Digital transformation: What banks can learn from the retail industry

Consumers these days shop differently than they did 10 years or even five years ago — and they want to bank differently, too.

Digital technology has changed how people get goods, and brick-and-mortar stores have had to figure out how to stay relevant in order to stay profitable. Just as retailers had to take note and transform themselves, so now must financial institutions. In fact, a study by Gallup found that more than half of banking customers preferred digital experiences with their bank over personal ones.

“Banks are embracing digital transformation,” says Julien Courbe, financial advisory services leader at PwC in New York. “They understand customers’ needs have changed. They know online retailers have set the bar for customer experience.”

Retailers may have had a head start, but the financial institutions now have the benefit of these three digital transformation lessons, based on the experience of the retailers.

1) It’s all about customer experience 

“Retail banks have also not kept pace with the improvements in customer experience seen in other consumer industries. Few banks stand out for innovation in customer interaction models or branch formats,” according to a February 2019 report by McKinsey & Co.

The report continues: “Marketing investments have traditionally focused on brand building and increasing loyalty; a reputable brand stood for trust and security and became a moat, providing protection against new entrants to the sector.”

In other words, consumers these days care less about name or brand and more about their experience. They want a digital experience that is differentiated from the in-person one. For example, if they can open new accounts online or use mobile banking services, the bank’s website and mobile app better be easy to use, says Christine Peters, a marketing consultant for financial services and technology firms.

And real-time is big too—like real-time fund transfers and real-time loan approvals. If it’s not easier than showing up in person to do mundane banking tasks, and customers don’t save time or money, what’s the point?

2) There’s room and desire for physical and digital banking experiences

Banks should embrace their digital transformation, while also not neglecting the experience inside their branches, says PwC’s Courbe.

Bank customers want both digital and in-person banking experiences. There’s room and desire for both. Take that Gallup study mentioned earlier—it says that, even among those who prefer digital over personal banking, nearly four out of 10 consumers would only consider banks that also have physical branches.

It’s about connecting the online and branch channels for a single experience, says Courbe. For example, the website and mobile app should let customers know how and when to connect with an associate by phone or in person—and make it easy. And associates in branches should promote the ease of online banking, too.

Peters, the marketing consultant, offers an intriguing way to combine the two experiences—smaller, well-designed branches in neighborhoods that offer Internet access and the one thing you can’t get virtually: a good cup of coffee.

Of course, an example of this concept: Capital One Cafés, which offer full-service coffee bars, stocked with Peet’s Coffee, meet-up space for getting work done, ATMs and more. The idea, she says, isn’t really the coffee, but rather to meet people where they already are—in the neighborhoods where they live and work.

3) Dig into the data

“Part of what banks can learn is really the value of leveraging the knowledge that they have gleaned about their particular customers,” says Peters, who is based in Charlotte, N.C.

In other words, what are they purchasing? When and how are they making such purchases? What influences their purchasing decisions? Is it referrals from friends or advertising they have seen? What is the emotional connection?

“It is a very different decision when you go to order paper towels from Amazon because you ran out versus when you buy a very special gift for someone,” she said. “The same is true for financial services. If I owe you for theater tickets, it is easy to use Venmo. If I am going to discuss a much more important financial decision, that is going to likely be an in-person conversation.”

Banks need to analyze customer data and behaviors so that they know when to inject themselves into their customers’ lives in a meaningful and timely way. For example, if the customer is a frequent traveler, a targeted credit card pitch offering miles or hotel points could be attractive. Or it could be letting a small business owner know of loans of financial services around business succession planning.

But you don’t know what your customers need and how you can help if you don’t know your customers. Banks know their customers want a different experience—and one that is highly digital. That’s a start. They just have to dig a bit deeper.

Amy George is a freelance writer who lives in Charlotte, N.C. She has worked as a reporter and editor at The Associated Press and the Charlotte Observer, and in corporate communications at Wells Fargo.