Is Your Bank Ready For Customer 3.0

The banking industry is in the midst of a significant shift in customer behavior fueled by new channels, new competitors and new shopping behaviors. Today's customer is hyper-connected, highly informed and demanding a highly personalized approach with regards to communication, product development and customer service.

These customers cannot be defined by a specific age or income category or geographic parameter, but by their ability (and desire) to adopt and apply new technologies to meet their banking needs.

Say "Hello" to Customer 3.0.

Customer 3.0 begins their bank and credit union product shopping experience at their desk, in their car or on their couch, relying on friends and family reviews and published reviews across social media channels. Instead of walking into a local branch office and sitting down to open an account during banking hours, these customers purchase their banking services much like they purchase music, books or other products . . . online, 24/7.

As Brett King highlighted in his book, Bank 3.0, the new customer doesn't 'go to' their bank or credit union or rely on a physical distribution network. Banks and credit unions need to find and effectively engage customers who are mobile-first and have vast choices and a 'want it now' attitude. This paradigm shift in the balance of power between banks and the customer positions Customer 3.0 as a power player who is firmly in charge of their personal buying process.

To find and engage with Customer 3.0, financial institutions need to transform their back office and delivery networks and begin to think like the new customer. They need to understand that the competition is not just other traditional banks or even the digital-first 'neobanks'. Instead, we are competing across all of the touchpoints used by Customer 3.0, where experiences are shaped by the latest in retail, gaming, search and mobile technologies.

In a just released research report, Say Hello to Customer 3.0, Accenture discusses the transformation of the banking customer over time and the need to move from being a financial facilitator to becoming a part of the ecosystem where Customer 3.0 interacts. The report also discusses the need to move from mass marketing techniques to a highly personalized approach that takes advantage of both structured and unstructured data to improve the overarching customer experience.

Defining Customer 3.0

Unlike the customer of the past, Customer 3.0 is not defined by traditional demographics like age, income, geographics or gender. Instead, they are defined by the way they leverage new technologies to meet their individual needs. Digitally astute, mobile-first and socially connected, Accenture found Customer 3.0 to have some generally common attributes. I provide my take on what these attibutes mean to bank product managers and marketers:

• Highly Informed: Customer 3.0 leverages the information available on the internet more than any previous generation. They use comparison sites and associated apps to gather insight about the banks and products they want to purchase before a bank even knows they are shopping.
  
  The change in bank shopping behavior was discussed in my previous post, Digital Shopping Has Transformed the Bank Purchase Funnel, and more generally in the Accenture report, Energizing Global Growth: Understanding the Changing Consumer. Customer 3.0 starts (and sometimes finishes) their bank shopping experience in the digital world.
  
  My Take: Traditional media is no longer enough for acquiring or cross-selling the new customer. The importance of digital marketing tools, such as retargeting, must become part of ever bank and credit union marketers tool kit.

• Price Sensitive: Saving money and/or 'getting a deal' is more important to Customer 3.0, who places an emphasis on a fair value exchange as opposed to simply buying on brand name or convenience alone.
  
  My Take: While Customer 3.0 is price sensitive, they will pay for a product that saves time and/or money in the long run. Banks and credit unions should not view this attribute as a message that 'free is better', but as an opportunity to build services that can be differentiated. This also bodes well for merchant-funded rewards if the offers are targeted and easy to use.
• Socially Connected: Today's social networks provide a double edged sword for financial institutions. While serving as a platform for sales, social media also is a platform for bad news, poor reviews and complaints to travel faster than ever to more people than ever before.
  
  My Take: Banks and credit unions need to be highly responsive to customers who use social media to air their grievances. It is usually best to respond publicly using the same channel the customer used to provide public closure.
  
  From a sales perspective, using social media for 'likes' and 'friending' is not enough. Social media should be leveraged for proactive and measurable sales efforts when possible (see Financial Brand's review of Navy Federal Credit Union's Facebook $200 million selling effort here). Channels like YouTube have also been used successfully to promote, educate and reinforce positive customer experiences.
• Trust Their Peers: Customer 3.0 is not shy. They are very comfortable receiving and sharing reviews on social networks and within apps wherever possible. Sites like BankRate, My Bank Tracker, Find a Better Bank, in addition to Facebook and Twitter provide the online platform to provide reviews, advice and opinions instantaneously. Recent research reinforces this trend with 14 percent of customers trusting advertisements while 78 percent trust peer recommendations.
  
  My Take: Monitoring recommendation and review sites should be part of the job of marketing and the customer experience areas of the bank. In addition, much like restaurants and retailers, banks and credit unions should seek positive online reviews from satisfied customers as part of daily social interactions.
• Self-Promotion: Aligned with the above attribute, Customer 3.0 will publish and promote themselves, their opinions and their decisions through social channels (myself included) while many other customer groups are much more shy about their daily activities.
  
  My Take: Some banks are proactively monitoring the social network activities of their customers not only to gauge satisfaction and to build a more robust profile but also to determine who may have the strongest 'social clout'. Moven may have the most public social monitoring feature with their CredScore. With a close eye on privacy issues, the ability to determine a customer's social influence can be a powerful marketing tool going forward.
• Instant Gratification: Influenced by the impact of online books by Kindle, music via iTunes and simple bank account opening by GoBank, Simple, Moven and PNC's Virtual Wallet, Customer 3.0 can be accurately described as the 'now' generation. They want to be able to open accounts, transact business, talk to customer service and view their financial position quickly, easily and in real time.
  
