Top of mind today for regional and community financial institutions is how to keep up with the increasing number of mega-bank, neo-bank, and fintech competitors entering in the market. Competition was stiff enough when branch traffic was the focus for increased daily transactions. Now that your account holders can research, open, and onboard digitally, it is increasingly difficult for banks and credit unions to create and nurture the kind of loyalty and engagement that was taken for granted just a decade ago.
Internally, today’s institutions are challenged by an abundance of data that is difficult to understand, let alone use. What’s worse is the constant feeling of not knowing. Not knowing what products and services are being utilized by which account holders, and what percentage of their share of wallet do you hold? What account holders have reduced their usage of products suddenly? Which account holders are actually making more money moves with competitors? And which just stopped receiving payroll direct deposits at your FI?
The answer to those questions is right at your fingertips, inside of your FI’s account holder transaction data…but also can be frustratingly out of reach.
Today’s Engagement Challenges – Fueled by the Economy and Generational Shifts
Today’s consumers are more demanding. The real root of it is that they desire for their financial institutions to understand them as individuals. They want to know the best way for them to navigate the financial lifecycle, to be educated, guided, and supported.
But, it’s not happening nearly enough. Or in the right ways.
According to the Financial Brand1, 82% of account holders expect their FI to personally understand them, but only 38% say their FI is effective in doing so. That’s a big gap between expectations and results. And it translates to bad news for your bottom line. Engagement has a huge impact on the health of a financial institution. Research2 shows account holders who are fully engaged bring in 37% more annual revenue than account holders who are actively disengaged.
That’s only part of the challenge.
After the country emerged from economic hibernation in 2021, COVID-weary consumers were eager to get out there and spend, spend, spend. Home mortgage rates were at rock bottom, so mortgage originations skyrocketed. People were taking out personal loans, home improvement loans and credit cards. But then, almost as suddenly, gas prices rose. Inflation came calling. Recession loomed. To combat it, the Feds raised interest rates multiple times. Mortgage interest rates went along for the ride. Homes became unaffordable overnight. Consumers were wary of all of that spending and pulled back. Uncertainty about the recession (are we in one or aren’t we?), coupled with falling gas and home prices, have financial professionals wondering if things could turn on a dime again. It’s been a while since the industry has been on such a roller coaster, and that has even the most seasoned budgeters scratching their heads about how to plan for 2023. Challenges facing FIs include:
- Rising interest rates on home and personal loans
- Increased reliance on credit cards for day-to-day essentials
- Recurring subscription payments that may result in lost revenue
- Buy Now Pay Later (BNPL) trend causing FIs to lose loyalty
- The fluidity of cryptocurrency
- Generational trends and the competition coming from neobanks, big tech and fintech
Simply stated, fintech is eroding relationships between younger account holders and their financial institutions. Period. Specifically for regional and community financial institutions (RCFIs), this is an urgent problem. A recent study by Alkami Technology, The 2022 Digital Banking Transformative Trends Study,3 found younger generations are “significantly more likely to state that a neo-bank, big tech company, or fintech company is their primary financial provider.”
- 39% of millennials are unsure if their primary financial institution will remain their PFI next year.
- 25% of Gen Z are unsure if their primary financial institution will remain their PFI next year.
A financial institution’s commitment to setting data into action and being able to pivot with on-demand intelligence and ongoing data insights will ultimately determine their fate in an aggressive and disruptive marketplace. Especially now, in this uncertain economy, the path forward is to focus on leveraging first-party data to drive strategic decisions that can impact acquisition, share of wallet, loyalty and growth.
Finding Success through Customer Insights
A strategy that starts with data as the foundation will make an FI nimble enough to shift with the economy, market, and account holder behavior. A credit union’s internal transaction data can empower the FI to combat challenges, and change the narrative to drive increased adoption and loyalty. Specifically, Segmint’s innovative Key Lifestyle Indicators® (KLIs)4 are insight engines that, when derived from transaction data, paint a holistic 360-degree view of an account holder’s financial behaviors. This data allows financial institutions to get the deepest level of understanding into account holders’ financial lifecycle, spotting merchant spend patterns, competitive engagement, and analyzing product usage activity.
Consider how these campaigns below, with highly targeted audiences found through Customer Insights, could drive engagement with your FI’s members:
- Increase debit or credit card swipes – attributed to a campaign encouraging members to make the switch from bill pay to a card for their recurring subscriptions.
- Win-Back – being able to determine which group of members are not engaging, indicates this FI is not their preferred FI, then retarget this group for win-back offers.
- Cross Sell – easily pull an audience of your account holders who recently bought a mortgage, and include them in a campaign for a HELOC, knowing where they are at the ideal financial life stage.
- Steal Share of Wallet – understand which account holders are engaging with the competition, or where money is being transferred out of your institution.
- Financial Wellness – build an outreach campaign using ‘Financial Health KLIs’ to members showing signs of financial stress, without them needing to ask for help.
- Business Banking – uncover profit opportunities within retail accounts that are showing signs of business transactions.
The Path Is Clear
Leveraging the data that you already have to better understand and engage your account holders needs to be a top priority across the institution.
Committing to a data-driven strategy with cleansed data, flush with customer insights, must be the one source of truth. Segmint and Alkami can help to put your data into context. We can guide your FI’s team through the process of activating that data into highly effective campaigns that help now, and through deeper analysis of trends over time, stay prepared for the future.
Start now. Data transformation and utilization across all areas of the business is a marathon not a sprint…a year from now you’ll be glad you started today.