Banks need to offer products that address unmet needs of current and prospective customers to gain a meaningful competitive advantage and retain market share.
But upgrading the “front end” experience is just one piece of the puzzle when it comes to competing in this increasingly crowded financial services landscape. Still, this can often be a nearly impossible step for banks with legacy delivery and core systems; these dated technologies typically don’t enable banks to customize products and services or have the combination of capabilities that they require to meet niche needs of customers.
To truly launch impactful products and services, banks must first fully understand who their customers are and where the gaps lie. This doesn’t just mean creating generic customer segments, such as Generation Z, urban dwellers and mass affluent, among others. It means determining niche groups based on their unmet needs. It’s time to look beyond traditional demographics like age, household income, gender and life cycle to uncover narrow customer behaviors.
Executives can ascertain such insight from mining many data sources, including the bank’s delivery channels, payment systems and core banking systems. However, it’s often necessary for banks to identify and use previously untapped data sources as well, such as payroll, assets or even health insurance. To effectively do so, banks must have the proper infrastructure and technology in place. But facing existing challenges like constraints on resources and tech talent shortages, many financial institutions instead rely on trusted fintech partnerships to collect, organize and analyze the data.
Once banks or their partners analyze the data, they can form niche groups based on what unique user needs are not being met with traditional financial services. This segmentation gives banks the opportunity to provide new value for those customers by offering meaningful, relevant features or products that can fill the gaps. This is a stark contrast to the generic mass mailing offer for a debit card or auto loan that some institutions send out on a regular basis.
For example, some customers value sustainability as one their core principles. These customers might drive hybrid cars, only shop at small businesses or prefer organic produce. Banks can use this insight to create empathetic products and services that support these customers’ lifestyles and beliefs. Maybe the bank decides to provide loans for purchases that directly support clean energy. Such innovative products and services show that the bank understands and shares their customers’ values, building stronger customer relationships.
Or, consider that a bank uncovers a niche group of young adults that tend to take advantage of buy now, pay later (BNPL) services. To meet this group’s specific needs, a bank might develop a feature within its digital banking interface that notifies the user when a new BNPL charge appears on their statement. The bank could provide a more holistic view of the customers’ BNPL purchases and upcoming payments by tracking and categorizing each purchase. Or, perhaps the bank could recommend credit cards to help build the user’s credit instead of using BNPL programs. In these scenarios, the bank is offering products and services that meet this niche group’s specific situation and needs.
In both examples, the new products and services resonated with customers because they demonstrate the institution’s empathetic understanding of the niche group’s unmet needs. These are the types of digital transformations banks need in order to remain competitive in a landscape full of disruptors. Those banks that are carefully evaluating their data, launch products and services designed for niche groups and are tapping trusted, proven consultants and fintech partners for analysis and development when needed will be well positioned to increase wallet share and increase and deepen customer loyalty.
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