  My Take: Innovation in the eyes of Customer 2.0 may not be in the form of more features and functions, but simplified capabilities that occur seamlessly. From simple account openings to seeing balances without needing multilayer authentication (GoBank Balance Bar), to instant mobile receipts (Moven), banks and credit unions need to remove complexity from everyday banking, allowing customers to bank where, when and how they want.
  
  The recent innovations by Mitek Systems using the camera functionality on a phone for mobile deposits, mobile billpay, mobile account opening and most recently, mobile balance transfer exemplifies the importance of instant gratification.
• Security Unconscious: Despite all of the talk about public discourse around privacy and security, Customer 3.0 does not seem to be nearly as concerned about viruses, spam or phishing attacks, uploading and downloading more digital information than any other group. This comfort extends to their confidence in doing banking transactions online or on a mobile device.
  
  My Take: For Customer 2.0, the need to emphasize safety and security is less of an issue when wanting them to try new online and/or mobile services. That said, this security could be short lived if a major breach occurs within the banking industry. In addition, the comfort with sharing personal information allows financial marketers greater access to insight that can be used for improved targeting, product development and communication.

Engaging Customer 3.0

To better engage Customer 3.0, Accenture recommends that financial institution become ubiquitous, melding into the digital ecosystem where Customer 3.0 already interacts. This is a 'pull' as opposed to 'push' environment, where banking develops products, services and content the customer seeks as opposed to being sold.

The expectations are not being set by historical banking organizations, processes and products but by other more progressive industries that have already embraced digital real-time transactions, robust 'big data' insight, geolocational capabilities and new ways to communicate through offline, online and social channels. 

The retail industry has set the bar high for developing a single customer view and removing product silos. They also have made the customer aware of the new 1:1 marketing potential and the ability to listen and interact with customers on their terms, providing products and services that add value and enhance daily life.

Below is a great narrative on the expectations of Customer 3.0 and the interrelationship between what they expect from banking compared to what they are already receiving from other companies they like and admire.

To improve engagement with Customer 3.0, there are seven barriers that must be addressed that are inextricably linked to the banking industry's current operating model:

1. Trust: While progress has been made to build trust within the industry, Customer 3.0 doesn't differ from other customers when it comes to making choices between different banks and credit unions. They turn to friends, family and their extended virtual community. Banks that avoid customer 'surprises' and improve transparency will benefit.
   
   
2. Advice: Progressive Insurance exemplifies the way a financial institution can provide an unbiased perspective with their comparison shopping tool. Likewise, banks can provide tools that are unbiased as well as content that can help educate customers. American Express does this well with their Open Forum and many banks have developed educational blogs around financial planning, etc.
   
   
3. Location: Financial institutions need to find more ways for the digital experience to provide many of the benefits of the physical experience. Customer 3.0 is reluctant to visit branches except for the most complex purposes, so the development of significantly better tablet applications that are tactile and more robust is a great place to start.
   
   
4. Loyalty: Loyalty is harder than ever to secure since most banks are followers as opposed to leaders and have become more of a commodity or utility as opposed to being differentiated. To build stronger loyalty, innovation will become more valued and the ability to provide services beyond traditional banking will be rewarded.
   
   
5. Price: Customer 3.0 is very aware that it is less costly to serve digitally than through a physical location, but is willing to share the benefits of this lower cost delivery. Unfortunately, serving digitally is not always less expensive, so improved customer education and the ability to generate fees from value-added services will be important in the future.
   
   
6. Time: Finding ways to serve Customer 3.0 at a time that suits them is not difficult for many transactions, but finding a way to serve this segment when interaction is needed is not as easy. Live customer support through digital channels will become an important differentiator.
   
   
7. Relevance: The collaboration with non-financial providers to stay relevant will become more important since Customer 3.0 wants their financial provider to be inextricably linked to their everyday lives. Location-based rewards, improved P2P capabilities, etc. are the foundation for this needed relevance.

Attracting and Retaining Customer 3.0

To attract and retain Customer 3.0, banks need to come to the realization that change is needed. They need to embrace the need to innovate and undergo a overhaul of the way they do business as Brett King highlighted in his book, Bank 3.0 and is done by Chris Skinner in his newest book, Digital Bank: Strategies to Succeed as a Digital Bank (interview with Chris Skinner here).

According to Accenture, banks need to engage with Customer 3.0 on their terms by:

• Redefining their business model
• Engaging whenever, wherever Customer 3.0 desires
• Changing the way products are created
• Utilizing technology to gain greater insight into customer behaviors
• Delivering innovative experiences
• Rewarding loyalty

In other words, to defend share of wallet from organizations like PayPal, Walmart, Visa, MasterCard, Google, Apple . . . , banks will need to collaborate with the customer in a way that assists with new product development, service and channel experience. In short, banks need to move from being a financial facilitator to becoming part of the digital ecosystem where the customer interacts.

The question becomes, can traditional banks and credit unions remake themselves for an environment where the customer has all of the power?

Additional Resources

Say Hello to Customer 3.0 - Accenture (2013)

Digital Shopping Has Transformed the Bank Purchase Funnel - Bank Marketing Strategy (2013)

Bank 3.0: Why Banking is No Longer Somewhere You Go But Something You Do - Brett King (2012)

Enhancing the Banking Customer Value Proposition Through Technology-Led Innovation - Accenture (2011)

Digital Bank: Strategies to Succeed as a Digital Bank - Chris Skinner (2013)

Energizing Global Growth: Understanding the Changing Consumer - Accenture (2013)