Addressing Rising Cost of Acquisition and High Churn within the Financial Services Industry
By
Andrew Naoum
Increased Digitization and Customer Loyalty in Financial Services
The numbers are stark: as of 2022, 65.3% of Americans use digital banking services. This number includes 80% of millennials but only 48% of baby boomers, which may hint at a more significant shift as more and more consumers rely on digital financial services.
For consumers, this increased reliance on digital financial solutions offers incredible opportunities. They can compare financial services and banking offers from multiple sources, ultimately selecting financial services based on convenience, customer service, and value.
However, that expanded reach comes at a significant expense. Brand loyalty is shrinking, and financial services providers are challenged to retain existing consumers. It's easier than ever for consumers to find new and better deals. The result is that these providers must expand their product offerings, enhance their value, and make it easier for consumers to stay than to look elsewhere.
The Splintering and Digitizing of Financial Services
As recently as a few decades ago, consumers would do all their banking with a single provider. Those days are long gone. Today, the average American household has accounts with five different banks. This astonishingly high number demonstrates that Americans don't value brand loyalty to the same extent that they once did. Instead, they want the best deals and products.
One of the top drivers of this trend is the internet. Most consumers use online banking to check account balances, transfer money, and pay bills. In addition, more than half of all Americans apply for credit cards, investment services, loans, or mortgages online.
How Financial Firms Can Respond
Financial services providers must identify new ways to reduce this digital fragmentation. Some options include:
- Redefine convenience. Consumers are busy and want the best offers that cost the least money and time. Financial services providers can enhance their value by positioning themselves as an easy, safe, and convenient one-stop financial shop.
- Focus on the customer experience. An easy, intuitive user experience is essential in every industry, but perhaps more so in a digital era. When making financial decisions, consumers expect a UX that's easy to understand, accessible from multiple types of devices, and secure.
- Be "Always On." Consumer engagement over digital interfaces means products and services must be available on your consumer’s terms. That means consumers need access to financial services 24/7, AI-informed product offerings, or another robust array of internet-based assistance.
- Expand product offerings. To win consumers in a highly digital age, financial services providers must offer multiple products and services to ensure consumers return to their business. A failure to provide an in-demand service means a lost consumer. If your organization doesn't offer certain products or services, you'll need to identify providers to satisfy those needs.
The Advantages of Digital Services
Digital financial services have become exceptionally popular. According to a 2021 survey, 88% of American consumers use fintech solutions, equaling over a hundred million American adults. Perhaps most striking is the overall trend; in 2020, these numbers were at a mere 58%. The COVID-19 pandemic pushed more Americans to become comfortable with digital financial services. As with most technological innovations, this trend will only accelerate with time.
This reality is also reflected in the fact that 27% of Americans use online-only banks. Tens of millions of consumers do not require a physical bank presence, unmooring traditional financial relationships and forcing banks to recalibrate how they do business and gain new customers. To be clear, this is not to say that physical banks are becoming obsolete. However, it does speak to the reality that increased digitization has made people more comfortable handling their finances online.
This change in consumer habits presents an opportunity for businesses to help their customers find new financial products to meet their needs. By helping to provide consumers with increased financial solutions using technology, any business can position itself to maintain their customer base, while increasing engagement and lifetime value.
Partner With Engine by MoneyLion
Building brand loyalty continues to be the primary way financial services providers reach their next level of success. What has changed is how brand loyalty is built.
Expanding consumer convenience and third-party offerings is one way to build consumer loyalty in an increasingly digitized age. At Engine by MoneyLion, we have developed an extensive range of embedded financing marketplaces, allowing any company to add financial products to their business. By adding these marketplaces to your website, mobile app, and other pre-existing digital tools, we enable you to offer your consumers access to more financial tools and services, including those you might not be able to provide on your own. Engine by MoneyLion's platform can enhance your company’s value by ensuring consumers can access the financial products and services they need.
