Building Banking Loyalty During Volatile Times

Jim Marous:

Hello and welcome to Banking Event Forum, the top podcast in retail banking. I'm your host, Jim Marous, owner, CEO of the Digital Banking Report and Co-Publisher of the Financial Brand. Consumer behavior is changing faster than ever. The impacts of the pandemic technological advances, a greater awareness of environmental, social, and governance issues and an uncertain economy are influencing financial wellness and buying decisions. More than ever, banks and credit unions are wondering how they can better shape consumer demand and drive engagement and loyalty as consumers are increasingly diversifying their financial relationships. We are fortunate to have PWC partners, Greta Lovenheim, and Brian Morris on the Bank and Transform podcast. Greta and Brian discuss the results of the PWC customer loyalty survey and share how banks and credit unions can strengthen relationships, increase customer lifetime value and reduce the likelihood of attrition. According to PWC's Customer Loyalty Survey, more than a quarter of consumers stopped using or buying from a business in the past year and bad experience were overwhelmingly the reason why. In addition, one third of consumers said human interaction was important to the loyalty and for some businesses it was more than 50%.

Finally, four out of five consumers would share some type of personal data for a better experience. Not surprisingly, these numbers are vastly different based on different generations. To start off, Greta and Brian, I have referenced some of the insights from your survey that was done last year. What were each of your most important takeaways? Let me start with you, Brian.

Brian Morris:

Thanks and I appreciate being here. One of the most important things that I took away is something that I've been talking to my clients about for years is financial services is not so much different than other industries in terms of wanting good experiences and having choices. It's interesting when I talk to my clients in the past, a lot of them are like, "Banks and financial institutions, they're special. You have all of your finances there.

You make those decisions, it's very important and you're locked into those." But really if you start looking across the surveys, which the survey actually goes across multiple industries, not just financial services, and you start to compare the various different metrics that were looked at in each one of those, we see it's fairly similar. They want some of the same things. They want a consistent experience, they want personalization, they want choice, they want... These are the things that drive loyalty. I think it continues to be a wake-up call for my clients in financial services to say is if you're not providing that type of a personalized experience and providing choices, people are going to start looking elsewhere for doing their financial services in general. I don't know, Greta, where you go?

Jim Marous:

Greta, was there any aha takeaway from your perspective?

Greta Lovenheim:

Yes, definitely, and hi, everyone, nice to be here as well, but from my perspective, I totally agree, Brian, seeing that not only in banking but across industries, it's not just about the capabilities that a company offers. Clients have been telling us, and by clients I mean consumers have been telling us a long time that their loyalty is not just about, "I have this great product feature," or, "I have this great name for my flavor of checking or flavor of savings account." It's about the values the company has. It's about the trust I have in the company as my advisor. It's about many things that is personalized to me, not just about the capabilities that my provider offers. I'm willing to move and that's what consumers are telling us. They're willing to move if they either have a bad experience or they're stressing the wrong things and it's not meeting my needs, and certainly if they find someone else who is meeting those needs.

Jim Marous:

Sticking with you, Greta, it is not a total surprise that customers are willing to drop a brand because of a bad experience or even misaligned values, but the question really becomes what do financial brands need to do to mitigate this challenge?

Greta Lovenheim:

I mean, I think there's a number of things and some of them are new and some of them we've been talking about for a very long time with our clients in the banking space and financial services space. I think, I'll harp a little on the capabilities and values again, but understand what capabilities are truly needed by the consumers you're working with, the consumers you're targeting and see growth potential with, but also understand those values because they are at least as important. Two different types of consumers. Those values may be different things.

They may be environmental impact. We're seeing with especially a lot of younger generations is very important to have them understand where you're going in that space. For another set of consumers, and we see some of this in specific diverse segments. What value you're adding to my community, how you're supporting my community and providing financial education is very important. Some of those things have been on the side for a long time, but as you think about how you're serving, as you're thinking about, it's not just the experience you're having that day with that phone rep or that banker in the branch or that interaction when you're logging into online banking, it's about much more than that. Those experiences, bad experiences can traverse that entire spectrum.

