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In the 1946 American movie “It’s a Wonderful Life”, George Bailey (played by James Stewart) runs a small building and loan bank in the fictional town of Bedford Falls. George cares about his customers, who are also his neighbors. He greets them by name and knows what’s going on in their lives. Partway through the movie, there is a run on the bank and his customers are desperately clamoring for their deposits. The bank doesn’t have the cash to cover all withdrawals, so George and his wife decide to use the money that was supposed to go towards their honeymoon to float the building and loan bank. At the end of the run, $2 remain, and disaster for both the bank and community is averted.
For decades, the business of banks was done almost exclusively in person. Tellers and managers like George Bailey were responsible not just for processing transactions, but also for building loyal relationships with their customers. The convenience of mobile apps and online platforms has shifted activity out of the branch, though, making banking more transactional and less relationship-based than ever. That shift exhibits two major symptoms: account dormancy rates are skyrocketing, and churn is reaching unprecedented levels. Millions of new digital customers lack confidence and trust in their financial institutions, leaving 53% of accounts worldwide inactive. Switching costs for customers to open accounts at rival banks, meanwhile, have become trivial.
Banking has become easier and more efficient, but meaningful relationships between banks and their customers have been left behind. More than nearly any other type of product, bank accounts require customers to have complete confidence, knowledge, and trust in their provider. How can financial institutions replicate George Bailey in today’s digital world? How can they become more than just another front-end platform to their customers?
Digital and mobile banking can and must move past transactional relationships. New technology has the potential to not just expand the reach of banks to a broader base of users, but to develop personalized relationships with each customer. Banks need a “Teller 2.0” that can be warm and personable, responsive to questions in a natural way, and sympathetic to customers’ needs. The Teller 2.0 should proactively engage with users in customized interactions, inform them of product features, and build trust and loyalty. This vision has historically been hampered by technical constraints; new automated tools, though, are making it a reality.
Many banks are already investing in AI chatbots that can respond to customer questions and requests. Chatbots can drive substantial cost savings for banks and provide customers with immediate answers to basic questions, but they are only one piece of the customer relationship puzzle. Best-in-class customer engagement models have a proactive arm to encourage account usage and build long-term relationships. Imagine the following interaction between a bank and one of its customers:
BANK: Saving today is the way to achieve your goals for the future. How much can you set aside this week? For example: Saving 100
CUSTOMER: Only 50
BANK: Great! The habit is the most important thing, even more than how much money you deposit. Let us know if there’s anything we can do to help.
BANK: Want to save some time? You can make a deposit to your ABC account on your phone without needing to go to the branch. To learn more, reply A.
BANK: Making a deposit on your phone is easy – just follow these steps: [bank lists steps]
CUSTOMER: Thank you, I appreciate your encouragement and advice.
BANK: You’re welcome. Keep up the great work!
The technology exists to automate these proactive, warm conversations with millions of customers. The opportunity for early adopters of digital relationship-building tools is massive: 1.2 billion people worldwide have opened a bank account in the last seven years, growing the percentage of adults with bank accounts from 51% to 69%. Financial services providers that can build trust-based digital relationships with their new customers will separate themselves from the pack. Even more importantly, millions of people will be empowered to take full advantage of the myriad benefits that come from using formal financial services. Banks may not be able to clone George Bailey, but they can do the next best thing: invest in digital relationships.
Katie Macc and Jason Greene are, respectively, Co-Founder/ Chief Commercial Officer and Consultant at Juntos, Inc. Juntos is a financial conversation platform that serves as a bridge between financial service providers and their customers. Juntos partners with financial service providers worldwide to deliver high-touch engaging conversations to build trust, comfort, and confidence with customers so they can effectively use newly available financial products, increase their participation in the financial system, and take control of their financial lives.
Juntos is venture backed by Aligned Partners and Omidyar Network.
This article originally appeared in Financial IT October Issue 2018.