Growth in the retail banking industry has always hinged on cultivating relationships through personal and attentive service, but electronic banking has undercut that model, putting a strain on bank/customer relationships.

Many consumers have replaced visits to branches for deposits, checking balances and transferring funds with mobile banking, and the impact on customer relationships has been seismic. According to a 2015 Accenture study, nearly 80% of customers define their relationship with their banking provider as transactional ? an 8% jump over the previous year.

Transactional relationships are bad news for retail financial institution. When technology replaces people, transactions become a commodity which ? in the consumers mind ? can be easily purchased elsewhere. All banking providers start to blur together as they become functionally equivalent and interchangeable.

Financial institutions have historically built their brands through quality service ?account management, problem resolution, product recommendations ? doing whats necessary to accommodate peoples needs. But when employees are removed from the equation, banking becomes strictly a technology play, achieved simply by pushing the a few buttons. Differentiation is minimized, and harder to achieve ? a problem compounded for smaller institutions who end up with me-too tech stack offered by a small handful of common providers.

Marketers use many strategies to counter commoditization, combat attrition and foster loyalty in the banking sector. Stickiness is one solution ? loading people up with enough products, processes and paperwork that tie them to their banking provider. The objective is to make them think twice before leaving, but it isnt an ideal approach. Stickiness may slow their exit, however a side effect is a build-up of frustration which gradually destroys goodwill before ending in an explosive departure. Creating stickiness could be viewed as little more than a defensive, somewhat cynical strategy that suggests the institutions products and services arent sufficient to retain customers.

Other banks try to tackle the attrition issue with loyalty programs rewarding accountholders with product discounts, frequent-flyer miles and/or cash bonuses. Airlines have used these programs successfully, so why not banks and credit unions? Theres a good reason.

When airlines reward frequent flyers with free travel, the cost of giving away an empty seat is minimal. Retail financial institutions cant afford to give money or retail products away as freely as airlines hand out free seats, so their programs dont have the same value nor the same appeal.

Research data bears this out. Consumers may sign up for ? but arent necessarily in love with ? loyalty programs. According to the Colloquy Customer Loyalty Census, the average American household maintains memberships in 29 loyalty programs but are only active in 12. Think about it it seems like every cashier in America is pushing patrons to sign up for their employers loyalty program ? the pet store, the auto parts store, the department store, etc., ad nauseum. And when it comes to retention value, loyalty programs dont seem to work for banking providers; only 9% of consumers cite loyalty programs as a reason for staying with their primary bank.

The only real, long-term solution for retaining relationships in the financial industry lies in delivering a better product, a higher quality experience and superior service. And that starts with an honest assessment of peoples needs ? a process thats difficult for traditional banks, but is apparently second nature to fintechs who have stepped into the vacuum.

Precisely how to deliver a better product, a higher quality experience and superior service depends on the nature of your institution. If your target audience views electronic banking as a mission-critical, brand-defining service, then you must deliver a cutting-edge version or risk losing them. You must build brand distinction by incorporating features that reflect your organizations personality and values.

In the digital space, creating a differentiated brand means personalizing transactions, making them faster, more convenient and reflective of the customers lifestyle. It means anticipating their needs, and making the experience easier, more streamlined and more intuitive ? e.g., auto-filling forms, pre-approving loans and credit cards, and reducing tasks to one-button convenience. Suggest nearby ATM locations, provide budget and investment advice. Data analytics can predict consumer behavior, and focus groups can identify aggravations that will unearth new ideas.

Delivering a better overall banking experience can give community institutions an edge, because their customer base skews older and doesnt require the latest in mobile banking technology. Rather than trying to deliver a radical, hyper-personalized digital experience, smaller institutions are probably okay using third-party turn-key solutions and instead ratcheting up their focus on personal services.

Reality Check: Trying to beat megabanks in the technology space by outgunning them with superior digital/mobile solutions will be a losing proposition for most community-based institutions.

Brand-building still requires personal interactions, but now it must be accomplished with fewer visits, requiring institutions to work harder if they want to demonstrate value and interject a personality ? the elements that humanize banking. That means providing people with more attention, anticipating their needs and customizing offers. Consider, for instance, implementing outbound telephone campaigns in conjunction with personal emails that are built around customers past behaviors.

Suggestions for branding electronic services and intensifying personal interactions are easier said than done, but they offer the only hope for keeping smaller, community-based institutions from becoming nothing more than another me-too commodity in a crowded and undifferentiated space.

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