The major banks are stuck. Although each has vast numbers of customers, they are unable to differentiate from each other.
At the same time, the new Payment Services Directive (PSD2) becomes law in January 2018. As a significant step towards so-called open banking, PSD2 is opening the market to the new breed of FinTech providers; brands that are strongly differentiated and capturing market share irresistibly.
The possibility exists that, over the next decade or so, our major banks could fade away into the obscurity of the financial infrastructure. Seen the right way however, this new environment opens a second possibility, which is that of a major bank creating real connection to its customer’s lives and stepping out in front of all others.
Major banks have both incredibly large numbers of customers, and data about their lives from every financial transaction that they make. Information that most brands can only dream of. Given this, why are banks so bad at reaching out to their customers and building relationships with them? It’s no secret that banks are among the least loved institutions in our culture.
There are many good, solid, rational reasons for this problem, but the one that matters most is the lack of emotional connection with consumers. At the core of this crisis is a cultural clash – banks have a deeply held belief in the ability of rationality to create financial products that are both useful and profitable. Consumers on the other hand display less rationality in financial decision-making, perhaps less than in any other area of life. The result is two cultures that can’t even begin to speak each other’s language, let alone connect emotionally.
We recently delved into the mysteries of consumer decision-making in one of our largest ever cognitive studies. What quickly emerged was perhaps the most defining problem in finance marketing today.
Finance marketers have correctly identified consumer trust as being a central issue, but they misunderstand the consumer’s concern as being one of trust for the institution. Hence, finance marketing is focussed on trying to inspire trust from the feeling of permanence, to the alignment with ethics or the rigour of process.
Consumer decisions however are defined not by the lack of trust in their institution, but a lack of trust in themselves. Spend a few moments thinking how differently you would communicate with someone who didn’t trust themselves, as opposed to someone who didn’t trust you. This radically different requirement in communication leads straight to the heart of how banks fail to connect and differentiate themselves to their consumers.
A rational frame leaves us distant, unable to understand the subtleties that are everything in a personal connection. Our relationship to money is complex, formed from so many highly emotional experiences throughout our lives – from our pocket money to our first house, from our first pay check to our first financial crisis. We don’t have one way of thinking. We don’t approach financial decisions from one point of view.
For us as marketers, it is critical to understand that the personality that a consumer has when picking a credit card is not in any way similar to that of when he or she chooses a mortgage. From universal credit scoring, to overly simplified behavioural models, consumers are left treated as single dimensional stereotypes. With so much going on for each consumer, it is no surprise that such an approach leaves them cold and detached when it comes to banks.
It is possible to spend time with consumers to understand how all these issues connect. Banks have the expertise, information infrastructure, and access to information to build powerful multi-dimensional segmentation models, to enable them to connect and personalise to the different aspects of each and every consumer.
A major bank has a unique opportunity, one that is enhanced by the opening of the industry. To step forward and build an unprecedented deep emotional connection with their audiences, to differentiate themselves from the others and to become the bank that sits at the heart of everyday lives.