Creating a high-end digital customer experience

Improving the digital customer experience is one of 2022’s top business challenges for financial services providers, according to BAI Banking Outlook research.

Gaurav Bhatia, chief marketing and digital experience officer at PenFed Credit Union, joins us to talk about what his institution is doing for its 2.6 million members and how it’s working.

A few takeaways from the conversation:

  • One key challenge is how to offer a quality digital experience within the constraints of legacy technology.
  • PenFed’s tech is not cutting-edge – their aim is to provide digital tools that are secure and are easy to use.
  • Artificial intelligence is the next big trend, but deploying AI effectively will require higher quality data.

Subscribe to the BAI Banking Strategies podcast:

Apple Podcasts     Spotify    Google Podcasts    Amazon Music

Sign up for the free BAI Banking Strategies newsletter and get industry insights delivered to your inbox.

By clicking the Subscribe button, you acknowledge that you have read our Privacy Policy and Terms of Use and agree to be bound by them.

Below is a full transcript of my interview with Gaurav Bhatia.

Gaurav, can you start us off with an overview of digital banking at PenFed? How you think about it, maybe how you’ve been expanding and enhancing your capabilities as a result of the pandemic, or perhaps for other reasons as well. PenFed has fewer than 50 branch locations for a core member base that’s scattered around the country and really around the globe as well, so I’d imagine you were early to digital and you rely on it quite a bit to be a force multiplier for you.

Digital banking is near and dear to everybody’s heart. And if anybody knows about the history of Pentagon Federal Credit Union, we were established in 1935, almost 87 years old. We got about $32 billion in assets and about 2.6 million members across all the states we service in. And like you highlighted, we’ve got less than 50 branches, so essentially we have a very small footprint. Having the genesis of Pentagon Federal Credit Union, we had armed services which are in different parts of the world. So our DNA has always been to service our core membership base, which is not located near our branches. So we’ve been very fortunate over the last few years to really make the investment in digital technology and digital experience. And part of it is because of the nature of our business and less to do with the pandemic. The pandemic really accelerated that, but our DNA has always been “how do you service your customer base which is not located close to a branch?” That’s been our thinking, and that’s how we’ve evolved and continue to do so.

So now that we know a little more about digital’s place in your approach to banking, let’s bring in the member experience aspect of it. Tell us, if you could, about how you think about the member experience, what you do to try to please or even delight your members, and how digital capabilities help you do that.

Like any credit union, we are member-owned, so essentially our goal is to service the member in any way they want us to. So we have really three channels. One is digital, which could be mobile, web, email, chat functionality. Second is our contact center, where people can call in and speak to a member service rep. And the last, but not the least, is walking into a branch if they are located very close by. And we have (access to) 65,000 ATMs. So it’s not really a digital transaction, but our goal has always been to service the member. And with the pandemic, we really accelerated our core focus on making sure that our members can access us 24/7 in whatever channel they think is most appropriate. And digital is always on. So I think it was basically a no-brainer for everybody in the organization that we need to double-down and invest more to make sure that our members can access their bank any time they feel like. They can go to an ATM any time they want to, and they can really transact on their loan at the comfort of their home. So that’s pretty pivotal for us. But the good news was that we were already investing in those channels, we just needed to speed up the things which were in the pipeline to make sure that we are much more accessible now that people really couldn’t visit the branches.

There are so many challenges that traditional banking institutions face these days as the industry is going through this period of disruption. What would you say are your key challenges when it comes to delivering the digital customer experience that you aspire to, and how are you trying to overcome those challenges?

