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Building relationships with the next gen through lending

May 17, 2022 / Consumer Banking
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Millennials and Gen Z represent almost half of the U.S. population, and they’re growing up so fast.

Rajesh Shah from Citizens Bank and Bal Shukla from Infosys join us to discuss why lending is the right product set for banks to build strong relationships with younger Americans.

A few takeaways from the conversation:

  • The key is to meet them where they are, which requires creating the digital capabilities to provide fast, easy and convenient access to products and services.
  • Lending is the right banking product to start a relationship because the variety of lending products available provides a potential solution to almost anyone.
  • Millennials and Gen Z can be quick to switch banks for a better experience – offerings that are mobile-first and hyper-personalized can help with stickiness.

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Below is a full transcript of my interview with Rajesh Shah and Bal Shukla.

Gentlemen, the theme of our conversation is “building relationships with the next generation through lending.” Let me open things up by asking both of you what this means in a practical sense from your respective position as a bank and as a bank’s strategic partner.

SHAH: From a bank standpoint, what is very critical for us is to build the next generation of platform and keeping our customers and our future customers front and center of our entire strategy. What this also means is it’s a long-term commitment for us and a persistent commitment to ensure we win the size and share of the wallet from our customers.

SHUKLA: As we look at the next generation customers, these are mostly the millennials and Gen Z, who are the fastest growing population on the planet. Their mood of relationships, however, is very different from previous generations. They are driven by value and purpose. So as the strategic partner of the bank, we focus on taking a “north star” approach to incubate using human-centric experience and first principle of design and then look at building the platforms flexible, relevant and scalable to get varying needs. That’s what we mean when we say “building relationships.” It means being always relevant to the needs of the customers – the Next Gen – in which it ties back to the lifecycle of the customer.

To be clear here, when we are talking about building relationships, are we talking about this from a customer or as a prospective customer? Is it an approach that’s trying to create new relationships with new people or is the goal here to deepen the relationship with existing customers?

SHUKLA: As we typically look at the cost of acquisition of a customer is 5X between acquiring a prospect and an existing customer. As we look at organizations, the intent is to look at what is the product landscape the organization offers and what’s the overlap of what’s already offered to the customer. Generally speaking, we see that there’s potentially almost one product per customer, or 1.2. The intent is to focus more on deepening the relationships with the existing customers. That would be much more value-add and much exponential impact for the businesses, and if you have marked that out, then go after acquiring new customers.

Rajesh, let me ask you, why is lending the right banking product to use as the foundation for this effort to build strong relationships with millennials and your Gen Z customers?

SHAH: I predominantly look at it as two main factors. First and foremost, if you think of lending, just the diversity of products allows us to be able to sell to a very wide range of customers. When you think of lending, we cover everything from student to auto to credit card to mortgage to buy now, pay later. And just the diversity of products is a tremendous asset in terms of attracting or engaging our customers. The second one that I’ll say is, as we learn, as customers become part of the franchise, lending gives us an amazing tool to be able to learn from their transactions, their behaviors, to be able to deepen the relationship further now with our customers. Those are two main reasons why I believe lending is going to be uniquely positioned to be able to attract the millennials and the Gen Z’s.

The leading edge of the millennials are now in their early 40s, so most of them are well along in their working careers by now. Many of them have their own businesses and they’re having children, they’re buying homes, all that family stuff. What do these folks want and need lending wise and how do banks best deliver it? Bal, why don’t you start on that.

SHUKLA: If I look at the economy lifecycle and what has happened since 2008 and 2009, there’s been a huge change in the lending landscape where it happens. Obviously, a lot of new banks came in and the intent was always to disrupt what is not working today. That’s the journey that has been going on. Even during the pandemic, things have gotten further accelerated from the disruption of what has not been working. Finally, if you look at this, customers want to have a seamless experience as you go across the lifecycle. Even though the customer will be working with banks and traditional banking players that provide them into an experience, what they finally look at is “Do I get an experience from an onboarding perspective, my experience from payment terms, my transparency into how can I if I have to dial up, dial down things, do I have the experience or not? How do I do payments and remittance? Do I have end-to-end experience?” That’s the intent why the customers are looking at the current banking firms that they’re working with and do I have option to go to the other one who can provide me a better experience across both?