Jim Marous:

That's interesting. Brian, what have you seen change over the last two, five, maybe even 10 years from the perspective of consumer expectations and the ability for banks or credit unions to deliver on those expectations?

Brian Morris:

That's a loaded question. There's a lot of things. I mean, again, I go back to what I said before is that there's a lot of, in my opinion, bleeding across various sectors. I look at something like the Apple and the loyalty that you have to Apple brands and actually some of the brands that haven't been in finance in the past are getting into finance. The Apple with Apple Pay and Amazon, all of these things are starting to bleed in and obviously you have a lot of the fintechs that are coming on that are making it easier to transact and the rest. This has been coming up for the past two, five, but 10 years ago probably not as much. That expectation of what it means to be loyal to an Apple versus what it means to be loyal to a bank, I mean the expectations that I'm a bank trying to be Apple is very, very hard.

But they have to be able to provide those types of experiences, customized experiences, integrated types of channel experience being relevant at the time. These are things that are antithetical to a lot of banks. Banks are like, "All right, I have my credit card, I'm going to give it to you, my credit card. You want one of these widgets, I'm going to give you one of these." They're really not even today really looking at what does the consumer really want? They have their widgets and they're selling it and it's being able to reverse that all really understanding what the client wants and then being able to support that in all the various channels. It's a challenge because it's not just the challenge to understand it, for banks and financial institutions in general, getting them to coordinate across all of those channels and different parts of the organization is incredibly difficult.

Greta Lovenheim:

The other thing that's shifting a bit, not to jump in here, but-

Jim Marous:

Go ahead.

Greta Lovenheim:

The other thing that's shifting a bit that we're seeing from consumers is a couple things. One is we're seeing fractured wallets more so than ever. We are seeing... Consumers are telling us that 70% plus of consumers want to consolidate their financial relationships, but fewer than about low 40%, 43% actually do consolidate with one to two financial institutions. That's not because they're intentional about it, it's because the buy now pay later or what's hitting them at what moment in their journey of what they need from a financial perspective. Even if they want to be more loyal so to speak and consolidate, they're finding reasons why they have more relationships with more providers. Banks need to understand that.

Jim Marous:

The challenge also is that the consumer's been exposed, to Brian's point, to so many new things, even since COVID, the difference between DirecTV and Hulu, the difference in the way Amazon treats you versus a normal retailer from the standpoint of really knowing you and understanding you. But to your point, Greta, around the diversification of relationships, it's so easy to click and play. If I find something I like that it's different than what I'm getting, it's very easy for me to open a brand-new relationship. In fact, it's massively different than trying to close a relationship.

I think we talk about a lot where we talk about silent attrition. The customer hasn't actually left, they haven't closed their account, but they're not using you the way they used to and certainly not to the degree and they don't think of you in the same way. Brian, I'm wondering from your perspective, do you think that banking's gotten a free pass in the past a little bit, where their expectation of what a bank's going to actually do for you has been lower than maybe for other relationships and all of a sudden we're waking up to the reality that people want that personalization strategy?

Brian Morris:

Again, to your point, and I do think things like COVID and the rest have influenced a bit like the interaction with brands and one of the key things around different channels to interacting. Again, a lot of the retailers were able to move very quickly and capitalize on the digital channels and the expectation. A lot of my clients in the banking industry like, "Oh my God, we had to have digital signatures and all of these things?" They were caught flatfooted, but now it's almost like they all have plans to be more digital and engaged a lot more and be more relevant. I think it was a huge wake-up call when they realized they were caught a little flatfooted because they were thinking people didn't really expect that and now they're almost over-indexing the other way where they're accelerating their digital engagement to keep up with where retail, CPG, restaurants needed to go to survive. Right now, suddenly banks are like, "Holy, look what happened. We need to go that way." Almost all-

Greta Lovenheim:

But they're playing [inaudible 00:11:46].

Brian Morris:

... has a hyper extended on like, "We have to be like that. What happens if that comes through again? we're going to be in a bad situation."

