The role of the banking industry during tough times – by Kantar’s Chirag Buch

By Chirag Buch, Director, Kantar Insights

A couple of months back I got a call from a sales representative at a bank. She was not trying to sell me any product. Her only question was “How was I doing in these difficult economic times and if the bank can help me in any way.”

I am sure this was also part of a prewritten script, but what was different about this compared to other sales calls I get regularly was the ‘empathy’ behind that voice. That made me think; have banks missed a trick or two during these critical times in the life of its customer? I have relationships with multiple banks for different products but only one bank bothered to call me and check how was I doing; and this is the bank with whom I have the lowest share of my wallet. As banks compete to launch that newest chatbot or invest to enhance their online and mobile app experience, they seem to have lost track of those fundamental tenets on which the bank-customer relationship is based on – empathy, trust & emotion.

Evolution of banking

If one looks at the banking sector’s evolution over the years, the shift in power balance has been nothing less than spectacular. Financial institutions (and I purposefully chose the word financial institution instead of banks) of the past were in a position of authority in their relationship with the customer. And there were a range of entities involved in this business from the very organised banks to the extremely informal money lender who would lend money with minimal paperwork and maximum interest rate. However, one thing was common amongst these institutions. The customer had to go to the financial institution and prove he ‘needed’ this financial product. The lender would also ‘trust’ the borrower if he believed he will be able to pay back.

As the sector became much more organised over the years, competition became intense and suddenly instead of the customer standing in the queue outside the money lender, it was the bank that came at the customer’s doorstep. Product choice expanded from just a loan to other offers like cards, home/car mortgages, overdraft, instant cash, salary account, etc. In effect, the bank had to go to people to earn their money.

Nowadays it’s not uncommon to find someone trying to sell you a loan that you don’t need, on providing only a proof of your existence, and a re-payment scheme that you cannot resist. Bankers like to believe that all customers have four primary needs – Saving, Investing, Borrowing and Spending. Products and services are also aligned around these fundamental customer needs. The general belief is that customers make choices based on careful evaluation of competitive offers – an extremely rational approach to money. Hence most communication is also focused on interest rates and other tangible features of products and service delivery. But this thinking is fundamentally flawed.

 Bankers like to believe that all customers have four primary needs – Saving, Investing, Borrowing and Spending

Address the symptoms as well as the cause

Financial services is ultimately about our ‘relationship with money’ and you don’t need much discussion about money to realise it is a highly emotive issue. While someone wants to flaunt their wealth and feel Powerful, for others having money is a matter of Control, some have a very Security-oriented mindset with their money while others believe money can buy them Freedom of thoughts and actions. The language of money hence covers the whole spectrum of human emotions – power, control, security and freedom. Saving/Investing/Borrowing/Spending are merely actions that people undertake to meet these more innate needs.

The current health scare coupled with the financial crisis has thrown the world into an era of uncertainty from a perspective of people who are impacted by it either directly or indirectly.  The crisis has directly confronted the fundamental human emotional needs for security and control. Even people with the needs for Power & Freedom are experiencing a sense of insecurity about their immediate future and a complete lack of control on what happens around them and what should they do with their finances. Despite all that, only a few banks were agile enough to respond quickly to prevalent customer anxiety via offering such as payment holidays, deferred payments etc. and then all followed suit. These while extremely important and provide short term relief to the customer who is going through potential job loss, salary reduction and immense uncertainty; it may not be enough given that these aim to address the symptoms (anxiety) and do not necessarily emphasize on the cause itself – feeling of insecurity and lack of control. And to do that, financial institutions will have to strike an emotional chord with its customer and make genuine efforts to feel his/her pain as opposed to resorting to product and service-related solutions only that eventually lose credibility as all banks start offering the same.

When anxiety increases, people respond either positively by re-aligning their needs and motivations (adapting to the situation) or negatively by remaining in a state of denial (avoiding or escaping reality) – leading to continuation of the psychological state of anxiety.

This means providing resolution to anxiety is key. Banks can do that by addressing the security and control-related concerns of its customers since these have been directly compromised in the current crisis. However, given the focus on the development and communication of product and service-related solutions to the current crisis, customers are likely to struggle to see real difference between one brand and another. It can even make their decision more difficult. Along with everything else, customers will almost certainly be reviewing their financial relationships, and they need to feel confident that their relationships are well chosen. The question is, how do you get out of this ‘sea of sameness’?

The question is, how do you get out of this ‘sea of sameness’?


An opportunity to create differentiation

Focusing on rates and fees, operational efficiencies and digitisation of services has created a relative brand parity and low customer loyalty in the banking sector. Almost every major bank in the industry had lined up investments and a vision to create a functionally differentiated institution. While these are clearly important, they have become hygiene elements that do not necessarily differentiate one bank from the other. Every bank seems to be having the best interest rate, the best service and the most advanced digital banking solution.

The current crisis has however created an opportunity for bankers to strike an emotional chord with customers – both current and prospective – thereby driving differentiation for their bank. Addressing customer anxiety, putting at rest their concerns around security of their hard-earned money and helping them get back control of their finances would go a long way in building trust and empathy. This in turn will help drive new customer acquisitions and higher share of the customer wallet.


Final thoughts

The current health crisis is characterised by uncertainty around people’s finances. World leaders and organisations have tried to address it with varying degrees of success; however, nobody quite knows how soon things will be restored to normalcy. Increasingly it is becoming more and more important to address the customer’s mental state to help him/her navigate these challenging times; and banks in the country have a clear role to play.

Hence If you are a bank, the questions to ask yourselves are – Does your corporate communications express the appropriate feeling in relation to money? Do the products and services address consumer anxieties around their finances? Are you trying to connect with your consumers emotively as opposed to functional superiority or operational efficiencies only? If your answer is ‘Yes’ to all these then you are well on track to getting out of this situation faster than the rest. However, if the answer is ‘No’, it might be time to get some help.