By Rowena Prest, Chief Strategy Officer, Joint
In the time we’ve moved from owning a small selection of music on CDs to streaming anything ever recorded, the innovation in the retail banking industry has been largely limited to moving everything you could do in a branch to an app. Sure, there have been other innovations, primarily Open Banking, but at its heart banking still offers the four basic pillars of mortgages, savings, debt and facilitating day-to-day transactions. Instead of changing our relationship with money, it’s simply made that relationship easier.
Some may argue that in a world where people are more likely to get divorced than change their bank there’s no burning imperative to change. This is underlined by most banks’ business models where they profit at the expense of their customers. For example, the Financial Conduct Authority (FCA) found that only 25% of the recent interest rate hikes have been passed on to savings accounts, whereas 90% of the hikes have been passed onto flexible mortgages. Given the crucial role the banking industry plays in the lives of the nation, surely there needs to be different business models where banks profit with their customers.
Now more than ever people need help to better manage their finances. This need is bigger than responding to the cost of living crisis. There is a huge requirement to acknowledge and counter the malaise in the British economy and the impact it’s having on people’s lives. Real household disposable income has pretty much doubled every 30 years since the end of WW2, but 2008 put a stop to that. Since then the UK has seen very little real growth. To put this in context, if we had continued growing at pre-2008 rates, the average UK household would be 40% richer now.
Hand in hand with this economic impact is the necessity for retail banks to adjust to new customer needs. The purpose for which they first served (to save and buy a home) looks increasingly outdated – the next generation will never be homeowners. Given all this, bank marketing is an extremely challenging beast. Banking communications often idealise the life of their customers and the role of banking brands within those lives. To win even bigger, marketing needs to get real, acknowledge the true role money plays and demonstrate why a bank is best placed to support customers.
To be future-fit, retail banks need to be communicating with people where they communicate with each other about finances – on social media. We’ve seen the first pointers to how momentum can build on social channels and create the online version of a bank run with the social media chatter that led up to the collapse of the Silicon Valley Bank. No bank, whether legacy or digital, can afford to ignore this shift in communication.
At the other end of the scale, they need to consider how they communicate with those who aren’t digital natives, or even remotely tech savvy. As branches close, what of this essential aspect of the lives of older people? There’s a strong argument to be made for banks to work together and create less costly shared-resource banking hubs as Age UK has called for.
And often communication is easier for the banks than innovation, although whether that’s a result of apathy or regulation can be hard to determine. Amid a housing crisis, where is the innovation in mortgages (fixed rates for the mortgage life anyone?), with fraud on the ascendency why do so many customers feel their banks are hindering their safety rather than protecting it?
So perhaps banks need to go back to the fundamentals of what their brand purpose is. What is the true role of money in life? There are many ways to approach this but a fundamental truth is money connects us. It connects us to experiences, it connects us to businesses – big and small– and most importantly it connects us to other people. From giving kids their pocket money to gratefully receiving a short term loan from the Bank of Mum and Dad, people are tied to each other through money. It’s the £10 birthday gift to a grandson or the share of a summer holiday owed to a partner.
Money connects us all and it only works well when a bank account makes those connections as seamless as possible. And while the UK is ahead of places like the US with integrated transfers and payments within proprietary apps, banks should be striving for that seamless process in all aspects of communications. This means going beyond the clunky AI chatbots with limited function and preset answers and providing a truly personalised understanding of customer needs.
Focusing on the higher purpose of banking puts potential customers at the front and centre of communications in an emotionally resonant way. Banks have the most extraordinary access to customer data and by using that data to find out what connections are most meaningful and pressing, especially as we continue to ride such difficult financial times, banks can much better meet people’s needs.