Bringing Humanity Back to Banking

All banks recognize that winning customer relationships in the future means winning in mobile banking. While the extinction of the branch hysteria is over-hyped, customers are undoubtedly doing more banking on their phones than ever. Eight out of ten Americans now use mobile banking nine days per month, a trend that is echoed across the world and shows no signs of reversing.

Practically every consultant, industry article, and banking conference has been screaming about channel migration for over a decade, and financial institutions have listened. In the rush to digitization, though, banks have abandoned a traditional strength: trusting, personal relationships with their customers. And that’s a problem. An existential one at that.

The hidden cost of digitization

Banks have primarily pursued digital transformation from three angles: increasing convenience, cutting costs, and optimizing marketing. The ubiquity of mobile phones has presented a massive opportunity for banks along each of these dimensions, as 95% of Americans now own a mobile phone and 77% own a smartphone.

Beautiful, user-friendly mobile apps are now table stakes, as customers expect to be able to do most transactions from their pockets. Financial institutions have encouraged this shift and pushed customers away from branches and call centers to lower costs. According to McKinsey, digital channels reduce costs per transaction by 88% or higher compared to branch fulfillment. Estimates suggest that about 78% of the time customers spend on offline banking services is wasted.

Additionally, banks have gotten smart about mining new data streams from their digital channels to optimize every marketing dollar. Promotional offers are more personalized, relevant, and timely.

These efforts have undoubtedly unlocked massive value for financial institutions, but something was left behind in the shuffle. Personal interactions between banks and their customers have been sidelined in favor of cheaper and more convenient alternatives. Relationships between consumers and the financial institutions that serve them have lost their humanity.

According to a study by Accenture, 80% of customers view their banking relationship as purely transactional. Research from EY backs these findings and offers an explanation — globally, 74% of customers don’t trust their financial institution to provide them with unbiased advice.

These reports should set off alarm bells in bank boardrooms. In a world where customers view their banks as interchangeable transactional tools, there is less room to compete and differentiate. Retail banking relationships will be won or lost on pricing, promotions, or user experience. Enter, stage left, Amazon and other digital natives.

Amazon hasn’t pounced into retail banking yet (beyond co-branded cards), but the landscape for them to do so looks extremely attractive. Two-thirds of Amazon Prime members say they would try a free checking account with the online giant, which certainly has the resources to offer such a deal in a customer acquisition grab. Even if it’s not Amazon, other online-only players with low fees and great apps should scare established financial institutions that don’t have strong, trusting relationships with their customers.

Technology that increases human connection

For centuries, financial services were nothing more than productized trust. People had relationships with bank employees who helped them set up accounts, perform transactions, apply for loans, and plan for the future.

This is still true today for a small portion of valuable customers for whom it is profitable for banks to invest in human effort. Relationship managers provide high-touch support to position themselves as trusted partners in their customers’ financial journeys.

Customers in the middle and bottom of the pyramid, though, usually only hear from their bank when they are being sold something or charged a fee. It’s no wonder trust has taken a hit.

What if banks could use technology to bring some of the humanity and personal attention back to their relationships with the millions of people in these segments? Can banks re-think how they communicate with their customers in mobile channels to differentiate themselves in this new world?

Umpqua Bank certainly has. Last year, they launched an app called Umpqua GoTo (previously known as Umpqua BFF, or Best Financial Friend) that allows their mass market customers to text a banker anytime, anywhere. Customers can pick the banker they’d like to work with from personal profiles shown on the app, and instantly have conversations about their accounts, life events, and financial goals. Initial results are encouraging. Customers have shown high engagement and a strong willingness to have conversations about their financial lives via text messaging.

Bancolombia has taken a similar approach, but one built for a larger scale. The bank launched a proactive, automated, two-way text messaging assistant named Emilia. Conversation sequences are designed by behavioral psychologists to build trust over time through encouragement and education. Similarly to Umpqua GoTo, these conversations create comfortable virtual spaces where customers can ask questions about their accounts. The unique, warm engagement makes customers feel valued by their bank.

Both Umpqua and Bancolombia have implemented practical solutions that combine humanity with technology. This blended approach is critical. Relationship managers can’t cover every customer, and AI alone can’t build human relationships. Together, though, blended solutions like these can help banks regain some of what has been lost in the rush to digital channels: trusting, loyal relationships. They’ll be needed to survive and thrive in the banking marketplace of the future.