Thrilling products make a splash and attract flocks of curious users during the great digital shift, as the success of neobanks shows — but, as we learned with meme stocks, there must be real value behind the dazzle. Legacy banks are learning this as they hit back against newcomers.
Confronted with a PYMNTS finding that three-quarters of consumers want low-cost, fast and easy-to-use products from banking entities — whatever form they take — NCR Digital Banking President Doug Brown told PYMNTS’ Karen Webster, “I think it’s an ingredient” to attract customers.
“But there’s a difference between offering something that looks attractive … and being better and more meaningful,” he said. “It’s got to be followed with a full delivery capability and experience model that makes the difference to capitalize on it.”
Giving neobanks some credit for cracking part of this code, he said that it’s not being done in an economically viable way designed to attract and retain.
Regardless, neobanks and nonbanks are giving legacy financial institutions (FIs) a run for their money — literally — and the response is a test-and-learn, fail-fast culture in banking. Given the digital-first competition, legacy FIs cannot afford to sit this out innovation-wise.
Related: ‘Don’t Annoy Me’: A Cardinal Rule for Banks to Keep Consumers’ Trust
He said that banks and credit unions are competing because there’s no obstacle to consumers trying any alternate options from the galaxy of financial apps now available to consumers.
“That’s why I say the attract part is not the difficult part,” he continued. “Some clever marketing, some advertising gets you there. But do you invest the time to make it your primary or a meaningful engagement piece? That’s when you’ve crossed the chasm to really putting it into a viable and healthy economic model.”
Conceding that the “fail-fast, fail-often” mentality hasn’t been a strong suit for banks or credit unions, Brown said better technology, data and analytics allow for multiple deployment options.
It’s the Little Things
Noting that the nuances often drive consumer sentiment and behavior, Brown told Webster that Net Promoter Score (NPS) is a reliable metric.
“I think 90% of the real innovation breakthrough comes from … the Net Promoter Score,” he said. “How satisfied and delighted are you with me in the entirety of what I’m delivering?”
In other words, it’s less about big product breakthroughs than consumer experience.
Brown said, “For somebody to uproot their household’s financial partner or relationship with an institution or a business, [that FI has] done something really to tick you off. That’s why it’s so important to deliver on all those little things every day.”
Consumer sentiment derives from the empathy — or lack thereof — that financial brands build into their products and support, which tends to drive the outcome. The pandemic drove a lot of this change, with consumers having to make appointments to walk into a branch during the worst of it, but from that experience came new expectations.
“Now, I only want to go to the branch if I know it has the person I want to talk to or things that are relevant,” Brown said. “Stores, the same way. There’s this extending out and starting the experience before you even get there” that’s become an ingrained part of the consumer journey.
These points factor into new demands around customer experience and where and how it starts. There’s no one path, so test-and-learn is now essential for FIs.
Read more: The Digital-First Banking Tracker®
Advisers Versus Unit Shifters
Perhaps the best defense established FIs have against digital-first and digital-only competitors is their rich reserves of data about customers and their preferences.
Brown said banks and credit unions need to put more effort into parsing consumers’ data to show important patterns and then suggest how financial conditions can be improved through strategic use of choice, giving a sense of control.
“None of us can materially control the price of gasoline, but if you make me feel like I’m in control and doing something right, sentiment wins, and you get their hearts and minds into it,” he said.
Asked if Banking-as-a-Service (BaaS) is helping fulfill consumer desire for control, he said, “It’s important and critical that you’re helping facilitate these customers where they are, where they want to be.”
That dovetails with the specialization that many neobanks use as a differentiator — banking for kids and the underbanked — and it’s an opportunity for legacy FIs, too.
What banks and FIs do with that opportunity is where things can go very right or extremely wrong, depending on the role they choose to play: bank product factories or true financial partners.
As Brown put it, “If you’re not a purveyor of units, you’re a partner, coach, adviser. That’s a tough one to pull off, because it’s not as easily measured.”
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