I recently wrapped up a week of teaching banking technology at the Graduate Banking School at the University of Colorado. One of the issues that inevitably comes up in class discussions is how Fintechs are marketing to customers as an “alternative” to traditional banks.  What I see is a Fintech offering a highly personalized virtual banking service specifically targeted to a particular subset of consumers or small business owners. This “bright shiny object” attracts a certain number of users, perhaps representing some of the best, most profitable customers for a local community bank.  The fact that few of these “Neobanks” ever stick around doesn’t seem to deter their attractiveness to certain customers. They pop up, grab market share and then are gone, seemingly overnight.  The lack of any longevity of a Neobank doesn’t get factored in at all. Internet only banks have existed since 1999, so how come there are so few virtual banks that still exist?

My thinking on this topic was shaped by an article published in The Financial Brand, authored by Marcell King of Nuuvia. The article, which you can access here, targets the very issue of what it is about Fintechs that make their offerings attractive.  Fintechs focus on marketing to prospects based on Life Stages and the inability of banks to similarly market using Life Stages may limit long-term success in attracting new banking relationships.

Oversimplified, a traditional bank may offer a virtual banking suite of services that attempts to provide a solid online/mobile banking experience across the customer base.  Contrast that with a Fintech that would laser focus on a specific subset of customers who are at a specific “Life Stage.”  While there is not a hard and fast delineation of the Life Stages targeted, you can think about this along the lines of key moments of truth, getting your first paycheck, starting a business, buying a house, planning for retirement, saving to put a child through college, just to name a few. Each of these stages presents a unique challenge and those in that stage are looking for insight and wisdom on how they could address it.

At the end of the day, the primary issue is personalization, a key element to having a strong Customer Experience rating by customers.  Say I was a prospect looking for an account relationship and I access your bank website.  If I click on personal accounts and checking, I might be presented with list of account options. Nothing about that experience is customized to me.  But how would that experience be different if you were focused on Life Stages?  Your user experience would include asking questions to ascertain where the prospect is in their life stage journey.  By gathering this information, you could present the prospect with a specific set of services that the bank offers that is now specifically tailored to them. This generates a much higher level of account conversion over just displaying a list of the account types you offer.  You could go one step further to actually tie in the results of Life Stages exploration into the online account opening process.

Why go through all the effort to change your approach to focusing on Life Stages?  As the author of the article points out, nearly half of all new account openings (47%) are going to Neobanks. Many of these new accounts are younger customers, the very younger customers that banks need to fill the top of the marketing funnel to maintain customer counts and deposit totals.  The effort to focus on Life Stages does not require a huge investment in technology. It is, rather, changing your mindset of how important the virtual branch is and properly deploying it to capture customers where they are by providing a high level of personalization. As a bank, we already have many built-in advantages over a Neobank; it’s just that we are not capitalizing on our strengths and likely not marketing effectively to tell our story.

Consider a strawman set of customers aged 14, 24, 34, 54, and 74.  I don’t even have to type out any description of the likely differences in the Life Stages of these 5 prospects. You can instantly imagine what their financial services needs likely are and how you might communicate uniquely to that Life Stage.  Furthermore, even in this simple example, age is not a primary qualifier.  Would a 34-year-old potentially be starting a business? Of course.  But so might a 54-year-old or for that matter a 14-year-old. A Life Stage is an event that might be traditionally associated with someone of a certain age, but the manner in which you ascertain the prospect’s Life Stage needs to be age agnostic.

Banks already serve customers across the entire spectrum of Life Stages.  We have the requisite experience to be effective in attracting customers who desire a bespoke banking experience while recognizing the stability and trust engendered by a local bank.  But offering a website and virtual banking experience that does not contain the element of customization with no effort to identify and speak to specific Life Stages will leave the prospect unsatisfied and then that bright, shiny online Neobank object beckons them to engage.  Don’t give up your inherent advantage as a financial institution to a non-bank.  Investigate what makes those Neobanks attractive and then deploy a similar path for a high level of personalization, targeting specific Life Stages.  Beat them at their own game.

The views expressed in this blog are for informational purposes. All information shared should be independently evaluated as to its applicability or efficacy.  FNBB does not endorse, recommend or promote any specific service or company that may be named or implied in any blog post.