distributed to various community groups, and "Centenary Time Vault," a twoweek treasure hunt offering a daily prize of A$2,000.
Social media-led strategies such as these can play a valuable role in improving customer goodwill and increasing the level of brand warmth.
Consumers are using more than one channel at a time to find information, communicate with peers, and carry out chores. This means that any differences in the quality of the customer experience between channels will be very noticeable to consumers. Providers must therefore ensure that they are creating a uniformly good experience for consumers across all touchpoints.
Although the online channel offers many advantages to consumers, especially with regard to convenience and immediacy, there are some weaknesses that need to be addressed. Chief among these is the online application process, which is often confusing, thus leading to high attrition rates.
LivePerson, a specialist in online consumer engagement, provides a number of different strategies to address this issue, including LP Chat. This tool allows providers to communicate with customers in realtime during the application process, identify where applicants are at risk of abandoning the process, offer hands-on assistance with text-highlighting and
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co-browsing capabilities, and to transfer chats between mobile and desktop devices. Live chats can also be initiated in external locations through the use of Quick Response codes.
Implementation of LivePerson's services has resulted in clients seeing improvements in first-time problem resolution and application completion rates, higher levels of customer feedback and customer satisfaction, and reduced support costs.
Consumers want to make purchases and transactions digitally. The rise of online and mobile channels is driving this demand from consumers who will want all their tools in one place.
Following the lead set by overseas banks such as ANZ and Commonwealth Bank, in February 2012 Barclays Bank in the UK launched its Pingit smartphone application for mobile payments and transfers. Consumers, who do not have to bank with Barclays, can download the application and use it to instantly send up to ÂŁ750 a day via their mobile phone contacts, thus bypassing the need to enter account numbers and sort codes.
By August 2012 Pingit had been downloaded by around 1 million users, demonstrating that there is huge consumer demand in the UK for solutions that make it easier to transact payments and transfers (although, admittedly, actual usage data are hard to come by). The service is now being rolled out internationally, starting in Kenya, which should further
Source: Barclays Bank (2012)
increase its popularity.
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Since May 2012, UK consumers with PayPal accounts have been able to use PayPal's instore mobile application to buy goods at selected retailers. At the point of purchase the user activates the application, which generates a unique barcode and number that the shop assistant scans at the till. The payment is then deducted from the customer's PayPal account in the usual manner, and any relevant offers or discounts will be automatically applied.
Currently, this facility is only available at a small number of fashion retailers, but there are plans to expand the service in coming months. For many consumers who are used to the convenience of using PayPal to buy goods online, the ability to use PayPal in the real world may prove just as attractive. Datamonitor research suggests that there is demand for such means of payment: the 2011 FSCI Survey found that 59% of consumers expressed interest in buying goods instore using their mobile phones.
Consumers want rewards and discounts that are immediately relevant to their actual location. Targeted offers are pertinent, and therefore attractive, to the consumer.
DBS in Singapore is at the forefront of integrating conventional banking service activities with addedvalue lifestyle services. The bank offers two mobile applications – Shopper and Indulge – that provide users with a range of special discounts and promotions from retailers and restaurants. The applications use augmented reality and GPS functionality to identify participating outlets in the vicinity, and time-limited offers are made on the basis of a user's prior retail activity.
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By the end of 2011 the applications had been downloaded by more than 400,000 users, and have helped DBS to become the market leader in mobile banking in Singapore. Through these services, DBS is positioning itself as much as a lifestyle partner to its customers as it is a bank, thus creating a stronger sense of customer affinity.
In an effort to attract consumers to its new Google Wallet digital payments tool, Google is combining it with its location-based deals and discounts service, Google Offers (currently in development). Google Wallet integrates users' credit and debit cards onto a near field communication-enabled Android smartphone, allowing them to pay for goods and services both online and instore. Google Offers provides access to local deals from retailers, and these are fully synced with users' Google Wallets.
Digital wallets are a completely new and unfamiliar payments technology, and consumers need to be given clear and tangible reasons to persuade them to make the switch. Providing financial incentives, such as Google's offer of retail deals that are available exclusively to users of its wallet, is an effective means of doing this.
Datamonitor's 2011 FSCI Survey presents evidence for this, finding that 48% of global consumers are interested in receiving location-based offers through their handsets.
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The rapid consumer adoption of digital financial services, both online and mobile, demonstrates just how important this channel has become. The case studies outlined in this paper highlight the ways in which many providers are seeking to innovate in this sphere and introduce solutions that make life easier for consumers.
Datamonitor's Financial Customer Intelligence framework offers a useful means of identifying the different aspects that providers need to be aware of when trying to maximize the effectiveness of their digital strategies.
If new digital services are to be successful in terms of boosting the popularity of financial providers, raising levels of customer satisfaction, and improving acquisition and retention rates, they must meet clearly defined consumer needs. Introducing new technology for its own sake is a strategy that rarely works, and running the risk of confusing and alienating consumers.
Digital provision of financial services needs to satisfy two basic conditions. Firstly, content must be of high quality. Provision of basic information is no longer sufficient, and providers must offer content that adds value to customers' lives by enabling them to manage their finances more efficiently and profitably, and allowing them to engage with other consumers.
Secondly, consumers must be able to use financial services how and when they want. Increasingly, this means while they are on-the-go. Mobile provision of services is rapidly moving from being a luxury to a prerequisite. Providers need to allow their customers to conduct the full range of financial activities through
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their mobile handsets, and to access content that is tailored to particular locations. Providers that do well in this area will become much more closely aligned with their customers' lives.
Design products and services to allow consumers to use digital channels for as many activities as possible – Consumers expect to be able to conduct a wide range of activities digitally.
Enable 24/7 access to services and support – Consumers no longer view their providers as 9am–5pm operations; they expect round-the-clock access to services through digital channels.
Embrace social media – Social media is not a fad but rather a trend that is here to stay; providers must use this to their advantage and strengthen customer relationships.
Allow consumers to use their mobiles for financial chores – Consumers are ever more reliant on their smartphones and want to be able to use these for a range of activities. Providers should allow these tasks to be conducted in a pleasant and engaging manner.
Use technology to make offerings more attractive – Promotions or rewards based on a consumer's location will be more attractive because they are immediately more pertinent.
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At Datamonitor Financial, we deliver intelligence-led insight and data on financial services markets, competitors, and consumers. Our robust forecasting methodologies, proprietary databases, and the experience and knowledge of our in-house analysts help clients to make better strategic decisions in the areas of Retail Banking, Cards & Payments, Savings & Investments, Private Wealth Management, Life & Pensions, and General Insurance. Our research on cards and payments covers competitor developments, consumer attitudes, market forecasts, and technology developments, highlighting current and future trends. The Global Payment Card Analyzer, our proprietary online tool, includes market size, consumer, and competitor data for 60 countries.
If you have questions about the research, data and findings within this document you can put your questions directly to the analysts. Simply email your questions to askfs@datamonitor.com. To find out more about Datamonitor Financial contact us at: email datamonitor_fs@datamonitor.com phone +44 20 7551 9437 visit our website: www.datamonitorfinancial.com Or follow us on Twitter: @DatamonitorFS
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