Jim Marous:

It is subtle sometimes. I call for a pizza and they go, "Hey, Jim..." They start off, "Hey, Jim." Because they recognize my cell phone number. "Do you want the same thing on the pizza you had last time?" I may say, "What was that?" They know what it is. This is all subtle interactions using personalized information that's driven so much easier on a digital channel than it was on a more individual walk in the branch type channel. Greta, there is a catch 22 here because as we try to create these personalized customer experiences, how do we do that without feeling like we're sacrificing the trust when it comes to sensitive data? Or is this simply almost like Amazon, whereas it's a value proposition that my trust level is what you do with my data becomes greater the better you do with it?

Greta Lovenheim:

I mean, it's a good question. I think, as we know, and I have clients that say, "Banks are in the data business." I mean, banks, they have a ton of data. From at least what we have seen over the years, it is usually a mess. It is not necessarily brought together even to leverage what they have for each of their current relationships. Using that data to not... I mean, it's pretty simple to not be throwing irrelevant offers at people, to be treating them that they even interacted with you for that last pizza. Understand that they're not the mortgage account, they're not the checking account, they're not the savings account, they're human. Bringing that data together, limiting the offers that you're throwing, limiting the engagement to what you think is actually going to be relevant based on what they are telling you, what they are interacting with you, what they are showing you as their preference and actually being relevant in that moment, like the Amazon in that way, I think is only going to garner more trust in terms of the customer knowing you have a ton of their data anyway.

Brian Morris:

I was going to just throw in an example because this is a layup type of a thing that I've been telling banks to do for years and finally happened to me recently, which was my bank. I had a large deposit that I put in and I log into the app and finally it came up, "We noticed that you put in a large deposit into your account, Brian, and based on the patterns, it looks like you're trying to do some savings plan. Here's some examples of things you could do and let's reach out to an advisor." Now this is something that we've been telling banks to do for years. They never really did it, but now they're starting to incorporate that just to be relevant with, "Hey, there was the transaction that just happened, take that and then let's run with it." Rather than just hawking credit cards at me and things that I absolutely don't need. I mean, these are things that are now table stakes to be able to do, to move from just transactional to more of a, "Hey, I'm thinking about you in the future and how we can help you."

Jim Marous:

It's almost a little bit comforting at times for a finance institution to respond to something you've done in a good way. I get a lot of communications from my business and my personal relationships and sometimes they're so dry, so vague, so general and with so many things at the bond that are the disclaimers that you go, "You sent this to everybody," but for somebody to do what you did.

It's funny, people who listen to podcasts have heard this story before, but when I bought my Jeep, I put all these feelers out there going, "Look at me, look at me. I need you to talk to me, financial institution," nobody did, but every dealer and manufacturer did because they picked up on the fact that there was a credit bureau hit when I did a test drive and my personal account, it was strange. I wrote a check for the down payment. They still didn't reach out to me. It's getting to the point where consumers are saying, "I'm giving you all the feelers out there to say, 'help me,' but aren't taking those up." Greta, when you talk about organizing and working with the data and unifying the data, where should financial institutions start? I mean, the good news is we have a lot of third party providers out there that can take data in its worst form and make it usable and deployable, but where do you think they should start?

Greta Lovenheim:

Agree totally on that point, I think from my perspective where I've seen banking clients and others fall down with that is trying to boil the ocean all at once and they can spend three years and millions and millions of dollars trying to get to where they can start to use the data after bringing it all together. From my perspective, focus on the key use cases, so be very use case driven. What are the things... What is the simple first step that you want to be able to bring a subset of data together and use and see value? Start there, then build on the next prioritized one based on what you think is going to be the ROI and the quick hits. When we work with clients and have them do that, there's a lot more value that happens and it just helps pave the way to build and build and build on top of that for the next use case. Then you'll end up being able to use the output of that for multiple things that even if you built it for that first use case.

Jim Marous:

It's like trying to boil the ocean. We always-

Greta Lovenheim:

Exactly.

Jim Marous:

... banking tends to make the easy, difficult over and over again, and as you said, take a use case, take something you want to do and you can act on immediately, build the confidence in the fact that it works and that it's not about an individual time period. It's about overarching examples. We used to have a hard time getting people off that spring for cars, fall for equity credit or it might have been vice versa, I don't remember anymore. But as opposed to, let's just pick the person when it's their time and talk to them. Brian, from your perspective, how do you see organizations actually from a success story standpoint, where do they start with their data, and how can they deploy it the best for the consumers benefit, not just serve for their own?

