Augmented Reality in Banking: Google Glass or Through the Looking Glass?

In his novel, ‘Through the Looking Glass’ Lewis Carroll tells the tale of his heroine, Alice, as she tumbles through a mirror into a fantasy world. 

Will banks fall through Google Glass into a different fantasia? Is deploying augmented reality in financial services as useful as the Mad Hatter’s Tea Party – or does it offer a genuine opportunity for banks to improve customer experience, service and sales?


By Alex Bray, Retail Channel Director at Misys
 

The banking industry thrives on buzz. When you work in a business that is founded on principles such as reliability, security and trustworthiness - where the manner in which you implement your risk management procedures can be the difference between solid success or spectacular failure – then the slightest hint of a sexy innovation can cause a dizzying rush of blood to the head. Today, it is the turn of augmented reality (AR) to leave many bankers in a fuddled state. But is AR all that? Or will augmented reality leave us wanting less? 

To review augmented reality in banking, I will be focussing on the device of the moment - Google Glass. Glass is Google’s first foray into wearable devices – augmented reality glasses. The user wears the device – which consists of a mini display screen attached to a metal frame, over the right eye. Simplistically put, it gives you a taste of life as the Terminator from the Schwarzenegger film series. 

Information is overlaid on to the environment that you see around you. So far, so what? Glass has been hyped as the new frontier in mobile banking. It has also been suggested that it could revolutionise how tellers deliver service in branch. These are big claims for a device that will weigh about the same as a normal pair of sunglasses. Can they be justified?

Migrating Banking Customers to Digital Channels

Today's banking customer can interact with their financial institution through more channels than ever, and the channels selected can have a significant impact on bank revenues as well as customer satisfaction. Gone are the days when a customer did all of their business in a branch. Today, most customers use multiple channels to research products, open, use and manage their accounts, resolve issues and receive notifications.

The key for banks is to determine the optimal channel mix for each customer that will maximize revenue (or reduce costs) without significantly reducing customer satisfaction or engagement.

To measure these impacts, the Gallup organization recently completed research on how customers prefer to interact with their bank for 14 of their most common needs. They also evaluated the difference between channel preference and actual channel use and the impact on satisfaction and engagement when a customer uses a channel they didn't prefer.

While this is some of the most detailed research on channel preference and use, Gallup only evaluated single channel preferences as opposed to researching how a customer may use multiple channels for some transactions (researching providers or services, opening an account, managing an account, receiving account information, etc.). Despite this weakness, the research is still helpful in determining how to best migrate customers to an optimal channel mix.

Financial Impact of Channel Use

Recent regulations that have impacted the ability for banks to generate fee income from retail customers has required banks to rethink their business models and even the customers they serve. In addition, banks and credit unions have had to reconsider the optimal mix of channels their customers use to interact with the institution and to transact their business due to the costs associated with different channels. 

According to a 2010 TowerGroup study, the costs of handling a customer transaction varies widely by channel, from as much as $3.75 for a call agent interaction and $1.34 for a branch transaction down to as low as $.60 for an ATM transaction and $.14 for a mobile transaction. Based on just these numbers, it would seem prudent to move as many customers as possible to automated or digital channels and away from branches and call centers. Unfortunately, it's not that easy.

Building A Winning Mobile Banking Strategy

Mobile banking has moved quickly beyond being simply online banking using a smartphone. It is at the hub of the customer relationship and is quickly becoming a point of differentiation and a potential source of revenue for progressive banks.

As smartphone penetration continues to increase, so do consumer expectations. To keep up, banks need to continuously review the best mobile banking strategies worldwide, developing those solutions that address customer needs and leverage the benefits of the channel.

To assist banks with the development and implementation of a successful mobile banking strategy, Forrester Research is developing a 12 chapter Mobile Banking Strategy Playbook. Within this playbook, extensive research is being compiled around marketplace assessment, mobile strategy development, optimal organizational structures, technology selection, best practices, measurement benchmarks and ways to continuously improve the mobile banking experience.

As part of the review of mobile banking best practices, Forrester just released their 2013 Global Mobile Banking Functionality Rankings (with U.S. and U.K. breakout reports) ranking the mobile offerings from 15 of the largest banking organizations in the U.S., Canada and abroad.

While only ranking some of the largest banking organizations worldwide, this research is invaluable to any bank wanting to see what the best in our industry are doing. Beyond rankings, this research also provides extensive examples of innovative mobile banking apps and advanced functionality (Purchase report here).

Essential Online Channel Metrics For Financial Marketers

With evolving technologies and platforms, financial marketers need a clear and comprehensive set of metrics to determine the effectiveness of their online channel. Instead of drowning in data and not being able to connect the dots in a meaningful way, here are four metrics that rise to the top and provide the clearest picture as to the selling power of a bank or credit union website.

By Melanie Friedrichs, Analyst for Andera, Inc.

