Few sectors have experienced as much disruption as banking over the last decade or so. The trusted partner personified by a high street presence and friendly bank manager has given way to an uneasy hybrid of digital and telephone services. Recession, digitisation, and high-street closure have changed our relationship with banks from trusted partner to service provider. Banks have suffered from their lack of customer centricity, focusing on sales rather than forging the long-term relationships of old.
At first, banks continued to focus on their most profitable and top priority segments, but alienated younger customers, who felt their needs were being neglected. Relationships became antagonistic: hidden charges and cumbersome online banking not able to keep pace with the rapacious demands of ‘digital natives’. Younger people are starting to switch to smart and personalised new digital services.
The older generation too, felt betrayed. As their high-street branches closed, replaced by disappointing telephone banking, and confusing online portals, they felt overwhelmed and under supported. New digital payment technologies feel unsafe or alien, making them unwilling or unable to embrace them.
Driven by technological advancements, a new and dynamic world of online banking has emerged. Digital players have pounced on the opportunities created and are reinventing services and payment systems. Agile digital banks and online payment tools with low overheads provide streamlined services designed to meet specific needs in the moment. Bolstering their offer by cutting out the transaction costs and charges from which established banks have traditionally drawn profit.
But not everyone is convinced. Although adoption of these new services has largely been driven by the younger generations, it is the older consumers, with buying power and savings, who present the greatest opportunity for banks to capitalise on this disruption.
How can banks leverage their position of “trust” and evolve their current portfolio of payments by tapping into moments of tension, such as helping older customers understand and use digital payments? How can they create new moments that allay fears and broaden their share of wallets?
Many of us have credit cards with rewards schemes, but how many of those rewards do we really want? A dinner at a restaurant chain 20 miles from your house is unlikely to create much of an incentive, whereas 20% off your favourite local restaurant might warrant a change of plans. By capitalising on the data available from a user’s regular spending habits, banks seeking to incentivise new and sometimes radical digital services could create some very attractive rewards schemes indeed. Targeting those moments when a user might be likely to try the service and tailoring the reward to their needs, could help older customers take their first steps into unknown territory.
ShopKick is a location based rewards system that covers all major retailers in the United States, in partnership with MasterCard. The service allows you to pay conveniently through an app, which generates points through an extensive and well targeted rewards scheme. The service fosters brand loyalty by creating consistent, positive moments between favourite retailers and customers.
Many older generations mistrust digital transactions altogether. Headlines focused on identity theft and phishing help create fear and a sense the process is unsafe. Real time updates on spending can help to reassure nervous users that their money is being well managed and give them comfort that issues can be identified quickly. Plus, that ‘in the moment’ trust building could convert into longer term relationships with brand loyal older generations. If they trust you to help them manage their spending, they are more likely to trust the advice you give on products in those significant life moments going forward.
Alignment of interest builds trust in digital payment services and broadens appeal. The mass market adoption of M-Pesa in sub-Sahara Africa taps into moments where caution and lack of savviness becomes usurped by convenience and necessity. Real time digital transactions, tracked via an app, are more often a smarter and quicker way to pay than reaching into our wallets.
A new breed of digital “challenger” banks are taking the market by storm. Services like Monzo (a bank in Beta) and Revolut are free of charge and come with accompanying smartphone apps. They offer perks like free cash withdrawals abroad, competitive exchange rates, and real-time transparency on spending via a simple smartphone app to surprise, delight and build trust in the moment by keeping a user constantly updated on their spending. Although Monzo’s target audience is younger, the opportunity to replicate its functionality for an older audience is clear.
A key difference between younger and older generations is how they view novelty in the financial sector. Youngsters embrace it, whilst older generations view it with suspicion and often do not see the value-add of digital payments.
Adding new functionality to existing social networks allows payment providers direct access to those moments when people might want to repay or gift money. A discussion via a messaging app about a meal out could be supplemented by the opportunity to repay others for that meal. Congratulations on a birthday could be complemented by a cash gift.
WeChat's P2P payments in China offer “red packets”: peer-to-peer (P2P) payments including points. WeChat is used by approximately 55% of China’s total population, and over 2.35 billion “red packets” were sent on Chinese New Year in 2016.
Simple, dependable and secure digital payment moments
The digital online payment space has been created and shaped by disruptors. Banks will play a key role in making them mainstream. Older segments represent a key opportunity for banks to do so, if they can harness the power of the moment, to align people’s needs in new technology.
To effectively target consumers across their payment moments, providers should go back to basics, continuing to offer simple, dependable, and secure payments, whilst enhancing the value of their offer. Banks must create synergies between transaction moments and a user experience that is second to none to cut through.