Banking partnerships need to meet changing customer expectations 27 August 2020

Customers no longer expect simple money management tools from their banks.
A constant theme throughout the financial services world is partnerships. From insurers to traditional banks to challenger banks, everyone is expanding their client offerings via partnerships. Sometimes those partnerships are useful and have real monetary value for customers. Think credit cards that provide cash back rewards and discounts on flights or concerts. Other times, partnerships provide a less meaningful sell-on product that you don’t have much use for. Think home insurance for renters or travel insurance for non-travelers.

The financial services industry is undergoing a major period of evolution. Not a major evolution in the types of products, per se. Banks continue to provide the same financial services they did 20 years ago: current accounts, debit cards, credit cards, and loans. While retail investing is a new phenomenon that has opened up financial markets to groups of people that were previously shut out, banking is still largely centered around the nuts and bolts of money management. The real evolution has taken in place in how these services are delivered. Digital services and methods of delivery are now firmly front and center. Banks exist entirely within apps on smartphones now. Customers rarely step foot in physical bank branches anymore. These trends were present pre-Covid-19 and are now being supercharged by this pandemic.

Along with that evolution in delivery, expectations about what a financial institution can and should deliver have also changed. Consumers are choosing banks with the expectation that they will receive more than mere money management tools. Along with the digital banking essentials, banks must align with the lifestyle of their customers. That is why we have witnessed rebrands and the creation of entirely new banks by legacy institutions: the need to be more relevant to the next generation of consumer that is socially conscious, hyper aware of its image, and spends entire days plugged in and logged on.

Thanks to a lifestyle-focused banking partnership, a new pair of Adidas shoes arrived in the mail today. My bank is N26. They partnered with Adidas to offer 25% off an order from their entire collection and I subsequently purchased some shoes. This is not a form of native advertising for Europe’s largest mobile bank. This personal anecdote simply serves to highlight the new types of partnerships that are increasingly becoming the norm. Banks are broadening their partnership horizons to introduce exclusive companies and experiences that they believe will set their offering apart from competitors.  

Other banks focus on social and ecological concerns, such as bunq, the digital bank from the Netherlands. Their priciest offering is actually their “SuperGreen” option, for €17 a month. When customers select this, they are paying extra in order to become CO2 free within two years, with a tree being planted for every €100 spent. Aspiration bank is an American fintech built entirely around the idea of building a better world through a number of eco-conscious initiatives.

Now, not everyone is going to find 25% off at adidas to be the most worthwhile perk. Customers have a wide array of interests. So, the challenge for banks and insurers is to form partnerships that a broad swath of their customers finds attractive and valuable. Maybe it is straight forward cash back. Maybe it is a music streaming subscription. This is where using data to understand customers comes into play. These banks and fintechs have reams of data on their customers. N26 knows that the bulk of its customers are in the 20-49 age bracket, so they would be more likely to buy a new pair of fashionable shoes than someone in the 65+ age range. They have demonstrated an understanding of their customers and what is relevant to their lifestyle. 

The client-brand relationship has transformed from a one-way street into something more mutual. Customers are not simply buying a service or product from a company and expecting the relationship to end there. There is now an expectation of something more on the business end: a benefit, an offer, or a discount. While legacy institutions may remain stuck in old paradigms, brands that can deliver unique experiences and value will capture the next crop of customers eager for a break from the past.



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