Brian Morris:

Again, this is not just a financial institutions, but it's more broadly, especially some of the key term that's coming up in the last three years is the Customer Data Platform and building out their CDP. There's thousands of different types of CDPs and actually it's the worst acronym, the Customer Data Platform because it does house customer data, but there's a lot of dependencies on how you bring that data together. The theory of the Customer Data Platform is to bring together into one space a unified profile of the individual, both everything you know about them inside the financial institution, but also taking all the digital signals, marrying those all together and then being relevant at the time based on the behaviors and the experiences in the moment to be able to be very relevant. Again, the past three years we have worked on strategies to help develop that out and actually implement a number of CDPs within the organization.

But a lot of financial institutions have been disappointed in them and they've been disappointed in them for a couple reasons. Exactly what Greta said. They try to boil the ocean with these huge use cases that, or boil the ocean where they don't get any value. Instead of taking one use case with maybe one part of the organization, maybe it's a credit card, maybe it's in the retail bank and showing how to do just basic retargeting for instance, or something to personalize on the site one channel as opposed to trying to do omnichannel, blah, blah, blah, blah, blah. They start trying to drive it and then it fails because they don't see the value of it because it's not just the technology, it is also how you need to organize all of the handoffs between this inside the financial institution.

To answer your questions, one of the things to think about is to think about something like a CDP where you could bring all those data together with one or two really solid use cases where you know the metrics you're trying to move, do a proof of value on it in a three, six month timeframe, get that going and then do the next use case and then slowly start to expand that across the different business units and the different product sets and we'll start to see the change. Again, we're doing this right now with a client and they're starting to see the value and they're starting to get the snowball effect.

Jim Marous:

With that in mind though, we talk about the CDPs, we talk about all these ideas and reports that get generated. How difficult have you seen it for financial institutions to move from these really good data reports that are kept internal and the actual deployment because the deployment is where the money is. It's also a matter of saying how do you do it at speed and scale? Because if you take three months to verify that the data's going to get you to the right solution, you've lost most of your opportunities because opportunities happen in an instant. How do you get there?

Brian Morris:

Again, I'll just reiterate, it's taking a use case that you can actually implement. Because to your exact point, it's not just bringing the data together, it's how you execute on that. A lot of our clients still, they know you were on site five seconds ago, they know that you were clicking on a mortgage and that you actually started to apply for the mortgage and then you abandoned. They know all of that, all that's sitting in the CDP and the rest, how they actually use that to get you an instantaneous, "Hey, by the way, why did you abandon the rest?" That requires not only the integration that the rest of the stack, but also the process and to pull together the campaign, pull together the creative, get it out in the site and then execute on it.

That piece requires not just the technology, but it requires the process, the approvals, all that stuff where a lot of our clients, and you think in 2023 this has changed because a lot of other industries it's not, is they still do a lot of these push campaigns. Push, every month we're going to do this one and then we're going to do this one and then we're going to do this one. It's going to take 70 days to get it going. They do all these push campaigns versus doing more of the poll where I'm there, I'm in front of the ATM, you got me for five seconds, what are you going to say to me? They're like, "I don't know." The technology is there and they're working on the technology. Where I think they really need to focus in on is how do they align the processes, the ways of working the org to take advantage of it. I think that's really where the bottleneck is.

Greta Lovenheim:

I'd add a couple quick things there, too. I'd say, one, in terms of when you think about execution, like Brian said, testing and learning, building that discipline where you are constantly testing, putting that feedback almost real time back into the process and adjusting at not just waiting until, "We'll do this campaign again next year and let's learn from it for next year," where it's, "How's it going in the moment, and how can you adjust on the fly?" What we see a lot of clients that are doing this well really do there is pull these agile teams together that not only include marketing and customer experience and that forward front office set of people, but also the risk and compliance folks so that you're not getting to the idea, you've designed it a hundred percent and then you then go send it into the ether to try to get it approved.

Jim Marous:

And get turned down.

