The next frontier of customer engagement

For the banking industry, the last few decades have brought massive innovation and change, with a shift from being primarily brick and mortar to being supplemented with online and mobile. Fintechs saw a meteoric rise, and payment processing shortened from a matter of days to a matter of seconds.

Just like their customers, financial institutions are learning how to navigate a world that is simultaneously simpler and more complex. Competition is fierce, and FIs need to prioritize retaining existing customers while acquiring new ones. They have to develop strategies to build customer loyalty and trust, provide new products and services, and meet customers’ needs in personalized ways across every touchpoint.

These efforts boil down to one objective: increasing customer engagement. Research by Gallop  found that engagement is the definitive predictor of business growth – for instance, retail banking customers who are fully engaged bring 37% more annual revenue to their primary bank than disengaged customers do.

As more Americans make peer-to-peer (P2P) payments part of their everyday lives, FIs can support these services as a way to create increased loyalty and customer satisfaction. Here are a few places to start.

Bringing more customers into the digital revolution

Too often, P2P payments are singled out as being the domain of younger generations. Data shows that’s simply not the case. Consumers above the age of 45 are overcoming their skepticism of this new technology and are beginning to try P2P as part of their changing mobile and online banking behaviors.

The strongest opportunities for adoption growth are among older consumers, especially Boomers, as only around half (52%) are current P2P payment users, according to the Digital Payments Adoption Study that Zelle published last year. The study found that 75% of Boomers and 76% of Generation X ranked “offered through a financial institution they use” as a top reason to try P2P payments.

FIs can demonstrate how these services provide a fast, safe alternative to checks and cash for their everyday transactions – and in doing so, potentially win an engaged customer relationship.

Expanding P2P payments

While P2P transactions are typically associated with gifting and splitting shared everyday costs, they are expanding into B2P (business to person) and P2B (person to business) as well. FIs now have the opportunity to reduce friction – and boost engagement – for retail and business customers alike by supporting these transactions.

Roughly one in four small business owners already collects customer or vendor payments via P2P services, according to a survey from TD Bank. However, many are likely microbusinesses such as dog walkers, house cleaners, hairdressers and personal trainers who are transacting from their personal accounts, creating accounting headaches and potential legal liability concerns for the business owner. Banks can offer a way for these businesses to receive customer payments directly and to send payments to customers (such as refunds) or to other businesses.

Another opportunity is in corporate disbursements, such as insurance payments and medical expense reimbursements. Digital disbursements can also remove costs and risk from the payment process by eliminating the need for the company to obtain and maintain customers’ sensitive financial information.

Looking ahead to the 2020s

The pace of innovation in financial services and technology shows no sign of slowing down. Customers today and in the years ahead will continue to gravitate toward services that are more personalized, less transactional and more relational – and this includes their banking relationships.

Just like we are all connected digitally through social networks, financial networks offer the same connection-enriching power that can strengthen relationships in our lives. The more that FIs can foster these bonds, the higher the chances that their customers will remain happy and engaged.

In the ultra-competitive world of financial services, no mandate is more important to an institution right now than understanding and supporting their customers’ needs. This is essential to not only maintaining current customers, but also building new revenue streams. As consumers adopt an “anytime, anyplace,” always-connected mindset for their lives, they expect the same from their financial relationships. P2P payments provide an avenue to foster that while decreasing friction in customers’ daily lives.

Jamie Armistead is vice president and business line leader at Zelle.