Banking's dilemma: Staying ahead of fintech competition in real-time
By Mike Hamlin, vice president of product strategy for card services, Fiserv
Today's consumer has an expectation of immediacy. Nobody tolerates a time delay if they are, for example, downloading a video or music. If I download a song, it's because I want to listen to it immediately, not wait hours or days to do so.
Our new seamless, always connected, mobile reality has implications for financial services too. We now have an expectation that we don't agonize over financial services, rather we have the ability to access our money – and the information associated with it – securely, quickly, easily and reliably. It is coming through loud and clear that “real time” will only become more critical to the consumer experience — and to the success of financial institutions.
Research from Raddon Financial Group, a Fiserv company, shows that consumers would like their trusted financial institutions to provide these services — 55 percent of consumers said they would prefer to conduct all current and future financial business with a traditional bank and or credit union. In the absence of your delivery of mobile services, however, consumers will eventually seek what they're looking for elsewhere, because they have no shortage of options as non-financial institutions increasingly are intruding on the landscape.
A clear understanding of the four payment dynamics at play
- Fraud is a huge area of concern and card management solutions are growing in response. New mobile fraud mitigation services like tokenization and digital wallets are examples. Tokenization is gaining traction — Raddon research shows four out of 10 consumers indicate a tokenization security measure would prompt them to use mobile payments. So is placing self-administered card controls in consumers' hands. Interactive cardholder text alerts, for example, are an efficient and convenient way to combat fraud. Early returns would suggest that putting control in your cardholders' hands means they will move your card to top-of-wallet position, spend more and transact more.
- The fast pace and adoption of mobile technology by consumers is creating a shift in transaction types. An investment in new mobile channels is imperative to keep pace with change and meet consumer expectations.
- Consumer preferences are driving digital payments based on the need for self-service capabilities. Millennials have a unique set of expectations, and it is necessary to segment consumers based on the criteria that is most important to them.
- New competitors continue to emerge and fight for consumer trust and relationships. Today, consumers can form electronic payment relationships – activities traditionally performed by the financial institution — with a variety of players and brands. These competitors have significant user communities and have the potential to disintermediate the financial institution to customer relationship. "Are we delivering market-leading innovation and providing a better customer experience than our competitors?" "Are we agile enough to shift with evolving market and customer demand?" Financial institutions will need to answer these tough questions to thrive in the digital age.
Deliver peace of mind and anytime, anywhere access to payments
Security and simplicity do not necessarily go hand-in-hand when it comes to mobile payments. This careful balance will have to be struck in order to provide the best possible experience to the consumer, and allow them to control when, where and how their cards are used. There are downloadable apps available that allow security-minded consumers to turn their cards on and off to ensure their cards are not used fraudulently. Equally important is education on mobile payments security, to ensure consumers understand the benefits of how their financial institution is protecting them and their information.
Putting the consumer in control has a number of clear benefits; they are now on the frontline, joining you in a united front against the fraudsters. Engaging in two-way communications with your cardholders fosters a relationship built on safety and conveneince. Where fraud occurs and cards need to be reissued, there are a percentage of consumers who will never activate that card. Putting these tools in the cardholders' hands not only generates revenue as consumers feels safe and more inclined to choose your card for payments or purchases, but it instills a greater sense of trust in you as a financial institution.
If consumers are conducting more transactions using your card, moving your card to top-of-wallet and front-of-phone, spending more and transacting more potentially there is the opportunity to start connecting dots over time about deepening relationships in terms of buying other products. For instance, Raddon research found that, for one half of the consumer population, tokenization of in-store payment cards would prompt greater debit and/or credit transaction activity.
It's all about engagement
The topic of engagement is of paramount importance. A differentiated, personal experience is how financial institutions set themselves apart from the competition.
A recent Gallup study found that consumers who are fully engaged (i.e. those with a strong attachment to a particular brand) delivered a 23 percent premium over the average customer in terms of share of wallet, profitability, revenue and relationship growth. Additionally, consumers who are fully engaged bring 37 percent more annual revenue to their primary bank than do consumers who are disengaged.
Traditional financial institutions have something in their favor over the new players who are beginning to crowd the payments space in the competition for mindshare: you know your cardholders. Using analytics and data are important to gaining a competitive edge and fostering profitable relationships.
Analytics are important in driving the effectiveness of sales and marketing efforts and deep customer relationships are fundamental to being top-of-wallet and front-of-phone. Simply framed, portfolio growth is all about the relationship: know your cardholders and target behavior with actionable opportunities.
Stay ahead in a fast-moving world
People aren't thinking about financial services, they are thinking about living their busy lives. They want to be able to access their money simply and securely in real time. In such a fast-moving landscape crowded with new players, competing successfully comes down to the ability to understand cardholders, deliver solutions that consumers want in the way they want them and give them peace of mind that they can conduct transactions securely.
By taking these steps, financial institutions can protect their investments in their cardholder in this new reality by keeping their cards top-of-wallet and front-of-phone.