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This Month in Retail Banking | December 2020

Navigate today. Anticipate tomorrow.


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LESSONS FROM THE LOCKDOWNS

Unfortunately, a wave of new pandemic-related restrictions is taking hold across the country as cases of COVID-19 increase at an alarming pace and hospitals become overwhelmed. While so many banks have already been through this before, others didn’t experience the severe lockdowns that paralyzed the most populated regions in the spring. This time, however, the virus is battering less-populated areas, which will likely impact bank operations there as well.

Whether they have been through lockdowns before or are new to the restrictions, all banks can learn from the industry’s response earlier this year. Some strategies worked better than others, but they all can provide a lesson for the lockdowns that may be around the corner.

  • BRANCH ACCESS: As cases rise, the need for associates to self-quarantine due to exposure (or actual sickness), combined with planned holiday time off, will lead to staffing shortages. Banks should consider what worked in the early days of the pandemic and selectively reduce capacity and customer access through adjustments to operating hours, lobby access by appointment, and even closing individual locations. Even in places where government mandates don’t limit customer activity, we expect that customers will reduce the frequency of branch visits relative to the summer and early fall.
  • PROACTIVE OUTREACH: If the bank returns to lobby visits by appointment only, there will likely be some bankers who have free time. Many banks made great use of these resources early in the pandemic by shifting the focus to proactive outreach to existing customers. In order to maximize the opportunity, banks should orchestrate these calling programs to ensure focus on highest-priority opportunities, combined with targeted scripting for the conversations. Given the ongoing impact of the pandemic and the uncertainty of governmental relief, banks should be prepared to witness and respond to the hardship that is hitting many communities.
  • FOCUS ON EMPLOYEES: While it may be counter-intuitive, the pandemic may be a great time to focus on professional development of branch staff. Observation and coaching may have taken a back seat this year as many retail teams operated in an “all-hands-on-deck” environment. If capacity allows, a focused effort during this winter will help associates prepare for continued professional development in the new year and drive improvements in employee satisfaction.
  • KEEP INVESTING IN MARKETING: In uncertain times, playing things conservatively can feel like the safest path. However, long-term studies show that the right approach during economic uncertainty is to increase — not decrease — your marketing spend. In fact, the latest Acquisition IQ data from Novantas show the while banks that left spend on (relative to peers) didn’t see a meaningful gain in acquisitions at the beginning of the pandemic, they did see a gain once we hit a “new normal” in the early summer.

The recent Novantas 2020 Shopper Research also shows that unaided awareness levels (or being top-of-mind for consumers) has declined for the top 15 U.S. branch-based institutions. At the same time, aided awareness/familiarity was down only slightly, while the familiarity with neo-banks increased significantly. This illustrates two critical issues that bankers must consider as they enter 2021. First, branch-based banks are having difficulty staying top of mind at a time when foot traffic and driving have tumbled. Secondly, the competitive environment is continuing to heat up.

The right approach during economic uncertainty is to increase your marketing spend.

  • PERSONALIZE: If the latest virus spike drives consumers back into significant restrictions in movement patterns, we expect digital sales to spike just as they did in March through May of this year. Yet the quality of digitally-opened accounts — even in cases where the only way to open an account was digitally — were generally lower than those that are opened in a branch. Banks can’t afford to delay investment in personalized product experiences, particularly in the early relationship. They need marketing capabilities that serve up the right offer at the right time and in the right channel.
  • BE NIMBLE: In a world where the sands are shifting month-to-month, teams need react quickly to new threats and potential opportunities. That requires a shift away from “big bang” campaigns with huge amounts of spend to a rapid-test-and-learn strategy that gets marketing messages in front of customers quickly, quickly determines what’s working (or what’s not) — and then scales the successful approach.

The Digital Transformation Imperative

The shift to digital was already well under way in retail banking, but there’s little doubt that the pandemic has accelerated the transition. As a result, the way that people engage with financial-services providers has changed dramatically.

But many banks are having a hard time keeping up. The increase in digital sales just isn’t replacing the value of those that historically were generated by the branch.

Banks (and bankers) must stretch beyond the physical branch to meet these customers on their own turf in ways that are relevant and meaningful to them.

The digital transformation imperative for banks is to ensure the value-building activities that historically were delivered in branches aren’t lost in an omnichannel world.

In a digital-first world, marketing and brand replace branches as the primary driver of customer acquisition.

Forecasted Shifts in Primary Checking Purchase Drivers

Branch Share
ATM Share
Leading Digital
Marketing and Branding
Other

Purchase Driver Definitions

  • Marketing & Branding is a composite score of a bank’s brand distinctiveness, direct mail (volume and incentive), and weighted marketing share of voice
  • Leading Digital measures a bank’s perceived online and mobile capabilities
  • ATM Share is a bank’s share of a market’s total off-site ATM sites
  • Branch Share is a bank’s share of a market’s branch count

Note: Brand Distinctiveness – composed of various attributes (e.g, “friendly and helpful”, “helps you plan”) from the Novantas Shopper Survey
Source: Novantas Analysis of Primary Checking Purchasers; Novantas 2019/2015 U.S. Shopper Survey, Novantas Branchscape, MasterCard ATM Data, Kantar Media, Comperemedia

What does “digital customer” really even mean? It’s not as if customers ONLY interact in EITHER digital or analog channels.

Only
0
8
%

of consumers are ready for a fully digital bank

Only
0
39
%

of consumers prefer to avoid going to a bank branch

About
0
18
%

of consumers recently opened an account digitally

Only
0
8
%

of consumers are ready for a fully digital bank

Only
0
39
%

of consumers prefer to avoid going to a bank branch

About
0
18
%

of consumers recently opened an account digitally

Source: Novantas Distribution Research 2020; Multi-channel segmentation, FindABetterBank.com research

Fewer than 25% of shoppers have opened an account via digital channels, but those numbers are expected to keep rising.

Never opened a checking account online

Tried to open account online, unable to complete process

Successfully open account online

Source: Novantas Customer Knowledge | FABB DAO Survey | Sample: FABB shoppers (N=1166), Shoppers who opened digitally (N=205)

For now, the in-branch opening experience still drives higher-quality accounts with deeper relationships.

Oct 2019 New-to-bank Cohort: Product Type Mix

Checking
Savings/MM
CD
Checking + Savings/MM
Checking + CD
Savings/MM + CD
Checking + Saving/MM + CD

Source: Novantas Digital SalesScape 2019-2020

Banks can focus on six core capabilities to keep up with the customer.

360 Customer Data

Provides unified, contextual view

Compelling Personalized Experiences

Result in deeper relationships

Customer-Insights Engine

Fuels the best value prop, products and experience

Real (Near)-Time Measurement

Helps develop the right message in paid channels

Marketing Orchestration Across Channels

Yields cohesive, customer-centric focus

Executional Agility

Connects top-of-funnel and bottom-of-funnel marketing activities

Source: Novantas analysis

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