Greta Lovenheim:

Then three months later you still don't have something to go to market with. It's including everyone along for that journey.

Jim Marous:

It's getting out of that campaign strategy is what it is. Brian, you referenced that a second ago. As long as you're in that campaign strategy, you can't deal with the instant opportunities out there and it's where you're compliant and everything else. Get them to approve the process, not the campaign and it's going to be a lot easier. That's a great point, Greta.

Brian Morris:

I don't want to... But I just want to make sure it's like, and some of the big banks have started to really... I mean, there's not many names, but some of the larger banks have actually started to get very good at this. They're investing a ton in their analytics teams in Agile. Interestingly, have some of the most innovative tech and the ways of actually getting stuff out is coming out of some of the larger banking institutions. They finally got it over the past few years. I don't want to say it's doom and gloom for those larger ones, but as it trickles down to the tier twos and then its down into the community bank, you see this drop-off of both from the resource commitment to doing it, but there's this hunger, they want to do it, they want to emulate what the big banks are doing. They're now trying to figure out how to do it. But it's a challenge. It's definitely a challenge.

Jim Marous:

It's interesting, Brian and Greta, that what we see is the big banks do it really well. The smallest banks are getting really good in finding partners that can deliver on that as well because their management is totally in tune with what they need to accomplish. It's those mid-level that have really been challenged because there's so much legacy and leadership and so many legacy thought patterns and processes in place and it's hard to break down those barriers. The little ones, it's like that pickup truck versus the semi. The semi's got a lot of money, so they get it accomplished, but nobody's doing it extraordinarily well yet. Greta, I'm going to get to you on a point, too, that your research talked about the importance of humanized relationships and we've talked about this recently on the deployment of data and the deployment of insights to the human element of financial institution communication. How do you deal with that and how important can that be, and how is it best achieved?

Greta Lovenheim:

I mean, it is important and we're seeing, as Brian said, it's not just within financial services, we're seeing that across sectors and then financial services is no exception to that. We're seeing, I think it was something like the research said, 55% of consumers within financial services say that the humanized experience can make or break their experience. In my mind, I think it's looking at... Thinking of an example like, opening a new account or applying for a new account. Consumers have preferences for channels, but when you get to a more complex type of interaction or engagement where they're opening a mortgage or they're opening a more complex product or they're filling a more complex need, they may start in one place with their research, they might be looking online and then they may need to because they have questions, they may need help.

How does the bank, today, what that will feel like having done such things, what that will feel like is, "I need to stop what I'm doing and then I need to go out of my way to go figure out where the bank can help me either I'm sitting on hold at a call center for maybe the right person or going into a branch in the middle of the business day or something of that nature."

How does the bank anticipate the potential points in time of that interaction to make sure there is human or humanized help in a way that is seamless and in a way that doesn't frustrate the consumer and make them go seek potentially someone else who can do it better. I think that's the place where it's not an easy thing, but looking at particularly in a... I know I harped on being use case driven, but that's where looking at some of the more complex and more common interactions and starting there to where do they see those frustrations, doing some of that strategic research to say in that journey of my customers, where are we falling down? Where do they seek out that human help? How do I start there in terms of being able to provide it either with online help or steering them in an easy way across channel.

Jim Marous:

On that point, Brian, are we looking at more of a need to what I'm going to call democratizing the data within the financial institution? In other words, the insights, the things that happen instantly that a customer may be in a great position to buy something or want to buy something. Do we see the democratization of insights where we deploy them across any contact center being important, where the human can actually get involved in the process above and beyond what's done digitally or through email?

Brian Morris:

Yes. I'll actually take that one step further. Again, going back to things like the CDP, that actually allows you to democratize data at one point in the bank that has the profile and everything that individual has done across all of the different lines of business, across all of those channels and the rest. That's, that's now being brought together at an individual. Interestingly enough, where it's actually also going now, again, I'll take it one step further, is now banks and financial institutions are looking for partnerships outside of financial institutions so that they're looking at things like data clean rooms and the rest to be able to allow partners to come in and marry what I know about my clients with what you know about my clients to be able to share, not at the individual level, and there's a lot of privacy concerns here, but more at a segment level.

