Rumors of tech giants Google, Apple, Facebook, and Amazon moving into the financial services space have long been prevalent. In fact, talk of this is so common the four have been abbreviated to an acronym that strikes fear into the hearts of many banking executives—GAFA.
But what, in our digital world, what can traditional retail banks learn from tech companies that have mastered the customer onboarding and sales experience?
What makes Amazon run
Amazon CEO Jeff Bezos has a very simple concept for his business, which he calls the Amazon Flywheel.
The tech giant has always been focused on maintaining a strong growth outlook, and the starting point for that growth is delivering an unmatched customer experience. The retailer’s superb customer experience drives increase in traffic through returning customers and new customers acquired through word-of-mouth. That traffic then allows Amazon to attract more sellers to the site. The more sellers there are, the better and more diverse the selection of goods for the end customer. This in turn improves the customer experience, thus setting in motion the flywheel to drive growth.
This growth in turn spreads any fixed costs across a higher number of transactions, which allows Amazon to have a much lower cost structure. That structure delivers lower prices which improves the customer experience.
So, if you can find what you’re looking for at the lowest possible price and have a frictionless customer experience, why would you go anywhere else to do your shopping?
Three key lessons
Amazon’s growth has been truly spectacular, building revenues faster than Google in the last eight years. So how else do they keep their place at the top? Aside from Amazon’s revolutionary yet simple model, there are three practical lessons that today’s retail banks can learn from Bezos’ model:
1. Understand that different customers look for different experiences.
Sales experiences are different for each customer. Amazon invested in “One-Click”—the ability for its customers to store payment and delivery details for reuse, enabling a purchase at the click of a mouse.
One-Click was so revolutionary that Amazon obtained a patent for this concept, and Apple now pays a royalty to Amazon every time a one-click purchase is made through iTunes.
But Amazon recognize that One-Click isn’t for everyone. While it’s perfect for one-off product replacement purchases like chargers or headphones, the traditional and more familiar shopping basket may be a better option for large, multiple item purchases (like birthday or Christmas gifts). Having both options readily available allows customers to create the experience which is most convenient and comfortable for them.
Similarly, in the world of consumer banking, there are many different paths to purchase. Some customers want a high-touch experience from their bank. They want the traditional guidance, complete with a needs analysis, product recommendations and guidance through the application process.
Other customers just want a quick and easy “checkout.” They have done their research and know exactly what they need.
Banks need to recognize that there are different paths to purchase for banking products—and then cater to all scenarios.
2. Just because someone doesn’t complete a purchase doesn’t mean they’re not interested.
This premise is simple but is rarely acted on effectively by banks. It is vital that banks get better at generating and nurturing leads. If a shopper put something in their Amazon cart, but does not complete the purchase, Amazon almost immediately generates reminder emails as well as targeted advertisements featuring the “abandoned” product, which remind the shopper.
Applying for financial products takes time, and everyone is busy. So, if a customer takes the time to begin an application and goes to the trouble of filling out their name, email address, and phone number, recognize that they are interested. If they don’t complete the application (they may have gotten distracted, lost connectivity, experienced a dead battery…), you should still consider them a lead and follow up.
Avoka’s proprietary data shows significant success for banks that have followed up on applications that were abandoned or saved and never completed.
One bank that followed up on abandoned personal loan applications achieved a 40% conversion rate. In follow-up conversations one parent explained that their child was sick while they were completing the loan application, so they abandoned the process. Life gets in the way; an incomplete application doesn’t necessarily mean that the customer was not interested.
3. Adapt or die—have a real-time strategy for improving the customer experience.
Amazon has software and processes dedicated solely to continuously improving their customer experience through every channel that their platform can be accessed on. These processes are completely separate from any back-office systems used for supply chain management or inventory management, allowing for rapid and agile changes to the customer experience.
The amazon.com site is constantly evolving, and the company is continually tweaking little things like the shape, color, text, icons, and fonts on the Add to Cart / Buy Now button. All of these experiments are designed to make it easier for people to complete a transaction.
It's vital that banks take note of this approach and separate their client-facing customer experience such as digital account or loan applications from their core systems. (Core system changes will never be rapid.)
Too often, banks build their digital experiences directly on top of core back-office systems. This inadvertently chains the customer experience (CX) to the core and imposes core limitations on the digital experience. As a result, CX experiments require full regression testing all the way through to the core system, which strangles the life out of agility. A dedicated layer in the technology architecture focused on customer experience will enable safe experimentation in the CX without fear of introducing bad data into core systems.
Considering these three strategies, it’s easy to see the not-so-secret secret of Amazon’s success. By creating an individual and convenient customer experience, banks will put themselves way ahead of competitors.
Customers’ lives are complicated enough, so banks must do something radical to make doing business with them easy! After all, it’s the hallmark of Amazon’s success and growth.