Customer Development
Here’s the challenge – keep pace with the rapidly-evolving expectations of young consumers entering the market. It was Millennials. Now it’s Generation Z (defined roughly as consumers born after the turn of the 21st century). Generation Z expects nothing less than on-command, transparent and seamless processes when it comes to acquiring virtually any product or service. Want a Starbucks iced-latte-hold-the-milk on your doorstep in less than 30 minutes without ever having to leave your house or pull out your wallet? There’s an app for that. Want your groceries delivered fresh without ever having to leave your couch? There’s an app for that. Need office supplies, home goods, books? There’s apps for them too. And here’s the most important part — you can see when your order is being prepared, when the deliverer picks it up, who the deliverer is, where the deliverer is at all times and you can see the estimated time of arrival. Welcome to the on-demand generation. The question is: can you keep up?
Banks have been trying. According to a 2017 report from the Digital Banking Report, 66% of banks offer online account opening and 18% offer mobile account opening. That’s not good (banks are working on bringing those percentages up) but the real problem isn’t that they are not trying to offer digital account opening, it’s that the digital account opening they are offering does not meet the expectations of those pesky Gen Z consumers.
In this respect, a majority of banks have a long ways to go and it is not clear if the path they are on will get them where they need to go.
The reason is simple — in the rush to meet consumers’ expectations for a digital account opening process, too many banks slapped a digital front-end on their existing account opening processes (some of which were older than the consumers that the banks were looking to attract).
The result was a digital account opening process that worked great, just as long the applicant was an established consumer with a perfect credit score, no identity verification risks, and no desire to switch between channels without starting the process all over.
Unfortunately for banks, established consumers with perfect credit are not looking for new credit, and the process does not work for the majority of younger consumers that are looking for credit. What happens to the consumer who can’t get instantly approved for credit because they have a thin or missing credit file? (not an uncommon problem with Millennial and Gen Z consumers) What happens if the applying consumer just moved to a new city for work (also not uncommon among Millennials and Gen Z-ers) and they trip a fraud flag because their listed address doesn’t match their address on file? In these examples, too often the result is that the applicant is booted out of the frictionless, automated account opening process and are told that they will hear back on their application in 5-7 business days.
We need to ensure that digital account opening works for these consumers too, which means we need to rebuild the processes that sit under the shiny digital front-ends. And when we do that, we also need to challenge some of the assumptions and conventional thinking that has been holding us back.
A great example – the concept of friction. Conventional wisdom suggests that we should remove as much friction from the digital account opening processes as possible. That’s true, to an extent, but sometimes the pursuit of a frictionless, Amazon-like “one click” experience can obscure a larger truth—consumers want to feel in control.
Take a closer look at Amazon. It offers one-click shopping for customers whose definition of control is all about speed and convenience. But it also offers an impressive (almost overwhelming) amount of information — customer reviews, product comparisons, Q&As – to help customers who feel more in control shopping online when they can take their time and get all their questions answered.
Amazon built a digital shopping experience for everyone. Banks need to do the same.
Let’s return to the example of a young consumer, who recently moved, and whose application has tripped a fraud flag during the origination process. To move the application forward, work needs to be done to confirm that the consumer is who they say they are. Conventional wisdom might suggest that the bank take all the work off the consumer’s shoulders and get back to them in 5-7 business days. Alternatively, the bank could acknowledge that many consumers would rather own process and timing with self-service digital options for confirming identity like digitally submitting a picture of a recent utility bill to confirm their new address, rather than staying in the dark over the status of their application, wondering why it’s taking so long.
In our rush to modernize the origination process to meet the expectations of today’s digital natives, we may have made some faulty assumptions. Now, it’s time to take a step back and figure out what these (and all) consumers actually want. Technology is no longer the barrier. Our mindset is, and it needs to change.