In the Wild Wild West atmosphere of the early internet era, companies raced to slap websites online without thinking too hard about what purpose their website should ultimately serve.  Consumer retail companies found their ROI in online shopping, and their websites gradually evolved to draw visitors in and drive them to checkout.  In contrast, financial institutions focused on expanding eServices, until their websites became little more than portals to online banking. 

In the last few years, we’ve seen institutions start to wise up to a second, essential function of the online channel.  As Joe Swatek from ACTON Marketing said, “Your website has an important SALES function.”  Technology has made it possible for financial institutions to acquire new customers and members and grow relationships completely digitally, and like consumer retail websites aim to sell consumer products, financial institution websites should aim to open new deposit accounts and originate loans.  When thinking about the account opening and lending through the online channel, there are four essential metrics that financial institutions should consider:

1)      Conversion Rate

The single most important metric for a financial institution website is its conversion rate, or the percentage of qualified  unique visitors that begin applications for deposit or loan products.

Before the introduction of online account opening and lending, financial institutions focused primarily on making online banking login as easy as possible, and on providing key corporate information.  The rest of the website really didn’t matter that much, so webmasters cluttered pages with news items and product advertisements from different departments.  Over time, most financial institution websites began to resemble ill-managed community bulletin boards.

Demographics No Longer Effective For Financial Direct Marketing

Bank and credit union marketers have traditionally relied on the use of demographic segmentation as a means of targeting customers for product and service communication. 

Recent studies, however, provide growing evidence that changes in product delivery, communication channels and competition may have made a demographic-based targeting approach much less effective compared to other approaches that use additional data sources.

Marketing segmentation is one of the most widely used marketing tools and has long played a crucial role in identifying and treating differences among customers. For decades, bank and credit union marketers have used demographic segmentation for product development, product positioning, marketing communication and results measurement. Traditionally, this segmentation has been done based on characteristics such as age, income, gender, family life stage, occupation, education, race, etc.

The reason for using demographic segmentation is that it is relatively easy to use for most financial institutions due to relatively accessible customer databases and because this form of segmentation is continuously referenced by both academic and trade literature. While it is still true that there are differences in the use of financial services across demographic segments, however, research as far back as the 1960s has suggested that demographic variables are only remote proxies for differences in buying styles, decision processes or sensitivity to promotional influences (A Two Dimensional Concept of Brand Loyalty).

A more recent research paper in the Journal of Financial Services Marketing entitled, Suboptimal Segmentation: Assessing The Use of Demographics In Financial Services Advertising found that there is little support for the reliance on demographic variables for bank marketing. Despite continuing popularity, the research found that while demographics can explain broad behaviors, they play a weak role in explaining brand preference, product purchasing, innovation adoption, channel use and technology uptake.

Are Some Banks Too Small to Survive?

With increasing regulatory capital requirements, declining interest margins, a greater need for investment in innovation and new competition, there are many in the industry who believe that smaller banks may have limited opportunity for growth in the future. 

These pressures may lead to an acceleration of consolidation in the banking industry that impacts both small and mid-tier banks and results in a significantly reduced number of institutions in the future.

While attending both the BAI Payments Connect and CBA Live conferences in Phoenix last month, discussions often revolved around the heavy financial and organizational impact of new capital requirements and of regulatory compliance being faced by institutions of all sizes. It was also clear that the investment in advanced technology and the pace of innovation was creating a distinction between the 'haves' and the 'have nots'. While there were some exceptions, this line of demarcation appeared to be defined by the size of organization.

The question I asked several industry thought leaders over the past couple weeks is whether smaller banks are in a position to survive given the massive industry changes on the horizon. While their responses varied regarding the chances of survival for today's community bank (and smaller credit union), there was unanimity in their belief that smaller institutions must quickly adjust to the 'new reality' of increased capital requirements and regulatory pressures, a greater focus on revenue, and a need to innovate for an enhanced customer experience.

"The thing that keeps me up at night is that we will likely see an industry contraction in the next decade like we never experienced", states Bradley Leimer, vice president of the $3.2 billion asset Mechanics Bank in California. We are moving from over 14,000 financial institutions today to less than 5,000 in the next 10 years (maybe sooner). This is due to the changing nature of consumer behavior with the introduction of mobile and social and technological innovation, but also due to systematic changes to the banking model itself."

Also supporting my informal findings, Emily McCormick, director of research and writer for Bank Director, interviewed the risk officer of an $8 billion bank holding company for Bank Director's 2013 Risk Practices Survey. He told her that, while he found a lot of positives in the regulations coming out of Washington, this could be a challenge for smaller banks that lack the resources and staffing to keep up.

McCormick also believes there's a technology challenge, "Internally, smaller banks need the right resources to do things like manage risk, but they also need the resources to compete. While smaller banks have the significant benefit of connections within their local business communities - giving these banks a potential advantage in business lending - customer expectations for services like mobile and online banking will continue to rise."

How Good Is Your Bank's Website Performance?

When determining how well your bank or credit union's website is performing, a number of factors need to be considered beyond visits alone. How long does a visiter spend on your site? Do they visit more than one page during a visit? How many pages do they visit? Is your website optimized for both smartphones and tablets?

