Banking Consumer Finance Strategic Update: September 2020 Review

October 2, 2020, Paul Evers

Banking Consumer Finance Strategic Update: September 2020 Review

October 2, 2020, Paul Evers

Banking Consumer Finance Strategic Update: September 2020 Review

October 2, 2020, Paul Evers

Merkle Blog Image
Merkle Blog Image

Banking Consumer Finance Strategic Update: September 2020 Review

October 2, 2020, Paul Evers

Banking Consumer Finance Strategic Update: September 2020 Review

October 2, 2020, Paul Evers

Merkle Blog Image

Banking Consumer Finance Strategic Update: September 2020 Review

October 2, 2020, Paul Evers

Merkle Blog Image
Merkle Blog Image

Banking Consumer Finance Strategic Update: September 2020 Review

October 2, 2020, Paul Evers

Many client and agency teams are currently working day and night crafting their 2021 brand plans. In a more normal year (remember those?), the process for data-driven marketers would start with a review of FY20 brand and channel performance in order to determine what initiatives should be continued, stopped or re-imagined.

This year, however, has been like no other, so historical year-over-year metrics provide little direction in planning and forecasting the next phase of our “new normal.” Every piece of data seems to have a big asterisk next to it requiring context and caveats. Foresight is in short supply when it comes to determining new challenges banks and lenders will face, so plans must be more flexible and agile than ever. Organizations that take a longer view and invest in customer relationships, build differentiated experiences, nurture brand loyalty by eliminating friction points – both in branches and virtually – and deliver real value will see greater overall success.

Scenario planning that identifies reasonable contingencies, a test and learn approach to channel investment and innovation, plus a continuous learning plan that reveals actionable customer insights have never been more important. An emphasis (i.e., bigger budget allocation and staffing support) should be put on advanced analytics, customer experience and market research like never before. The more intimate each brand becomes with the changing landscape, the better prepared they’ll be as things shift and evolve.

Customers are engaging with financial services companies (and each other) more than ever through digital channels at the expenses of branches. Visa’s subsidiary Plaid recently shared a survey that shows “…overall, 59% of Americans use more apps now to manage money than pre-COVID-19. This usage covers a wide range of financial tasks, led by increased handling of daily banking.”  We are also seeing in other surveys that show customers’ preferences for branches is declining significantly for task such as account openings and getting advice.

All this change will force smart marketers to push beyond the boundaries of their tried and true playbooks and embrace new opportunities across digital channels. The toughest decisions may be what NOT to do.

Industry Insights and Trends

Consumers are relying more on financial apps

A survey commissioned by Plaid found that customers handled the COVID-19-imposed transition to digital channels gracefully and that they’re using mobile apps at an accelerated rate. Sixty percent of the 2,000 U.S. adults participating in the Harris Poll survey said they were using more apps to manage their money than they did before the pandemic. 56% said they could not have coped with their finances without such apps.

About three-fourths of the respondents said they will keep managing the majority of their finances digitally, viewing fintech as the “new normal.” And 80% of Americans say they can manage their money entirely without a bank branch, expressing a preference for contactless digital solutions.

Huntington Bancshares in Columbus, Ohio, recently launched Money Scout. This tool analyzes a customer’s spending patterns, income and expenses and then moves small sums of money, between $5 and $50, to their savings accounts.

Banks continue to reduce reliance on brick and mortar locations

PNC is now on track to close nearly 160 branches this year and another 120 next year, Chairman and CEO William Demchak said. Combined, those cuts would be a roughly 12% decrease from the roughly 2,300 branches PNC had at this time last year.

Key has only closed an additional 21 branches this year after shuttering 61 branch locations in 2019, Gorman said the ongoing shift to digital due to the pandemic is providing an “opportunity to continue to ramp up." While he did not disclose how many branches could close, he noted the objective for the company is a smaller "more impactful" footprint.

Banks and financial services companies are expressing empathy and support across a variety of topics through paid social ads

The social media blackout appears to be over among most of the largest banks.

Banks are using social media to engage and express empathy with their customers. Not only are they reaching their existing customers and fans through owned social, but they also are running ads around these topics. They include disaster alerts/support, schooling support, and other topics.

