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The benefits of a local approach to digital banking services

Building societies should leverage an understanding of data to ensure relevant, localised and personalised digital banking services for members.

Building societies should leverage an understanding of data to ensure relevant, localised and personalised digital banking services for members.

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Insights

Date

2nd June 2021

Garry Larner


What makes you different? What makes any provider of banking services different from any other banking provider? When most mobile apps can provide account balances, money transfer and payment tools, the differences become harder to see. Is there a competitive advantage angle, and does it matter if there is when the outcome should be customer-focused anyway?

Competition helps everybody. It pushes innovation so that products and services improve. Competitive advantage does matter. If we are to see digital banking really take off, products and services need to be pushed to the absolute maximum of what we’re able to achieve from a technological and regulatory perspective.

And if all financial institutions have the same access to the same tools and know-how as everybody else, what’s the difference then? We’ve discussed this before, when we wrote about the benefits of being a smaller outfit such as a building society or credit union (‘How being a nimble and agile building society can help your digital transformation‘). We’ve also covered how collaboration between FIs can reveal symbiotic advantages working alone simply cannot provide (‘What could challenger and incumbent banks build together?‘).

And there’s another advantage I believe building societies and smaller FIs can lean on for differentiation in the marketplace, and that’s localisation.

Local and community-driven development

Part of capitalising successfully on how well digital banking services perform is knowing what customers want. This can help building societies focus their efforts (and budget) on delivering those features as a matter of urgency. Eight out of 10 mobile banking users in the US, for instance, rate balance/fraud alerts as “critical or important features” according to Cornerstone Advisors research. It may be a good place to start, as would be the ability to turn payment cards on and off. Security is definitely top of mind for most people.

UK building societies going through digital transformation right now can play to the strengths of being more agile in their approach. They’re able to work on digital banking features bit by bit according to the demands of their local customer base. And the real key to understanding what each customer wants is to adopt personalised products and services, not a bloated version of what everybody else has.

With oodles of data at most banks’ disposal, you would think getting personalised products out the door would be a piece of cake. But it isn’t because data is neglected or not mined with sufficient understanding of what it can do and what it can lead to. This is an opportunity for building societies to do something better than their much larger counterparts in being able to assimilate customer data and allow it to lead the decision-making process for digital development. Bigger FIs often focus on personalised messaging rather than personalised services because they’re unable or unwilling to think on a local level.

If a building society’s member base expresses concern for the environment, for example, the building society could introduce incentives around savings goals that tackle climate change. And if it has many self-employed members running their own gigs, perhaps digital accounting features would help. These are two examples from what is potentially a long list of personalised benefits.

When a target audience is using a banking app to manage what’s relevant to them, and they feel closer to a particular brand because of it, that’s the best possible outcome. Localisation helps to build trust and relationships, and building societies are at the cusp of marrying what they know about their members and what products and services they should be developing. Understanding data is an important part of the process, and not losing sight of being local and community-driven is crucial.

Photo by Tim Douglas

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