In a just released report entitled, "Best of the Best Benchmark", Adobe examines six primary site performance metrics across five different industries to show the norms and areas of excellence. Even though supporting data provided by Adobe is rather sparse, financial marketers can still use these metrics as a guide to evaluate their website's performance and to provide impetus to make websites more powerful.

Time Spent on Website

Time spent on a website is probably the most important metric for determining site engagement. As could be expected, the amount of time spent on a top-performing financial institution website (6.77 minutes) is more than 5 minutes less than the time spent on an entertainment site (11.84 minutes) where content is robust. Interestingly, the variance between the best and the rest within the media and entertainment category is the largest, indicating that not all entertainment sites are . . . entertaining.

Adobe noted in their research that video is the most powerful content to use in social media because of the engagement value. While banks are just beginning to add video as part of their website experience, custom product and service videos could definitely increase engagement for financial firms (I covered the power of video in my February 27 post entitled, "Improving Bank Onboarding, Cross-Selling and Retention With Personalized Video").

Source: Adobe, "Best of the Best Benchmark", March 2013

CommBank Introduces Kaching For Facebook and 'Signals' Insight Platform

Commonwealth Bank of Australia continues to be one of the bank innovation leaders, announcing two social-based platforms this week. 'Kaching for Facebook' is an extension of the already popular Kaching smartphone app covered in a previous Bank Marketing Strategy post, allowing customers to do basic transactions within the Facebook website. 

In addition, CommBank introduced the 'Signals' insight hub that collects transactional data to allow customers to view and share how their transaction patterns compare with others.

Kaching Comes to Facebook

CommBank Kaching for Facebook is a new app that will give Australia's 12 million Facebook users access to everyday banking and payments on their favorite social network. Based on the popular Kaching mobile payments app, the new app lets users pay back money owed or make cash gifts to friends of family for birthdays or weddings. The app also allows a customer to view transaction history within the Facebook website.

"With Facebook popularity skyrocketing to more than 55 percent of the population in Australia, we know our customers, particularly Facebook's core user base of 18-35 year olds, are looking for new ways to connect their banking and their lives, friends and causes within Facebook," states Commonwealth Bank's chief marketing and online officer, Andy Lark. "So what better way to respond than by giving them access to everyday banking and payments on their favorite social network?"

Accessed directly from the Commonwealth Bank Kaching Facebook page, the app is a scaled down version of a typical online banking app optimized for mobile using responsive design.

Improving Bank Onboarding, Cross-Selling and Retention With Personalized Video

At a time when self-service banking models are replacing one-to-one interaction, personalized videos can provide a highly engaging and relevant communication option that can improve engagement, increase sales and reduce churn. Combining real-time data with highly customized content, marketers can turn big data insights into differentiated 'wow' experiences.

Online video is coming into its own, no longer being just an add-on component to institution's Web site. Partially due to the explosive growth of tablets, web videos have evolved beyond being used just for education or brand building to become a viable direct marketing messaging and selling tool, deserving of dedicated resources.

Online Content Booming

According to recently released data from comScore, 180 million U.S. Internet users watched almost 36.2 billion online videos in January of 2013. While the majority of these videos were for entertainment purposes, nearly 25 percent were promotional content, helping companies communicate with new and existing customers. In fact, video ads were the fastest growing category of online advertising in 2012, with U.S. spending increasing 46 percent to $2.9 billion.

More and more sophisticated viewers don't want to watch a repurposed 30-second TV spot on their computer, tablet or phone. They want online content that is personalized, compelling and interactive. "People are sitting viewing content online wanting to push a button -- give them a reason to push a button," said Jay Miletsky, CEO of online video network MyPod Studios in an interview with CMO.com. If done right, online video can be both a strong branding opportunity and an effective engagement tool.

A survey by Digitas found that 51 percent of online video viewers in the sought after 18 to 44 year old demographic would look up a new brand or product they saw on an online video, and 58 percent of 18 to 34 year olds who follow brands on social media would watch a video that a brand posted online. In addition, the just released Global Video Index : 2012 Year in Review conducted by video analytics provider Ooyala, found that while viewership differs between devices (desktop, tablet, mobile), the overall amount of viewing doubled in 2012.

Competition for Wealth Management Customers Increasing

At a time when retail banks are finding it difficult to achieve pre-recession levels of growth and profitability, the competition for wealth management business has never been more intense. But while increased marketing and significant monetary incentives are being used to lure customers, recent research indicates that organizational barriers remain that could hamper growth. 

A just published Retirement Plans Trend Report conducted by the direct and digital monitoring firm Competiscan found that retirement rollover direct mail, electronic media and digital communication volumes increased during the second half of 2012 as did the value of offers used to entice customers. While many of these offers came from investment firms, more marketing was done by traditional banking organizations than in the past. 

In 2012, Bank of America was one of the most aggressive wealth management marketers, cross-selling the services of their brokerage unit, Merrill Lynch to current higher value bank customers and prospects.

Bank of America/Merrill Lynch Cross-Sell Mailing (December 2012)