SHAH: As we build our solutions, it’s very important that we instill learning from these behaviors into our solutions. First, this is a generation that is digital-native. The second one is they absolutely expect an instant digitized qualification. The third one is they would only move to physical brick and mortar experiences if the digital experiences are not good. That brings us to the three core ingredients that become stable state. First one, transparency, second one is optionality and third one is ease of doing business. When you think of transparency, it covers everything from policies to the statuses to how our status of the application and to how our customers access and how we deliver each of those experiences to our customers. From a lending standpoint, whether it’s origination, underwriting, servicing, operations, disbursement, it’s about ensuring we are able to do that very transparently. Second, I’ll tie it with the optionality. In terms of their goals, you may have personas whose goal is very important to save money, whereas you may have a persona who may want to minimize their monthly payments. Now how do you cater to those? The magic lies in how we build our experiences so that we are able to get to the multiple dimensions of personas and the optionality tied to that. A very simple example is also thinking of giving them product choices, not just tied to, let’s say, a credit card, but how can we basically bring them into buy now, pay later – very, very important if they are making a big purchase and they want to defer or devolve the purchase item. How do you do so and do that very efficiently, very seamlessly?

While the oldest millennials are heading up toward middle age, the leading edge of Gen Z, they’re only in their mid-20s. They’re just getting started in the labor force. Most of them, or at least many of them, are not doing the family thing quite yet. They’re not buying homes quite yet. So essentially the same question: As they get older, they’ll start looking more like the millennials but what does Gen Z want now and how do you connect with them now, where they are now?

SHAH: Out of the three points, I’ll focus more on the optionality. As we started building our lending strategies over the past three years, it is tailor-made to ensure that there is seamless integration front to back for our customers’ entire lifecycle. What it means to the customer is they are able to start their application all the way to completing the servicing in a matter of minutes. That is what we see them both becoming table stakes from their expectations as well as us being able to deliver it. Buy now, pay later as an example – it’s becoming such an important piece of how do we lend our customers who are in a shopping experience. How do we translate those shopping experiences into products and services that actually tailors to what fits their lifestyle? Two very distinct examples there.

SHUKLA: I want to build on what Rajesh mentioned taking the digital commerce example itself. I’m a Gen Z and I’m playing games. The intent for me is how can I use the gaming industry itself to build great products from there and help me get great products from there? The other piece I would call as well here is, in the lending industry it is important to build a great profile. How can institutions help build a great profile of customers? Rajesh gave an example of buy now, pay later, but it could be other products, it could be student loans, it could be personal loans. It’s very important to bring what we call creative financial education with these customers because that builds confidence in the system. Plus, they also understand how this can all take you to the next level. The second point I would also call is, we need to connect with them on where they spend most of their time. Now this generation is what they call TikTok generation and all coming up. I know new things are coming up now like NFT, metaverse and new games coming up and all. The intent here is how do we bring great products over the lifecycle of organizations closer to convergence with different industries and then connect back to where they’re going to spend most of their time. That’s how I would say we take it forward.


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As Infosys and Citizens have been working together to be able to create the capabilities, including the technical capabilities needed to support relationship building, what’s that process been like and what have been some of the key challenges that you’ve run into? And those key challenges, how have you addressed them?

SHAH: In terms of challenges like any financial services or any large organization, I think there are two key challenges that we have to address. First one is talent. I’m sure everyone knows how important talent is, especially if you are trying to build some of these most leading- and bleeding-edge solutions. The ability to hire the best talent has been a very important piece. The second one, if I were to say, is really simplifying our internal processes. We had to almost re-imagine our process front to back. This is where I’ll say the partnership with Infosys is extremely beneficial, like from helping us understand the crowd-sourced intelligence of what’s happening not just on the financial services side, but also on the fintech side.