Wells Fargo Citizens
Before COVID-19, banks and financial services companies were considered the most innovative when it comes to leveraging technology

Since COVID-19, banks and financial services ratings by consumers in innovative customer experiences plunged from 27% to 16%, replaced by the retail industry as the most innovative when it comes to the use of technology in providing good customer experiences.

Consumers value retailers’ quick implementations of practical services such as Click and Collect solutions.

Digital representatives and Artificial Intelligence were rated the top technologies to be most useful to consumers in banking. (E.g. Chatbots)

Source: Sitel Group - Customer Experience Trends in a Post-COVID-19 World

Which Tech

Consumer Sentiment

Six months from when the COVID-19 crisis began in earnest in the US, Americans, while still experiencing prolonged shock and grappling with the realities of the pandemic, are beginning to live their new normal and even experience signs of recovery.

Many consumers feel the health crisis is stabilizing and are feeling more grounded in their personal lives as well. This is translating into greater concern for other pressing national issues, such as the economy and the nearing presidential election. Consumers are tired of staying home and waiting to re-start their lives, many have already made life-event decisions, like deciding to move to the suburbs, going ahead with their wedding or starting their families. These “special moments” for consumers also translate to financial needs. Pent up demand is something many banks are already managing through with mortgage and equity products, but demand is also translating to new checking accounts, renewed focus on savings and investments, and opportunities for banks to ramp up their marketing and cross-sell efforts.

Consumers are split 50/50 about their comfort levels with going out in public since March and tend to feel more comfortable doing activities that are fundamental, like grocery shopping, exercising, or attending medical appointments. Conversely, activities that are discretionary carry higher levels of discomfort (like travel and beauty services).  Given that 80% of Americans say they can manage their money entirely without a bank branch, providing superior banking experiences in a digital environment is crucial, as well as marketing support that intercedes in “moments of truth” when customers really need more expert guidance available to enable them to take their next financial step.

For months now, consumers have told us they are paying more and more attention to brand responses to COVID-19. That has now leveled off, but consumers still expect brands to help put their safety first.  Consumers also want to see that brands are taking measures to ensure their employees safety and we’ve seen that come to life in some advertising, most notably in Amazon ads.

Offering discounts and value-added services to customers during this time continues to be a top desire from consumers.  Typical holiday shopping periods are being extended far earlier, with discounts and promotions being the norm, and not the exception. Look for ways to add value to your customers and prospects that goes beyond your typical bank product and service levels in order to maintain table stakes competitive positioning.

Similarly, consumers want their brands to demonstrate and advertise about how they’re evolving to meet people’s needs during the crisis. They also want to see actions that brands are taking in their communities, charitable organizations and other causes are increasingly important to ALL consumers, where traditionally Millennials and Gen Z were the cohorts most interested in choosing brands based on their goodwill efforts.

Latest Trends

A new personalization model is emerging

Organizations must change their personalization strategy: Businesses need to quickly update their understanding of individuals’ wants and needs, and quickly retire information that is no longer valid. Banks that give people the ability to steer their own digital experiences will be the first to understand what their new wants and needs are.

Digital Experiences must transform: Most digital platforms and digital experiences were designed to supplement, in-person experiences but demand is rising for shared digital experiences and digital communities. It’s not just a matter of reacting to your customer’s or prospect’s needs based on data, but refreshing that data “in the moment” so that it is continuously improved to reflect the consumer’s changing and evolving needs.  For example, imagine a customer searching for the perfect new checking account.  They finally purchase after doing all the research and weighing the pros and cons, but then they STILL get ads from all the competitors that they considered, but did not select! Don’t be that bank. Look to future needs with more real-time data. Some banks are even looking at emotion detecting technology to digitally read emotions on the consumer’s face and dynamically (using Artificial Intelligence) change their marketing in response to the consumer’s emotions.

Innovators: Tasting Collective, a subscription dining club, has pivoted from in-person dinners, led by chefs in their own restaurants, to livestreamed cooking classes, led by chefs virtually. HEY Bracelet and Bond Touch, both wearable bracelets for health, are attempting to virtualize human touch. Usually sold in pairs, the bracelets can lightly squeeze the wearer or light up and vibrate when activated by their counterpart.

Sources: Accenture, Hubspot

Voice-activated assistant and smart workspaces use grows exponentially. How can your financial institution develop skills for use in popular devices?

