By Shawn Ward
There's a lot of great innovation happening in the retail banking world: personal financial management tools, person-to-person payments, mobile/apps, remote deposit capture, rewards/targeted offers, etc. These are all about engagement banking.
Simply put, engagement banking is providing banking and advisory services to your members where and when and how they want them. It's all about today's consumers: finding out what they want and meeting that need or set of needs. Today's consumer isn't bound by traditional restraints set forth by yesterday's bank or credit union. The key for successful FIs in the new millennium is engaging their members/customers and, in doing so, seeing an increase in retention and a greater share of wallet.
However, until banks and credit unions realign their product mix, reaching full potential engagement will be an uphill battle.
Twenty years ago, our banking needs and expectations were simpler. We had checking and savings accounts and everything revolved around paper! The monthly bank statement was sufficient and, hopefully, told us what we already knew about where we spent our money and how much we saved. The products offered matched consumers' needs.
This product mix no longer works and is outdated on several levels. First, people rarely use a savings account. Second, too many activities are funneled through a single checking account—paying bills (online, with paper checks or electronically); ATM withdrawals; point of sale transactions—for an ever-increasing number of purchases. And lastly, many members try in vain to save for those larger purchases.
Basically, the lone checking account is an oft overused, outdated tool, serving too many purposes and leaving today's consumer to wonder, "Where did all my money go?" Today's consumers are on the go and want to know where their money is all the time.
To reach a genuine culture of engagement, FIs first need to align product offerings to better reflect consumers' banking habits and needs. Next, value-added services that support each product should be aligned. Take a look at the sample product mix below and note there are three key accounts in the default product architecture.
THE BILLPAY ACCOUNT: This account is exclusively used to pay fixed, routine bills by check, electronically or via P2P. One account with a simple goal: Assure there is enough money to pay routine bills.
To enhance utility, financial institutions can offer a cash flow calendar tied to this account. Scheduled payments and direct deposits are automatically plotted on this calendar. Banks can send proactive alerts if the account is lacking funds to cover scheduled bills. Your members should always know when their bills are scheduled for payment and whether they have enough money in their account to cover the bills. Most important, they need access to edit/alter bills and transfer funds. A great way to increase engagement is by offering analytics and/or money-saving offers based on customer-specific bills.
THE GOALS ACCOUNT: The goals account replaces the traditional savings account. Consumers have multiple goals and need the ability to track individual goals, in one account. These days, consumers are saving for multiple needs, such as children's college or a new car and perhaps moving toward debt reduction, simultaneously. This is where credit unions can guide their members with tools and calculators to help them figure out how much to contribute to meet goals within a certain timeframe.
If you want to get closer to your market and better understand the specific needs of your customers or members, how about creating separate modules (accounts)? Create them for different life events, such as buying a car or house, getting married and even having a baby, retirement planning, etc. Then, add some relevant content along with planning tools and calculators … and that is Engagement.
SPENDING ACCOUNT: If bills are paid in the BillPay Account and savings goals are tracked in your Goals Account, what's left? Spending! The spending account should include a debit product and allow cash withdrawals. This account should track discretionary spending and include all traditional PFM elements: allowing merchant categorization, budgeting, cash flow planning, etc. Tracking consumers' spending habits and offering targeted rewards is another great way to increase engagement.
The way consumers think about banking and money management is shifting and a huge experience gap has widened. Banks and credit unions need to align products with consumer banking behaviors—allowing for a richer, more convenient consumer banking experience. Concurrently, FIs can engage consumers in more relevant ways and operationalize their brands by putting infrastructure in place to support innovative value-added products. At the same time, they'll be moving from an undifferentiated commodity product to a differentiated and individualized experience.
Shawn Ward is CEO of Geezeo, a CUES partner .
Read more about engagement banking.
