In most banks, products and services are designed and executed along functional product lines. While this drives a product-centric efficiency mindset, it misses out on a crucial factor: customers do not always think of their financial journeys as falling into such well-defined brackets. For instance, a family might have to make a choice between home improvement and college tuition, both of which are driven by a combination of factors related to the customer’s life journey. In this scenario, in all likelihood, two different functions within the bank would individually design offers and target the family, not factoring in the trade-offs that the family needs to make in choosing either option. This comes with another paradox. The biggest competitors for banks today, the fintechs, usually offer specific products. The bank would, in all likelihood, be competing with two different fintechs – one in home equity and another in education loans.
Today, banks can convert this challenge into an opportunity: what if the bank takes a complete life cycle-journey view of the customer and uses that to define bundled product offerings that can combine the home improvement and education loans? A data- driven approach would look something like this:
These data-driven recommendations could then serve as the basis for customer relationship managers to have a truly deep and meaningful engagement with their customers. This cross-product, customer- centric approach has the potential to create a competitive advantage for banks over the product-specific fintechs.
A leading Cleveland-based bank introduced three new banking products: no-fee overdraft protection, a 2 percent cash-back credit card, and a debit-linked savings programme, all bundled together as a solution to reward customers for working towards their financial goals. Danske Bank, a northern European bank, has gone a step further and offers a housing app to its customers to help them navigate the house-buying process, including the loan applications, approval and disbursement process. It goes even further, offering customers home equity loans to finance the purchase of appliances, etc. In both these examples, the banks decided to step out of their traditional product mindset to look at the overall customer journey and design customer-centric solutions.
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