Retail banking is a means to an end. No one goes to a bank or credit union to hang out like they used to do at the mall.
That's a philosophical shift financial institutions are going to have to make.
Consumers are exposed to all sorts of great experiences outside of their financial institution. And they now have more choices than ever to manage and move their money. At the same time, the old model of net interest payments and fees is being challenged. As a result, banks and credit unions are under increasing pressure.
The Implications for Financial Institutions
Financial institutions need to consider new ways to create value for their customers and for their own organizations. Critical to that goal is providing value in a way that makes consumers feel good about what they're getting – and makes them willing to pay for it.
Consumers need to understand and appreciate that their bank or credit union is on their side. In a 2018 survey of U.S. adults with banking accounts, Celent found that 79 percent of consumers trust their bank. Financial institutions need to earn that trust and genuinely be on the consumers' side.
Provide Value for Consumers
We're starting to see some of that added value now. The process of buying a home or car, for instance, has been made easier in ways that weren't conceivable just a few years ago.
Helping people manage their digital identity is another way financial institutions can help consumers. Our industry is generally not as far along with that endeavor, but it's an interesting, compelling way for banks and credit unions to help consumers.
A key element of those new value propositions is accessing data to create insights. But you can't do that in a vacuum. People don't want to be served up a spreadsheet or chart.
Instead, they want a specific, customized recommendation tailored for that moment. Rarely should that recommendation involve only buying a new banking product. More often, it should be a recommendation, a brief lesson or a nudge.
Celent found that just 43 percent of consumers say, "My bank knows me." Change that perception and you change the conversation.
In the end, successful financial institutions are shifting their mindset to become an advocate and an ally for the consumer. Financial institutions will benefit when their customers and members benefit. This is no longer a zero-sum game.