According to ABI Research, the pandemic is expected to push global voice control device shipments to grow by roughly 30% in 2020 compared to last year. Amazon reported that worldwide Amazon Alexa skill usage increased by 65% between April and June. Almost 34% of the total population owns a voice assistant, and according to eMarketer, in 2019, an estimated 111.8 million people in the US will use a voice assistant at least monthly.

In the US alone, 52% of voice assistant users say they use voice tech several times a day or nearly every day, compared to 46% before the outbreak, according to a report.

Technology, such as that seen in smart workspaces, is increasingly human-centric, blurring the lines between people, businesses and things, and extending and enabling a smarter living, work and life experience. CapitalOne, Ally and USBank have had voice skills since 2019, and while consumer adoption has been a little slow based on trust/security concerns, demand for the conveniences are growing steadily.

The more time people spend at home getting comfortable with their smart technology, the more trust they develop and the more they want the ease that voice banking skills provide.  When you wake up at 2 a.m. in a panic because you forgot to pay your credit card bill, you can just say, “Alexa, pay my credit card bill” and go back to sleep.

Aside from consumer convenience, consider too that the average time spent on basic customer inquiries such as balance requests and transaction updates consume approximately 52% of customer service call center time.  The savings from voice-handled transaction questions could potentially be worth billions in savings to the financial services industry.

If you haven’t collaborated with Alexa and Google on voice skills yet, now’s the time to start!

Sources: Medium, PWC

Jane Fraser named CEO of Citibank

Citi names Jane Fraser as CEO, the first woman to lead a major US bank. While there have been women in positions of leadership in the public sector like Janet Yellen, Fraser will be the first in the private sector at that scale.

Fraser will join a record number of women leading Fortune 500 companies. Clorox, Coty, Gap and UPS named female CEOs. Still, less than 10% of Fortune 500 CEOs are women and only three are women of color.

It is a great development, and we are hopeful that we will continue to see more diversity among financial services leadership. It is critical that financial services organizations continue to drive for diversity in leadership as well as within marketing departments. This allows for diversity in thought, approach, and success.

Podcast ad spend is on the rise
US Podcast Spending

US podcast advertising will see especially strong growth this year, relative to ad spending for all other audio formats. We estimate that podcast ad spend will grow by 10.4% to $782.0 million this year, compared with a 17.0% drop for digital radio outlays overall. US podcast ad spend is still set to surpass $1 billion in 2021.

Podcasts will make up around one-fifth (21.0%) of digital radio ad spend this year, a large jump from the 4.1% share it had just five years ago. We forecast this growth will accelerate strongly in 2021, increasing by 44.9% to reach $1.13 billion in ad spend.

Many financial services organizations leverage some type of radio or audio advertising. With the growth in podcasts and the advertising within them, we believe that advertising on podcasts will become more attractive to financial services companies.

Black Friday may never be the same

Brands, seeking to avoid racial sensitivity, are adopting alternatives to Black Friday sales and shopping this season.

Home Depot canceled Black Friday but is adapting the 2020 holiday shopping season to the pandemic era with two months of deals. Target and Walmart are starting early with their holiday messaging. Many brands may try to extend the holiday shopper season and therefore minimize the importance of Black Friday. Our prediction is that Amazon Prime Day, Cyber Monday and Shipping cut off week will be vital moments in the holiday season.

This is another example of how organizations and marketers need to be mindful of customer sentiment and what it means broadly for organizations. COVID-19 and racial sensitivity are driving significant changes in how our target audiences behave and perceive brands. We believe it is critical that financial services organizations examine and challenge messaging and approach to marketing campaigns. This way we can not only be aware of potential pitfalls, but to also be the leaders that our customers expect of us.

Innovative Creative

PNC Bank

PNC is running a multi-channel campaign to promote its Virtual Wallet. The Ad draws a parallel between money and pizza tracking services: “If an app can help you track your pizza from almost anywhere in the world, then your bank account should be able to help you track your money from almost anywhere.”

PNC Bank Example
Chase Bank

Chase runs ads promoting its rewards program to existing customers with a focus on gas and grocery purchases for Southwest Cardmembers. This demonstrates how brands are using the one-to-one match available in Facebook to not only target prospects, but also existing customers to encourage engagement.

Chase bank
U.S. Bank

U.S. Bank promotes its blog post about staying positive during the job search as banks become more supportive of their customers outside of the standard banking activities.