We're starting to see more ecosystems starting to form where both financial institutions and those outside of financial institutions are starting to work closer together. Now again, we're in early days of things like the data clean rooms and sharing of that information and there's... But I think there's, with the deprivation of what we're seeing in the third party cookie, it's requiring a lot of our clients both in financial services as well as outside financial services to get their data together. Now that their data is together now, how do they share their data with others in privacy compliant manners to get insights to again see how they can start to surround these individuals wants and needs both financial needs and other needs. Again, I'm taking a maybe to the extreme, but it's really is around that data and getting as much insight as you can sharing that, so people can be there in the moment

Jim Marous:

It's actually looking at the customers holistically and you can take alternative credit data, you can take purchase debt, all these things. I get frustrated because I've been banking forever and we gave away all that purchase insight where now finance institutions simply get a transaction that Amazon $12.45 cents as opposed to Jim's mind elect a lot of technology equipment and things of this nature. When we look at these things, I think you're right, when we have to combine more data from inside and outside and some of it not as personalized, but at least trending in certain ways to get us so that we can bring the consumer better solutions. Because if we don't, and even to the point of asking consumers their opinions on things and being able to process that, which we can now do on the cloud, which we weren't able to do before.

Brian Morris:

I would just suggest was what Greta said, because people are making their decisions on not just what you do for your product and your services, but what you believe. I'm going to say I'm a cynic guy. It's like, people buy what you believe and so you start to see if you're involved in things like social justice causes, ESG, environmental pieces and others, and you could see a lot of brands actually got into hot water for taking positions on these things. But it matters to people. To your point, it goes beyond the transaction. It's what you know about what's important to these individuals, not just their financial needs, but other needs and are you satisfying them? Are you aligned to those, is going to what's going to take you from transactional to a more loyal customer?

Greta Lovenheim:

I would say not just democratizing that data, but it's democratizing what that data means.

Jim Marous:

Yes.

Greta Lovenheim:

I have seen multiple examples over the years of, you put a lot of data in front of a customer facing banker depending on... They may or may not know what to do with it. You need to make sure it's not just like, Greta Lovenheim earns us X dollars in profitability per year. The banker in front of you may or may not know that that's good or bad, may then tell the customer and spark a whole conversation around what drives profitability. As a customer, that might be a frustrating to me that I earn you so much in profit. What does that mean and what should you do with that information.

Jim Marous:

Greta, that's an extraordinarily important point because I keep on referencing the fact that sometimes we forget that we have to ask the question sometimes. If we keep on driving through answers based on data, we're going to mess up. But I give the example of when the PPP checks came out that we saw in many cases, and when people were able to defer their payment on their mortgages, a lot of people deferred the payment on mortgages, but half of them were deferring it because they couldn't pay their mortgage. The other half were deferring it because they wanted to build up a savings package between the PPP deposits and government deposits as well as the deferred loan payments. They were able to build up a nest egg, worried about what could happen next. Those are vastly different people with vastly different needs, but if you ask them the question, "Why did you defer the loan payment," you can get to a much better space and we now have the ability to actually collect and use that information, which we didn't really have in a seamless way before.

Greta and Brian, I get frustrated because number one, in all the research we do, improving the customer experience is always number one. Things that I look at from the standpoint of what they invest in don't always talk the same tune. We look at reduction of cost and other things and data and insights are not as high up the rank as I think they should be. What stands in the way of progress around loyalty, customer experiences and things of this nature? What are the hurdles to success? I'll ask you both that question.

Greta Lovenheim:

I mean, from my perspective, the things that we often hear the most, or that I often hear the most are, "Our data's a mess. I wouldn't even know where to start." Back to, we talked about this, I won't beat the dead horse about being use case driven, but you don't have to start with the whole world. You can start a piece at a time. We hear, "The customer data changes too quickly. I can't get a gauge on what's really happening, so why bother?" Not in those words per se, but that's the theme. I'd say that's actually a learning is that it's something is changing very quickly. Maybe develop triggers based on that, that then points to when something like to Brian's point, he made a transaction and he finally heard from somebody that they noticed.

