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June 27, 2019

Why Human Connection is Crucial for Financial Institutions in the Digital Age

Last week, we held our webinar on How to Create a Human Connection in the Digital Age which is on demand here. Aequilibrium Head of Innovation Kelly West was the host while GM Ruxandra Aldea, Pushfor CTO John Safa, and BlueShore Financial VP of Retail and Business Banking Reg Marrinier joined as panelists to weigh in. Our webinar focused on the human connection, and why for financial institutions in the digital age, it is crucial to foster personalized, one-to-one connections with your customers.

Creating the human connection is about triggering a type of emotional response and attachment which then leads to loyalty.

 

Trends that really matter.

Our inspiration for the webinar was triggered by our curiosity of how digitization can support human interaction with customers, i.e., the personal touch. While it’s evidently important that human interaction is valued especially in more complex conversations on financial needs and on-going support, we wanted to know how much is actually needed and to what degree it is considered just right. This is all in the context of rapidly shifting demographics with a large cohort (estimated at 33%) of baby-boomers who are financial service professionals exiting the working years in the next decade and Millenials or Gen Z-ers who are shifting the game for how they expect to be serviced and interacted with in regards to financial institutions. 

Moreover, new regulations, such as the Global Privacy Direction Regulation (GDPR), are creating questions for what private data is and what the acceptable uses of consumer private data are, as well as how that should be protected. While GDPR sprang out of the European Union, North America is following closely with the California Consumer Privacy Act (CCPA), and we expect more of the same in the years to come. 

Finally, the increase in digital interactions and digital content are increasing the fear for data breaches and all too often we hear media stories of data leaks, particularly in highly sensitive domains. 

 

What is the human connection all about?

Creating the human connection is about triggering a type of emotional response and attachment which then leads to loyalty. A study by Harvard Business Review shows that customers become more valuable at each step of the emotional connection with a brand, from (1) being unconnected to (2) being highly satisfied to (3) seeing the brand differentiation to (4) being fully connected. Fully connected customers, or those who are emotionally attached, are 52% more valuable on average than those who are just highly satisfied from the point of view of a variety of metrics, such as purchases or the frequency of use of products and services. 

There is a profound downside that comes with the lack of human and emotional connection, as it becomes easier for customers to churn. While switching has traditionally been a lot more difficult for banking clients relative to other industries, digital technology and Open Banking are decreasing the barriers to exit. This is not to say that people will just leave their primary banks altogether, but the niche choices available, for example, Apple credit cards, PayPal’s small business financial solutions, and Monzo’s fully digitized bank attracting 40,000 new customers per week which will create tectonic shifts in financial relationships. 

 

The north stars.  

If we look at multi-channel financial institutions, the human connection is actually where a large part of their competitive differentiation exists. 

BlueShore Financial

BlueShore Financial is a boutique financial institution based in Vancouver, BC that very much mimics the experience of a Swiss private bank. BlueShore has doubled its assets base in the last decade, largely with the same number of “richly valued clients”. As their brand value proposition would state, they have done this by simply focusing on the share of wallet strategies with human interaction being an integral part of the brand’s DNA. BlueShore has turned their branches into a concept of “financial spas” where concierges greet clients with warm white towels and help stream the traffic to the right financial advisor for that very personal touch. 

BlueShore has a laser-focused vision, where their personal touch is enabled and supported through laser-focused client personas. These personas are well defined through advanced analytics called “Bluegorithms”. Data, how they explore it, and the questions they ask of it, are an on-going competency they developed and turned into a sharp competitive edge. 

 

Umpqua Bank

Another financial institution we admire is Umpqua Bank. With its highly acclaimed human digital strategy, it is all about connecting humans to humans at Umpqua. Their mobile app enables a customer to search for a bank advisor in their preferred location, with highly relevant backgrounds or interests. Not only that, but it also allows seamless and real-time interactions between customers and advisors within the app itself, while also supporting high security and audit requirements for the bank. 

 

From transactions to engagement.

Going forward, financial institutions need to create two-way conversations in the digital world, and transition from a transactional data mindset to one focused on customer engagement. Without it, banks and credit unions will be left behind, relegated to little more than transaction facilitators while business models that focus on engagement will win more complex and profitable functions, such as wealth, financial advisory, and high value lending. For younger clients, banks must forge this relationship sooner rather than later or risk staying relevant, especially while millennials have a higher rate of switching banks than other groups.

“We live in an instantaneous world, and people living in this instantaneous world need an instantaneous response,” advised John Safa, Pushfor CTO, during our panelist discussion in our webinar last weekAs the baby boomer wealth shift dislocates one-on-one advisor and client relationships, financial institutions need to be prepared. To prepare, they must first position teams of experts rather than one-on-one relationships. Digital technology will help connect Millenial and Gen Z heirs with the advisory teams. Then, banks need to prepare with science-driven advice, using the power of Artificial Intelligence to drive insights, and robo-advisors so as to offer a hybrid-model catering to price sensitivity for advice, the complexity of financial issues, and customer self-confidence. 

 

In summary.

Thanks to new technologies that enable frequent, low-friction, and personalized digital interactions, financial institutions can build much deeper ties with customers than ever before. Instead of waiting for customers to come to them, financial organizations can be addressing customers’ needs the moment they arise—and sometimes even earlier. These are truly connected strategies through which customers receive a dramatically improved experience. As a result, banks can offer high-touch value at scale, and boost operational efficiencies with lower costs.

During the webinar, we ran a quick poll with the audience to get a sense of their biggest blockers to creating a human connection via digital channels. One of the learnings from the poll with financial service professionals in charge of digital initiatives was that while they recognized the importance of building the human connection in the digital age, 36% of respondents questioned how they would have time to foster the interactions with so many competing priorities. 

In Ernest Hemingway’s novel, The Sun Also Rises, there is a character who at one point goes bankrupt and asks, how did I get here? “Two ways,” he answers for himself, “gradually, then suddenly.” While the pace of change driven by the digital generations and new technology may appear gradual, where we can take our time to process and think about it, there will be a time where the effect of change will come so suddenly that it may be too late to act. So getting ourselves out of the general busy-ness and thinking engagement, beyond transactions is a must do now.   

 

Want to learn more? 

Watch the full webinar on demand:
How to Create a Human Connection in the Digital Age

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