I think it’s pretty important today for every financial institution to be digital, because the nature of banking has changed. So our demographics, we are a traditional financial institution and the demographics skews more towards the 50-plus (age group) and they were not natively digital. So they really adopted digital technology, and we really followed that adoption curve in terms of helping our members where they are. Traditional banking institutions really face two challenges. Challenge number one is most of the systems have been legacy, so how do they innovate? They really don’t have the luxury of building from scratch like fintechs do. And secondly, making sure that the institution is safe and secure, because being a part of a financial institution – a credit union or a bank – you have to make sure that the funds are safe for a member and they can access it any time they feel like. And that’s a top priority – the safety of our members’ deposits are going to be key. So I think that what most financial institutions think about, is that, “I really want to be able to provide digital access, but I really want to make sure that it’s in a safe and secure manner.” I think that’s basically the constant battle internally, in terms of how you make sure that we make the experience seamless and frictionless while making sure that it’s secure.

Gaurav, you have an interesting background. Before you joined PenFed a few years ago, you worked in venture capital, you worked in e-commerce and the travel industry, and you even spent a little bit of time at AARP. So what are a couple of the key things that you learned in those non-banking roles that you’ve been able to put to work at PenFed, particularly on the digital side?

I think I’ve been very fortunate to work in these large companies. And all the focus I’ve had is really being customer or member-focused. How do you really keep the customer or member at the center of the ecosystem versus putting the organization first? So I think moving around in different industries, the theme that’s pretty much been the same – it’s keep your customer in the middle, develop transactions or products based on their needs and wants versus what the organization wants to push. I think that’s the same thing we are doing it at PenFed Credit Union, and that’s been the DNA, I’d say, of the organization. I feel very fortunate to work here and lead the marketing organization, simply because the DNA of the organization aligns with more about a customer service and member service mentality. And that’s what I look for an organization, and that’s what I hope to leverage from my past experiences.

The member’s experience is the thread that’s going to weave through our conversation today. No doubt you get feedback from your members that informs you as to how to serve that member. What are some of the key insights that you’ve received in that communication regarding the member experience, and the digital member experience, in particular, that you’ve been able to convert into action?

I think security and access are two important things every member wants. They want to make sure that the funds are safe, and they really want to be able to access it 24/7. I think that’s really helped us define the digital experience. Can a member who was walking into a branch or going to an ATM to deposit check actually pull out their mobile phone and deposit a check with one click on the mobile app? We’ve done that. When we communicate in terms of the statements online now, we have the option where people can say, “Hey, I want my statements online, don’t send me a paper statement.” And we enable that functionality as well. We listen to our members, we do surveys with them, we measure (net promoter score), and we actually take feedback on social media channels as well. And there’s a huge population which actually wants to chat with our customer service reps, so that’s also a channel which we mine and look for pain points in terms of our customer experience and member experience and see how effectively we can resolve it in a really expeditious manner.

In terms of customer experience, do you think about it differently for primarily digital customers who may skew a little older versus primarily mobile customers that may tend to be a little bit younger?

Yeah, I think we think about it a little differently. Our demographic is slightly older, so we look at all the design standards for subtle nuances. The fonts are slightly bigger, the color combination is slightly different. We want to make sure they can engage with the mobile and the web properties we have. So those are minor changes we’ve made to make sure that it really fits the target audience segment. But we also give them the option to interact with us through our call center, but also in terms of our IVR, which is essentially the phone system, which is fully automated. I don’t know whether we’d call it digital, but it’s not – it’s basically remote. But that’s going to be pretty important differentiator for us – really understanding how our member base is slightly different than the younger demographics. We don’t do much about gamification, which I know certain fintechs are doing because we already have an engaged member base. We understand what they need. We talk to them on a regular basis. We really make sure that it’s functional, it’s elegant, and it’s simple. It’s a financial institution, so we don’t play any gimmicks. It’s their money, we make it easy for them. And that’s basically how we think about it.

With all of the fintech attention to mobile through payments and through other functionality, it seems to be a channel in a constant state of change. Given the development timelines and controls within banking, once you finally put something into place, there’s a good chance that it’s no longer cutting-edge. In this environment, how do you get ahead or how do you even keep up?

