In the world of marketing it has become a cliche to say that a brand or even a whole market must “evolve or die.” However, the cliche is perhaps becoming reality for the UK’s major banks as they find themselves facing a cohort of innovative web-based challengers. With their copybook well and truly blotted by a general lack of customer care, the majors now face competition that is more attuned to consumers, provides easier access, offers more competitive rates and is refreshingly free of all the “baggage” surrounding the 2008 financial crisis.
The positioning of the Fintechs fits well with an all-inclusive digital age and makes long established brands appear somewhat antediluvian. Offering an entirely different customer-centered service, the likes of Starling, Mondo, Atom and Tandem are gaining a following at an exciting rate.
Traditional banking brands like Lloyds can only find solace in the fact that customers are currently more likely to get divorced than change banks. Thanks it seems to sheer customer inertia, the majority of us will continue to tolerate increasingly poor service typified by “outages” (non-functioning cash machines), telephone queues, poor rates and unimaginative, ‘me-too’ product portfolios. Meanwhile, the ‘smartphone generation’ has connected with hassle-free finance by signing up with brands that make banking a simple, pleasurable and rewarding experience.
It’s not only the banking landscape that is changing through the emergence of Fintechs, the customer is also beginning to change. Agile banking systems with novel features like “authentication by selfie” or video chat services are delivered at the moment to a relatively small audience. However, as generations ‘x’ and ‘y’ steadily leave school to join the Millennials (ages 18 to 34), a new wave of consumers will demand and expect a different relationship with financial brands.
For these young consumers, the issues of trust and technology will set the agenda. The bland advertising statements from the traditional players about ‘trust’ that appear daily on our TV screens will no longer cut the mustard with this savvy audience. Brands that loftily refer to doing things ‘Another Way’ without offering a discernible difference to other brands or offer a reassurance that it’s “Good to be Different” without showing how that difference manifests itself or meaningfully benefits the customer, will quickly lose the confidence of their audience.
To avoid being boiled alive like the proverbial frog, traditional banking should be looking to other sectors which have changed dramatically by introducing mould-breaking business models. A cursory ‘Ides of March’ round up has to include the following two examples from the Travel and Estate Agency sectors which, like banking, are mature markets where size, complacency and tradition have ruled the roost far too long.
The first is the storming success of travel accommodation website Airbnb which in just 7 years has dealt with 40 million guests and won itself a market valuation of over $20 billion. Launched as an entirely new product, it has brought budget accommodation to millions on a global scale, and is now set to take on China in its portfolio.
The second is YOPA, which has sent shock waves through the estate agency world. It’s aim has been to “disrupt” the estate agency sector by using technology to slash costs and not surprisingly, the new model with its keywords of ‘honesty’ and ‘transparency’ is proving hugely popular.
The similarities of these two markets to the retail financial services industry are eerie. In both the big traditional players have relied on their size and strength and have looked down with amusement on digital challengers until it was too late.
My advice to established financial brands is not to regard Fintech as a fad. Here is a proposition that has already attracted a significant customer-base and continues to have more coming on stream. The only way for established brands to meet the challenge is to go back to basics, think like a start up and genuinely offer something inspirational to the next generation of consumers.
What banking needs to do now is evolve quickly to beat the newcomers at their own game. Gone are the days when they could rest on well-established, tried and tested products, processes and communications. Now they have to operate and update existing infrastructure, and at the same time, develop and expose new services to a customer base that expects to do everything online. And here lies the other big challenge for the traditional players – their huge, dated legacy systems prevent them from being anywhere near as responsive or as nimble as their younger digital rivals.
When it comes to marketing and branding there’s no doubt that financial brands have their work cut out. For too long the brief to agencies has been: “We’re basically the same as everyone else; can you make us different?” Sadly, it’s not the agency that makes the fundamental difference, they simply articulate the brand offer. It’s the brands themselves that have to be different.
For too long the majors have been confusing the delivery of real value with advertising strap lines that scored well in a focus group. A talking platypus called Barry probably won’t fit the bill! A funny ad doesn’t make a great bank. Telling customers that you are ‘different’ doesn’t make you different. It’s what customers are offered and what they experience that counts.
I doubt if any of the majors have developed a strategy for dealing with the emerging Fintech threat. In fact, the institutional lethargy that has their marketing departments in its grip appears to be thriving and was most recently exhibited by Alastair Pegg, CoOp’s Marketing Director, who admitted to being merely “fascinated” by the Fintech sector, but not particularly worried about it!
Worried or not, there is no doubt that as we go through the next five to ten years the big financial brands in the UK will continue to lose market share to Fintechs. By placing the consumer and digital at the heart of their brands, the newcomers will change the banking landscape and cause the incumbents to take a long hard look at how they manage their brands, product portfolios, and communications strategies.