Once again, a new year rings in with anticipation and excitement. At Merkle, our very experienced team of financial services strategists monitors trends and how they may affect the industry. Here are 10 expectations for 2016 and the resulting implications for bank marketers to consider:
1. Interest Rate Paralysis
The Fed provided a very minimal increase in rates in December and has indicated that it will continue on a very slow pace (1.00% a year) to “normalize” interest rates. This is all providing that there is no compelling reason not to – i.e., economic meltdowns, terrorism, elections, etc. End result – bank spread will continue to be compressed and earnings lack luster.
Implication: Banks have to focus on deeper, more profitable relationships and attracting the right kinds of customers. Creating greater loyalty to expand and retain quality customer relationships is paramount. Real CRM is needed.
2. Expanded channels and new technology provide greater customer access to research, information, and servicing.
Implication: Banks need to employ the proper technology to capture prospect and customer interactions, be able to properly analyze and deploy learnings, and connect offline and online activity ... right message to right target at the right time.
3. Customers are using branches less for informational and transactional needs.
Banking is becoming more self-serve, but branches are expected to be able to “know” the customer and to be able to quickly and accurately solve problems.Implication: Banks still have a tremendous amount of equity in their branch networks and the associated, highly trained personnel. Understanding customers’ needs and interactions with the bank is critical. Identifying heavy branch users can be an area of focus for banks, particularly if these customers are profitable or have the potential to be. Technology and digital enablers are crucial to capturing, analyzing, and re-deploying data to interact with customers when, where, and how they prefer.
4. Banks continue to fall short in terms of appropriate cross-selling and the consolidation of customers’ banking to their institution.
Implication: Loyalty and retention are built by identifying the correct needs and being proactive in offering solutions. Managing the communication stream of sales through multiple channels is also important for creating customer relevancy; understanding the appropriate engagement triggers allows you to provide relevant interaction during “moments of truth.”
5. Bank marketing organizational structures are still primarily silo-based around product, prohibiting customer management across channels, media, and around customization of message/offer.
Implication: To fully embrace CRM, structure has to change. Products are just one facet of the banking relationship and have to be managed in conjunction with sales, service, and additional needs. Shifting from lines of business management to segment management while still generating desirable business outcomes will continue to be a challenge in an evolving industry, but is imperative for long term growth.
6. IT continues to move sluggishly to integrate systems and capture the data necessary to deliver the right message to the right customer/prospect at the right time.
Implication: Organizations that can implement technology to capture, analyze, and provide intelligence from big data and integrate offline and online data will have a decided advantage over competitors that don’t make marketing technology a priority.
7. Alternative lenders will continue to grow their share of the lending market.
Implication: This will continue to erode banks’ revenue streams from lending products due to the overall loss of loans and tighter spreads from competition. Banks will have to look for creative ways to weave lending products into relationship offerings.
8. The regulatory environment continues to be counterproductive for banks.
Implication: It will be continually harder to be innovative around lending and other products, unlike the less-regulated “disruptors.” These new innovators will likely steal significant share from banks before regulatory powers pursue them. Banks will have to compete for relationships through education opportunities, counseling/advice, and stellar customer service.
9. Borrowing has been declining over the last few years, but is starting to see an uptick, particularly among younger customers (millennials).
Implication: There is significant opportunity among new borrowers coming into the marketplace; however, siloed products no longer will suffice for satisfying customers. Banks need to wrap products around solutions and offer financial advice through content that educates the customer and encourages them to do more business with their “relationship” bank.
10. Marketing dollars are significantly shifting from major media (TV/print/radio) to addressable media (digital/DM/EM) in an effort to be more targeted, more relevant, and more timely in providing offers and messaging to prospects and customers.
Implication: It’s paramount to utilize all marketing “levers” to provide the maximum impact on marketing spend. To do this, banks need to capture, analyze, and understand associated customer characteristics and behaviors and nimbly and consistently deploy marketing across different media and channels with the greatest relevance.