I think our rules are simple. We try to do things which are important and valuable for our members. I think what we’re really not trying to do is win the award in terms of the best mobile app. We want to make sure it’s easy to understand. We stay in middle of the fairway. We don’t take too much risk, and that’s warranted in the financial services industry. How do you make sure that security is there? We are validating the members at the point of sale because one of the risks which most financial institutions are grappling with is “how do you validate a customer or a member who doesn’t really walk into a physical branch?” You want to make sure your mobile app or your web property is safe and secure, but we also keep an eye out in terms of what’s trending out there. Are we the first movers? Probably not. But we’re pretty close in terms of following technology which is mature and secure, and that’s been our DNA. It’s implement what’s required, but make sure that it’s secure and safe for our members.

Speaking of technology, when it comes to developing technology, are you doing everything in-house or are you working with fintech partners? And if you are partnering, how do you decide when to partner and who to partner with?

I think if you go back 15, 20 years, there really wasn’t any fintechs. So most of the financial institutions which existed before 2000 really had some legacy technology. So what we are thinking through is keeping our core banking system and then leveraging the third-party technology, integrating it, so that we can get our products really out to the market faster. We have a review process where we review every piece of technology which integrates in our ecosystem in terms of complexity, the product roadmap, and also in terms of security. So I think it’s a very judicious decision we make. We are not one of the organizations which really wants to 100 percent outsource or keep 100 percent in-house. We want to make sure that we are providing the best solutions for our members. I don’t think we really have a hard and fast rule. It’s technology we evaluate on a constant basis and see what makes sense to build or buy, and apply the security lens on top of it.

Let’s talk about data for a minute. We hear a lot about how banks and credit unions have these vast repositories of data about their customers, but that they find it difficult to extract a lot of value out of that data. So how are you thinking about data in terms of serving your customer, and how or where are you getting the most value so far out of all the data that you have?

We are very honest with the customer base. Data is definitely a treasure trove, but we also take data very seriously. We really believe in permission-based marketing and leveraging data, and we really take permission from our members to use their data which benefits them. So a use case I would use is that if somebody has really opted in for communication with PenFed, we will send them offers. If they’ve decided to opt out, we are not going to send them communication. So we are not overloading our members based on what we want to do as a financial institution. We really ask their permission to use their data. And you’re right, we’ve got data sitting in different systems, and we are able to use our own data insights and intelligence to mine that data, but it’s all permission-based and all very secure. We don’t buy data from third parties. It’s all member data, and we are stewards of their data, so we are very careful about how we use them and what we use it for. And that’s basically how we earn trust and respect from our members.

To wrap things up, Gaurav, as you look ahead, what do you see as maybe the next big thing, the next big challenge in customer/member experience, and more specifically, digital customer experience for the industry? In other words, what’s the next thing that’s going to be keeping you up nights?

Yeah, I think a lot of people have talked about artificial intelligence and machine learning. I think it’s an important trend to watch out for. Are we there in terms of the AI technology? Probably. But we really don’t have the data which can work on artificial intelligence, because the bedrock of any good AI tool is clean data, which most financial institutions lack or are not able to integrate. But that’s probably going to be one of the differentiators for most financial institutions, where if somebody uses and logs in and interacts with the financial institution, whether it’s chat or through text messaging, they know who you are, they know your preferences, and they can really be much more responsive versus a human being. I think that’s a trend to watch out for. Everybody’s experimenting with it, and I think that’s one thing which … I don’t think it keeps me up at night, but it’s something we are very careful about in terms of monitoring it and seeing how we can adopt that in the future.

Glad to hear you’re getting your rest, and no doubt AI bears watching as customers and members will continue to expect their financial institutions to anticipate and meet their banking needs. So Gaurav Bhatia, chief marketing and digital experience officer at PenFed Credit Union, many thanks again for sharing your thoughts with us on the BAI Banking Strategies podcast.

Thanks for having me, Terry. I really enjoyed the conversation.