A Scientific Look at Improving the Digital Banking Experience
Fragmentation. The American Heritage Dictionary defines fragmentation as: The act or process of breaking into fragments. Fragmentation is an interesting way to look at innovation, considering that innovation and fragmentation have a cause-and-effect relationship. The fragmentation of old processes (cause) leads to new innovations (effect). And in a cyclical manner, those innovations eventually become fragmented and newer innovations are born. Look at any industry and you will see this process in action. Telecommunications: landline, satellite, and cellular. Computer: desktop, laptop, tablet, smartphone, and wearables. Financial services: teller line, ATM, debit card, online banking, mobile banking, and wearables.
Ecosystems Determine the Products You Use or Abandon
While the above examples may seem disparate, they are not. Ecosystems are created when their components are interrelated and dependent upon one another. They are destroyed when one or all the components in the ecosystem become fragmented. For example, for mobile banking to work, telecommunications, system processing power, and a portable form factor are needed. The fragmentation of any of these components causes the ecosystem to fail. Consider the scenario where a mobile device can no longer be updated due to limited processing power. It cannot take advantage of improvements in the latest software release and telecommunications network. The device is therefore useless, and the ecosystem is impaired. A device with capable processing power is required to normalize the ecosystem. Without the replacement of the device, the ecosystem is obsolete. Permanently fragmented. Doomed to obsolescence.
In this mobile device example, another byproduct of the fragmented ecosystem is security. Software upgrades often include security patches written to block exploits in earlier versions. The inability of the device to access the updated software means the device is vulnerable and can be exploited. The user’s information can be stolen, and the device can be used in a malicious attack. The security ecosystem on the device is compromised not by the failure of one of its components but the fragmentation of a separate ecosystem. It’s evident that the fragmentation of one ecosystem can damage others.
The core ecosystem that determines when a technology fragments is the consumer. The consumer ecosystem is comprised of two components: convenience and efficiency, and together they establish the experience. Only ecosystems that improve the experience survive.
Ecosystems At Risk of Abandonment Can Be Saved
The traditional online and mobile banking model is fragmented. It is ubiquitous, homogenized, and stagnant. It is neither efficient nor convenient. But parts of the model still have high utilization, such as the transaction history. The opportunity to resuscitate the model lies in the improvement of the experience. And we improve the experience by innovating an existing part of the model that already has high utilization.
Transaction history has high utilization because it enables the user to see all their activity in one place. And because it updates in real time users will often check it multiple times a day. This frequency creates the opportunity for additional information to be presented. And what information can benefit from that frequency? Marketing offers. In simplistic terms, marketing is effective when it is personalized and in the right place at the right time. The transaction history is the perfect platform for personalized right place, right time offers.
Consider the scenario where a user views their transaction history to confirm their car payment, which is a loan at another financial institution, an auto refinance loan is the perfect marketing offer. The user is in the transaction history (right place) to verify the loan payment has been sent (right time). The same methodology can be applied to deposit products. Savings accounts with consistently high balances are a target for certificate offers. Increasing the cost of funds by moving money from a product with a lower rate of interest to a product with a higher rate of interest seems like a costly move, but in an environment where the investment market is hot, it is a strategy to prevent the funds from leaving.
Ecosystems That Deliver Hyper-Personalized Offers Require Accurate Information
The ability to present the right offer is dependent upon accurate information feeding the marketing engine. To accomplish this, traditionally the marketing department uploads a list of users who do not have an auto loan. Herein lies the problem with that methodology. An uploaded list is a snapshot in time. Unless the target list is uploaded multiple times a day, the ability to present the right offer at the right time is unlikely. That brings us to another point regarding resuscitating the online and mobile banking model. Integrations (which we will discuss in a future blog). If the online and mobile banking provider is adept at integrating external products or information sources, the traditional online and mobile banking model can be innovated exponentially. Traditional functionality such as account balance, transaction history, and even bill payment become the backbone for integrated products and services to be built upon.
Back to our marketing example. Instead of feeding the marketing engine uploaded lists requiring resources and time from the marketing department, and in many cases the information technology department, an integration with a data warehouse or target upsell provider enables prospects to be moved in and out of campaigns as data changes occur. To present the right offer at the right time. In our auto refinance example above, the loan payment to the competitor is contained in the transaction history, but the transaction history cannot act upon it. It is the data source for the marketing engine that accomplishes that. A data warehouse for example, knows the prospect does not have an auto loan with the financial institution. A rule can be built in the data warehouse to push the auto refinance offer when it sees an auto loan payment to an external provider (the transaction description). In the same way, it can present a certificate offer when a rule is established for the amount of time a high balance has been in a savings account or when a large deposit is made in that account. The information feeding the campaigns is always current.
Combined Ecosystems Improve Convenience and Efficiency
And here is the beauty of these systems (ecosystem) working together. Marketing campaigns can be created with specific criteria and rules based on the data. The marketing engine knows if the offer should be presented, be presented again, or not be presented. If, for example, a large balance stays in the savings account over a period of time, the certificate campaign can be presented multiple times until the balance is reduced which means they no longer meet the campaign criteria. But, if that same user’s savings balance increases to meet the certificate criteria in the future, the offer can be presented. The marketing department can set the criteria for multiple campaigns and the engine will decide what offers are presented to each user. Set it and forget it.
The marketing offer functionality added into the transaction history makes product acquisition and retention more convenient and efficient for the user and the financial institution. More efficient for the user because they receive personalized offers and more convenient because they receive the offers in the transaction history where they spend the most time. It is more convenient for the financial institution because the data warehouse or other upsell engine moves the users in and out of the campaigns without any interaction by the marketing or information technology departments enabling them to focus on other matters. This increases the efficiency of both departments.
Ecosystems That Enable Consumers to Get More Done Create Value
Improvement of an experience creates product differentiation and competitive positioning. Improvements can be made by enhancing the functionality of a fragmented ecosystem or creating a new one. While creating new innovative ecosystems may seem like the best approach, enhancing the functionality of existing ecosystems may be more productive. Why? The enhanced ecosystem already has a userbase. Their ability to use the new functionality is a shorter learning curve creating faster return on investment. And an existing user base will view the new functionality as innovative because it can be compared to the original process. Disparate systems cause fragmentation making it difficult to retain users and acquire new ones. And repetitive fragmentation can negatively affect brand reputation. Just ask Southwest Airlines.
Convenience and efficiency are the components of the consumer ecosystem. The value proposition for today’s consumer is to get more done in less time. Brands that enable them to achieve this grow. Brands that do not are destined for obsolescence.