Jeanine Skowronski at American Banker penned an interesting article recently titled What Engagement Banking Needs Is Less Engagement. In it, she wrote:
“I can’t help thinking the money management moment has passed and that, moving forward, engagement banking – a future model for the industry that PFM is a big part of – would benefit from less engagement. This might reflect my lifelong aversion to charts and graphs. Or it could be related to a suspicion that many financial firms want to ‘engage’ with me simply to obtain information marketable to a third party. This could be one more instance where terminology is failing the industry, given that the word ‘engagement’ denotes a level of commitment not all consumers may be looking for in their banking relationships. Maybe something like ‘empowerment banking’ or ‘choice banking’ would be a better descriptor.”
I totally understand where Jeanine is coming from and why she would feel that way. She even cites a study that found that 46% of consumers want technology to simplify their lives.
My take: The problem here — as Jeanine brings up — is in the terminology. We’re not using the term “engagement” appropriately,
Customer engagement has been a pet topic of this blog for year. Back in January 2007 I tried to define the concept of customer engagement as:
“Repeated — and satisfying — interactions that strengthen the emotional connection a consumer has with a brand (or product, or company).”
The key phrase there is “emotional connection.” Simply interacting more often with a customer is not engagement. Only meaningful interactions create, or build on, the emotional connection.
To make a sweeping generalization, it’s hard to believe that the banking industry has embraced this definition.
Making offers within the online banking platform or on a mobile device — regardless of how relevant the offers are, are just not meaningful interactions for many consumers. Jeanine talks about her “lifelong aversion to charts and graphs.” She’s not alone. Lots of people couldn’t care less about charting their current or future spending. Expense categorization? A chore.
So yes, people want technology to “simplify” their lives. What they’re really saying is “I want technology to do the things I don’t want to do” and “I want technology to alleviate and fix the problems I have with the companies I do business with.”
But what banking is needs is not less engagement, but real engagement. More meaningful interactions with customers. Interactions that not only strengthen the emotional connection that the customer has with the bank, but that deepen their involvement in the management of their financial life.
Today’s PFM tools — despite the advancements in user interface, and ability to collaborate with ex-spouses — aren’t doing the job of engaging more consumers in their financial lives.
In a recent Aite Group report, I segmented consumers in one of three categories based on the frequency with which they performed 15 different financial activities. I found that 20% of consumer are Highly Engaged (or active) in the management of their financial life, 50% are Moderately Engaged, and 30% are Inactive (or not at all engaged).
The figure below shows the extent to which each segment wants their primary financial institution to help them manage their financial lives.
Among consumers who aren’t highly active, or highly engaged, in the management of their financial lives, the overwhelming majority don’t want their primary FI to help them manage their finances.
In other words, all the charting/graphing tools, merchant-funded offers, Facebook pages, blog posts, Twitter tweets, and YouTube videos that banks and credit unions throw out there — i.e., the things banks and credit unions call “engagement” — are mostly unwanted by 80% of the population.
The solution isn’t less engagement. It’s more engagement — more meaningful engagement.
The challenge is that, among the 80% who aren’t highly engaged today, the diversity of reasons for why they’re not engaged — and what might get them engaged — is mind-boggingly wide.
Tactics like the one employed by SavedPlus (mentioned in Jeanine’s article) may be very effective with a percentage of the population, but it’s likely that that percentage is pretty small.
Banks and credit unions will need to experiment with a wide variety of techniques to get the 80% engaged. And if management is going to ask “What’s the ROI of doing that?” every step of the way, nothing is going to get done.
Lastly, there is one point in Jeanine’s article I would take issue with. Specifically, where she writes:
“Banks should focus on developing products and services that make accountholders’ lives easier.”
I know the bank blogging gurus love to bash banks for not being innovative, and one startup in particular plays on the complexity of the banking industry by naming itself the opposite of complex.
But I think the industry has a pretty damn good track record of making account holders’ lives easier. ATMs, online banking, online bill pay, eBills, remote deposit capture, online account applications. What’s all this? Chopped liver?
They’re all innovations that have made bank customers’ lives “easier.”
What banks should be focusing on is improving the performance of account holders’ financial lives.