How do you take advantage of the fact that certain things change that you want to act on and build those triggers. I think the other thing we've talked around this a little bit is segmentation has to evolve in terms of a lot of banks we talk to, particularly in not the top tier of size, but in that middle tier, a lot of times things think about segmentation from a, "I am looking at the affluent segment," or, "I'm looking at this age range and this income range." You can only do so much with that. Particularly from a compliance perspective, you can only do so much with that. But it's about behaviors, it's about mindset, it's about what choices is the customer going to make. Those questions that you asked about, why is someone doing that? What's underlying and driving that person as a consumer and using that for your personalization. That's not an... With today's technology and the data that's available, you really can get at those answers in a way that's very efficient.

Jim Marous:

It's putting those things together. I'm sitting here in a demographic generation that is old. However, my-

Brian Morris:

[Inaudible 00:38:18].

Jim Marous:

Thank you. I wasn't looking for that as a response, but thank you very much. The challenge is the way I bank is not defined by my age. What we are banking with is not defined by where we are in our life cycle. The reality is, until two years ago, we had a son in college, quite a bit later than many people that we know. As a result, we are still dealing with cashflow issues more than retirement issues. The way I do my banking is entirely mobile. The way I do all my payments are entirely mobile, not with cards, not any other way. I'm not writing checks, so I'm not your demographically typical consumer, but nobody is. It gets down to behavior. Brian, you've talked about different industries, but I think it's not unlike the financial service industry, what stands in the way of doing what we all are talking about and have been talking about for quite a while. The common sense things?

Brian Morris:

People, that sort of thing. Seriously, maybe I'm taking the more cynical.

Jim Marous:

No, no. I-

Brian Morris:

People... Look, the technology's there. Everyone's like, "We need to be able to integrate data, we need to be able to get insights," and it's all important and look at behavior. That's all... We can do that. That's the easy part. It's not the easy part, but the problem is what are you measured on? What are your metrics? What are you going after? The process that you're dealing with. The card folks are still focused in on their cards. The retail bank is still focused in on their products. I was just talking about to a client recently who was saying they wanted this product portfolio strategy and how they were going to go and do their marketing product by product by product. I'm like, that's great.

Jim Marous:

You're not.

Brian Morris:

But don't do that. It's great for you, as the bank to really be organized by your product so you can hit your metrics. Unfortunately, it's not how the client buys. Client doesn't care about why this credit card or this credit card or this credit card and the rest. What it cares about is what's in it for me? Again, people are defined by their metrics and they'll go after their metrics and they'll optimize to those metrics. Until we reorganize that and say, "Look, we're going after..." Customer lifetime value is your new metric, by the way. Customer lifetime value across all channels and products, that's your metric and that's what your bonus is going to be based on. Your product actually may be the lost leader and his product over here or her product over there may be the one that's the most profitable, yours isn't.

But you're not going to be measured on that. You're going to be measured on the lifetime value of this individual and how it aligns to our brand values and the rest. Once that happens, when maybe I have gray hair, maybe I'll be... I don't know when it's going to happen in my lifetime. We are starting to see that shift. But slowly, once we start to see that happen, you'll start to see a lot more of this cross-channel, the omnichannel kind of stuff. Again, I'm standing up a stack for a client right now and we have a great stack that could do all those analysis. What is the one thing that we're not really talking about? The elephant in the room is how are we going to change the way we work to enable us to actually do this?

Jim Marous:

That is so true though. We see it over and over again that legacy thinking, legacy processes get us in our own way. We stumble upon ourselves as we try to move forward and it gets very frustrating because the opportunities are there, everybody says they want to do things, but until you change, sometimes the back office processes until, and Greta brought this up at the very beginning of this podcast, until you involve compliance on the front end and realize that they're not the enemy, but they're part of the partnership you have to build to get these programs out. As you said earlier, Brian, until you get out of the campaign mentality, until you stop looking and saying, "I got to generate 3,000 credit cards in the first quarter," and say, "Oh by the way, I need three a day and by that, that's going to get me the number I need by the end of the year."

