OPINION 3 ways financial services companies can create lifetime customers

Tim Glomb, VP of content and data for Cheetah Digital, looks at three techniques that help drive long-term loyalty in customers.

Generation Z is more likely to change financial service providers than any other generation, according to a 2020 Finder survey. More than half of British respondents say they have changed providers at some point, and consumers are forecast to continue switching at increasing rates. More than a quarter of respondents said that they change providers every three to five years—and it’s the younger generation spearheading this trend.

Brand loyalty that existed in the finserv sector of yesteryear is dwindling, and at the same time, the digitisation of financial services continues to rise. How are these two concepts linked? Before Millennials and Gen Z started managing their money, financial service companies were largely person-to-person with relationships cultivated over years of partnership or guidance. This is not the case for the digitally-driven younger generations who favour app or tech-based financial services.

These same young people who favour digital financial services have high expectations for the platforms they use. They are the most educated generation in history and, as a result, they are highly informed and concerned about issues surrounding digital financial management—particularly about how their data is used, stored, and shared. A decade ago, more than 50% of customers had never used online banking—customer loyalty was driven by a face-to-face relationship in which trust was cultivated over time. Now, 80% of consumers use online banking services, and finserv companies must cultivate this loyalty in a new way.

Consumer loyalty in the financial services industry centres around longevity. Companies must ask the question: “How can we cultivate a long-term partnership with the customer?”

Our team found that two-thirds of UK consumers are loyal by nature to brands that they feel have engaged with them appropriately. The company has culled three key factors to cultivating loyalty based on more than 2 billion data entries from leading financial service institutions. Ultimately, financial service companies must balance the consumer’s expectation of a personalised experience with their concerns about data privacy. So how do we find this balance?

1. Security and clarity must drive initial customer engagement

Customers want to know what they can expect from financial service institutions before they even log on to the platform. This is essential because finserv companies handle more personal and more significant data than the average app on a consumer’s phone. With rising concerns about data privacy and security, financial service providers must clearly communicate with their customers, informing them of how their data will be used, shared, and even sold.

The bottom line is this: creepy marketing doesn’t convert. Companies that use background data collection or third-party initiatives forfeit the trust of consumers early on. Zero-party data is the key to generating a positive customer experience without losing the consumer’s trust. Instead of third-party software that gathers information in the background while consumers browse the internet, zero-party data gets straight to the point by going straight to the source—the customer.

Specific data is an essential tool for finserv companies because it shows the consumer that the company only wants to deal with the information relevant to the service. It shows that the communication is private between the finserv provider and the consumer alone. Consumers want this security, and this offering will drive initial consumer engagement. Security and privacy are the hook for finserv companies looking to cultivate long-term relationships.

2. Offer consumers an all-encompassing experience

According to our study, 34% of consumers said they are not loyal to a brand simply because the company did nothing to cultivate their loyalty. Consumers want to stick around, but brands are missing out on loyalty because they do not interact with consumers in close enough proximity (metaphorically). Zero-party data mimics the face-to-face interactions consumers experienced in financial services of old. Customers want to know that brands understand their individual needs, experiences, and goals, and zero-party data makes this possible.

Through strategic marketing efforts and a suite that can manage extensive amounts of data, finserv companies can reach out directly to the consumer to understand their financial needs. This is crucial when companies are looking to expand their offerings, revamp their apps or build a new system from the ground up. Consumers want an all-encompassing experience, and that means they want the ease of digital access combined with the comfort of working with a person directly. Working directly with customers, even in a digital space, makes it possible for finserv companies to provide the experiences that customers want.

3. Rely on personalised communication

Strategic data collection enables finserv companies to anticipate consumer behavior and understand the best ways to engage with each individual customer. To maintain long-term relationships with clients, finserv must offer personalised communication. Fortunately, 50% of consumers have reportedly downloaded an app associated with a brand—meaning they are looking for ways to engage with the brand directly.

Finserv companies must take advantage of this unique opportunity and create systems that provide communication options targeted to the needs of the customer. If finserv companies consistently reevaluate and reinvent their platforms to enable the best consumer experience, those customers could stick with the brand for life. Creating consumer-centric experiences for every aspect of the customer lifecycle will ensure that financial service companies stay competitive. This will affect the bottom line—happy customers lead to opportunities to cross-sell and upsell, ultimately generating more profit for brands.

Cultivating a lifetime customer requires trust and commitment to the improvement of products over years of service. Financial service companies have a unique opportunity to optimise trust on digital platforms so that they engage younger generations and pull in customers at the early stages of their financial journeys. Clear communication and privacy-focused initiatives demonstrate that a long-term, positive customer experience is the primary goal of the financial service company over any short-term financial gain.

Resources

https://www.finder.com/uk/digital-banking-statistics

https://www.finder.com/uk/banking-statistics

https://www2.deloitte.com/us/en/insights/multimedia/podcasts/financial-services-industry-outlooks-2021.html

https://bankingjournal.aba.com/2019/01/how-generation-z-is-changing-financial-services/

https://www.morganstanley.com/ideas/millennial-gen-z-loan-growth

https://thefinancialbrand.com/90873/generation-z-millennials-social-media-branch-youtube-marketing/

https://www.pewresearch.org/social-trends/2020/05/14/on-the-cusp-of-adulthood-and-facing-an-uncertain-future-what-we-know-about-gen-z-so-far-2/

https://www.mckinsey.com/business-functions/risk/our-insights/the-consumer-data-opportunity-and-the-privacy-imperative