US Bank

PenFed offers a $200 cash bonus marketed as Add $200 to your stimulus payment. This cash bonus rebrand takes the angle of PenFed wanting to further provide for and support its customers: “We want to make sure you have the opportunity to get an extra $200 from us.”


Citi sent a DM piece to small businesses offering a cash reward for opening a business checking account. Citi’s philanthropic efforts were highlighted calling out its donations to their COVID-19 Small Business Relief Program.

Citi Bank
Wells Fargo

Wells Fargo provides COVID-19 Facebook marketing tips to small businesses. Another instance of banks trying to show their support beyond just banking.

Wells fargo

What We See Working (and Why)

Continued ad spending

Financial services companies should continue to spend on marketing and advertising during the economic downturn.  Reasons include:

  • The drop in competitor advertising creates a white space for your brand to fill. Advertising increases your share of voice and share of market.
  • Studies show that maintaining or increasing marketing during a recession gives brands a significant competitive advantage both during and up to three years following a recession.
  • Increasing direct mail during a recession can provide more short-term sales.
  • Since the cost of advertising drops during recessions, it creates a “buyer’s market” for more efficient spend.

Marketing during economic downturns is critical.  Based on research from the Great Recession in 2008-2009, companies that continued to advertise not only captured share when others went “dark”, but those that maintained or increased their marketing averaged significantly higher sales growth both during and in the years following the recession.

We’re seeing similar positive trends with our clients that continued marketing or even increased marketing during the COVID-19 pandemic compared to competitors that stopped or decreased marketing. There is “white space” in the direct mail channel since March, for example, that provides extra visibility to banks that are still in the mailbox competing. This leads to extra share of wallet for those marketers.  And while banking acquisition activity is increasing slightly in May and June (June 2020 up 48% from May 2020, but down 57% from June 2019 volume), now is the best time for marketing to more efficiently break through the clutter and gain competitive advantage.  The longer you wait, the less advantage.

Top 10 Direct Mail

Source (above): CompereMedia “June 2020 Financial Services Acquisition Marketing Activity”  (July 2020)

A new study also shows that broadcast campaigns (TV, radio ads) are performing better during the COVID-19 pandemic with a 7% greater increase to the advertiser’s website.

Despite all the distractions in the environment, consumers are still in the market for financial services and you need to be the brand that stays in their consideration set when they’re ready to decide.

Broadcast campaigns

Sources: Merkle “Banking and Financial Services Weekly COVID-19 Update” (April 20, 2020), CompereMedia, Forbes, Mediapost (September 15, 2020)

Track changing consumer habits, ensure your marketing aligns and consider value-adds!

Consumer habits have changed rapidly since March. Consumers that would never have thought of purchasing groceries online and having them delivered may never go back to in-store shopping again. Similarly, actions that our customers used to perform in branch may never transition back from online banking or In-App transactions.  Monitor these customer habits and prospect account opening behaviors to be sure that your marketing Call-to-Actions and service support line up accordingly.

If you’re not developing online alternatives to in-branch sales and cross-sell, you need to start now in order to stay competitive.  While we typically think that there’s no better experience than an in-person, in-branch experience, replicating how your banker engages with consumers in an “offline” environment is critically important to the future of your overall customer experience.

75 percent of consumers

Consumers have become less loyal and are shopping for more value out of economic necessity in many cases.  Retailers and many other brands are offering discounts and special offers like never before. Consider how you can help customers and prospects beyond traditional financial services products and services.  Banks that can develop an authentic and natural value-add for their customers will retain and solidify more long-term, loyal relationships and win over new customers as well.

Reinforce safety and good will

As outlined in the Consumer Sentiment section, advertise what your bank is doing to help keep your employees safe, and help your customers understand exactly how they are being kept safe as well.  Consumers also care more about good will and charitable endeavors. They want to see that you’re making a difference in your communities and in the world. Share what you’re doing and how you’re helping in a variety of channels, not just on your web site.  Consider Amazon’s TV ads that are focused almost entirely on their employees and how they’re keeping each other and their customers safe. It isn’t an accident that their message is focused on exactly what customers and prospects want to hear!

In conclusion, financial services companies need to actively address marketing efforts given the new environment to both overcome today’s challenges while also capitalizing on new opportunities. “Navigating the new normal” will require revised marketing guidelines for the end of 2020 and beyond.

Marketing Guidelines

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