Until we also change the digital processes to start the engagement, we're stumbling over 15 minute digital account opening experiences and we know we got to get down to three to five minutes, but then we say we want that, but we want the driver's license to be the first point of verification. You go, "You can't get to three to five minutes with that being the first step." The solutions are there. They're there. We get in our way and I'll say so does profitability. Our success as an industry and institution by institution gets in our way because it doesn't feel broke yet even though we know it is. It's tough. Brian and Greta, for the last question is, looking ahead, what trends do you see on the horizon with regard to data, experience and loyalty?

Brian Morris:

All right, I'll start. It's just fun. I think that they. We start to see things in the AI space that I think is going to start to really speed a lot of this stuff up. I mean, I know that the big buzzword out there now is around chat GPT and this generative AI. I really do think that this is a game changing type of a technology that actually takes the human out of a lot of this where you're going to have... Again, it's not just chat... Everyone thinks it's chat GPT as you chatting, but this can actually be ingested through their API on things like what's going on in the site, what's going on in other channels, and listening, and then be able to respond back or prompt things in real time in natural language. You're also seeing that with generative content and I think that's going to speed up the flywheel and ability to react much, much quicker now to be more personalized.

The flywheel to be able to get from you are in this channel and what to do next will be exponentially faster. The challenge is going to be still the regulatory, the compliance and how we actually allow that AI to perform. Then there's the whole thing around bias and things of that nature. But I definitely see that that that technology is going to make it much more challenging for banks and financial institutions to remain in their silos and continue this push campaign because every other industry is already starting to go down that path.

Jim Marous:

Greta, from your perspective.

Greta Lovenheim:

I mean, I totally agree and I think back to the notion of legacy thinking. I think leveraging the analytics, the data, the AI that Brian's talking about, to understand the mindset shifts that are happening and anticipate the mindset shifts. I mean, I have a lot of clients that ask about, how do we improve our number of primary checking relationships? That, in my mind, I mean, growing checking is not a bad thing, don't get me wrong. But to the consumer, particularly the younger consumer, the notion of primary checking isn't really a thing anymore. When we look at-

Jim Marous:

That's a great point.

Greta Lovenheim:

... Gen Z and you ask them who is their primary bank and why, they're talking about, "Who do I trust as my advisor? Who shares my values?" Lots of different answers and it is vastly different than the average Boomer [inaudible 00:46:27].

Jim Marous:

For many people, it may be their credit bank, it may be their buy now pay later bank, it may be Venmo.

Greta Lovenheim:

Correct, exactly. Exactly.

Brian Morris:

I mean, I agree a hundred percent that is generations really the value prop and how you relate to them and not that's going to be a key thing for keeping a loyal customer. One of my clients, they're like, "If someone can tell me how to understand Gen Z, please tell me because I can't understand them."

Jim Marous:

It's interesting because I look at my business bank, if somebody asked me who's my business relationship with, I'd say PayPal in a instant because they handle all my inflows and my outflows and they're continually offering me things based on my relationship, but they understand intimately my transactional bank that holds my business deposits doesn't know me nearly as well and I wouldn't consider them my business bank. They're simply the place where I hold my checking account and that is not my primary relationship in the business world. Greta, how do people get ahold of this loyalty study?

Greta Lovenheim:

Yes, it's posted on our website. They can certainly reach out to Brian and I. We're happy to have any conversations on the subject.

Jim Marous:

Great. Thank you both for being on the show today. It's always interesting to look at the gap between expectations and deliverables and the good news is this is not an insurmountable challenge. We sometimes just have to get out of our own way.

Brian Morris:

Well said.

Greta Lovenheim:

Exactly.

Jim Marous:

Thanks for listening to Banking Transformed. The winner of three international awards for podcast excellence. We appreciate the support we have received during the past three years. If you enjoy what we're doing, please take some time to show some love in the former review. Also, be sure to catch my recent articles on the financial brand and check out the research we're doing for the digital banking report. It's been a production of Evergreen Podcasts. A special thank you to our senior producer, Leah Haslage, Audio Engineer Sean Hoffman and Video Producer Will Pritts. I'm your host, Jim Marous. Remember, the challenges of winning and keeping a consumer's business are very real, but so are the opportunities.