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Banks Use Digital Strategy to Develop Relationship Primacy

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Banks Use Digital Strategy to Develop Relationship Primacy
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PricewaterhouseCoopers LLP published a paper “The New Digital Tipping Point” in late 2011. The report can be found here, and a blog post written by Chris Skinner providing insight to the post is worth a read. Many thanks to trusted colleague Richard Sanders to alerting me to this study.

PwC based the research on interviews with about 3,000 retail banking customers from a range of segments, and included samples from developing markets (China, India, Emirates) as well as developed markets (Canada, France, Poland).

The backdrop for the report is the residual impact of the global recession on the relationships consumers have with their banks. While consumers evidence less trust than ever for their bank, they also have changing expectations for how banking services (both offline and online) should be delivered.

In this case, “changing” translates to “greater expectations” and the report focuses on how the Millennial generation, finally arriving at a point where they will select their primary bank for the foreseeable future, are influenced by the way retailers are using digital strategies to engage and delight them online and in-store.

With this in mind, the PwC report puts forth the premise that there is a renewed opportunity for “banks to create shareholder value is through a focus on “relationship primacy” (being the preferred and main bank for a customer).” Why is relationship primacy so important?

  1. According to PwC, it drives increased share of wallet, leading to higher revenue from that customer group, and ….
  2. Research showed that 81% of Canadian customers surveyed preferred to purchase additional financial service products from their primary banking provider rather than any other source. Results were similar in Mexico 75%, India 77%, China 79% and UK 52%.

The learning is that banks “have them if they want them”. People are predisposed to stay where they are. Switching banks is neither easy nor fun. The question becomes, how can banks employ digital strategies and what should they consist of to engage consumers and seal the deal to retain “relationship primacy”? PwC concluded that banks need to develop digital strategy that goes beyond “building apps” and includes these key points:

  1. User experience
  2. Mobile devices and networks
  3. Social media and collaboration
  4. Customer analytics
  5. Channel integration

The study found that customers are willing to pay for a new breed of banking services which transform the ordinary into a WOW moment when the information is delivered through a digital channel. These include receiving transaction notifications via via Twitter or Facebook, having availability of spending analysis tools, and receiving relevant third party promotional offers on occasion.

Loyalty was right in the middle of it all, as 65% of those surveyed in UK said they would be willing to pay for loyalty services provided by a bank and “storing loyalty cards and converting points to cash” were in the top 5 services noted by consumers. Consumers in the survey estimated an optimal price of £4.20 per month for loyalty services, a figure translating into additional annual fee income of about £50 per customer.

If banks take the hint and realize that the pot of gold they seek may just be in their own backyard, relationship primacy will be in the spotlight. In that case, data-driven customer strategies will receive even more attention as banks seek to rebuild lost trust, build engagement, and create a better value proposition for their customers.  Just remember that by executing a smart digital strategy and prioritizing relationship primacy, that banks can win not just with Millennials, but also the wider population of “Consumer 2.0”.

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