Let’s assume that the efforts to use lending as the vehicle to connect with these younger generations works out well. You’ve delivered what they need and now you’ve got a relationship. The objective, of course, is to take that relationship even deeper, so how do you do that?

SHUKLA: This generation is what I call a “content generation.” They create content, they’re on YouTube creating content. They are driven by value. It’s very important for organizations to constantly be looking at “How do I remain relevant for them?” At the same time, the main challenge organizations have, that Rajesh mentioned earlier as well, is scalability. The intent is to focus on every scale, how am I relevant to the customers on scale? At the same time, how can I create more valuable products and capabilities to the customer? It’s very important to understand what we call “micro journeys” and pivot toward providing hyper-personalization. The behavioral inputs of customers and looking at all the journey that the customer is going through across any other products, any lifecycle that’s going on. Bringing it together would be very relevant to the customer. It can now expand from lending to savings products or PFM products now. The intent is almost to look at the banking invisible to the lifecycle of the customer and the outcome becomes so personalized, the customer feels that it’s always relevant to me.

BAI has conducted a lot of generational research and perhaps the most consistent finding we get is that millennials and Gen Z are notoriously fickle when it comes to banking. Where other generations have been long-term loyal to institutions, these younger demographics seem to be more loyal to technology, so easier, faster, more convenient banking is what they’re looking for. And they tell us that they will happily switch banks for a better experience. Catching one of them is one thing, keeping them is another. So how do you keep them?

SHUKLA: It’s difficult to keep attention span of these customers for long and that’s why organizations remain their toes because they are driven by value and purpose. It’s very important to ensure how we bring a consistent set of features in our products, which is hyper-personalized to them. That means this generation is accustomed to having an Uber-like experience to come on, which is, as you look at, based on a fundamental principle of frictionless, ease of access and relevance. That’s why banks need to focus on three important things. First is, mobile app-first experience from end-to-end journey, with converged authentication experience. The second is business domain-based platforms where decisioning becomes a service across multiple lending products that comes out so the customer did not go after delay in decision-making across any product that they go through. And third, very important is customer-centric data ecosystem with simplified data structures so they can quickly mix and match the data attributes available to learn from it and bring back to customers.

SHAH: I don’t think anyone would be surprised with the research that we have put together. Products in our mind can always be copied. I think where you win the game is in terms of how do we differentiate our experiences. To this yardstick, when you think of Citizens, there are three main areas that we are focused on which covers not just the customer-facing applications but also the internal experiences. First and foremost, if I were to think of retail experiences, it’s all about creating that modern vibe and experience. Again, there are very different ways of really making it relevant to this target audience. The second one is conscious shift towards omnichannel. Mobile-first is extremely important, but it doesn’t have to be only mobile. If the customer is coming through a phone, is coming through online, is coming into the branch, we really want to make sure that he’s able to start from where he left off. That is a very critical piece for us. And a lot of this is also driven by ensuring we get the last-minute intelligence across our channels so that the experience remains similar. Third is again leveraging the power of data, ensuring all the behaviors and transactions that we are able to glean from customer relationships with us. Leveraging that into building simplified cross-sell and upsell opportunities, whether it is within lending space, moving from lending into wealth management space, or moving from lending into our retail space. Those are the three areas that I would say are the most important in terms of creating the differentiated experiences for our customers.

As banking becomes more and more commoditized, finding those ways to differentiate yourself from the rest of the field becomes ever more important. Rajesh Shah from Citizens Bank, and Bal Shukla from Infosys, we appreciate both of you sharing insights on the BAI Banking Strategies podcast.

SHUKLA: Thanks, Terry.

SHAH: Thank you, Terry.

Terry Badger, CFA, is the managing editor at BAI.