As traditional banks embrace empathetic campaign approaches historically used by fintechs, are we on the cusp of a golden era for retail bank marketing?
Neobanks are thriving. With a global market valuation of $66.82 billion (£52.52 billion) in 2022, according to US market researcher Grand View, challengers have secured a healthy slice of the banking market.
Separate research from Statista suggests that 2023 will also be a stellar year, with the global number of neobank customers set to reach 394 million, up from just 39 million in 2018.
The term “neobank” has become an industry umbrella term for newer, smaller challenger banks competing against the pre-established bank brands. While they have banking licenses, they are sometimes branchless and often entirely digital. In most cases, they take the form of an organisation specialising in a financial product, such as a current account or credit card.
Traditional retail banks, however, have been waking up to the shifting competitive landscape, having previously been accused of failing to match the digital experience offered by these newer entities.
To compete, they have had to alter their marketing tactics and figure out how to defend their appeal to younger retail consumers and customers with higher service expectations.
For neobanks, meanwhile, the focus has been figuring out how to build their awareness to compete with the enormous marketing budgets of traditional banks.
Personal service
But make no mistake – traditional banks are working to maintain and attract new customers. A Bain & Company report entitled “Customer behaviour and loyalty in banking” suggested that banks will need to focus more keenly on personalising offerings and consumer engagement in the years ahead. Those that do not are likely to become victims of the ongoing fragmentation of banking services, the report states.
When examining how prevalent marketing personalisation is in practice, Financial Promoter interviewed a sample of UK retail banking brands to better understand their approach.
Coventry Building Society’s senior marketing manager, Rachel Jones, explains that, in a period of increased fragmentation across financial services, the mutual is relying on customer experience to facilitate customer engagement.
However, with touchpoints changing and mass marketing no longer applicable, the branch and phone experience cannot be the sole focus, she says.
In her opinion, personalised marketing is “coming into its own”. “We need communications that are timely, relevant, and personalised to customers’ needs,” she says.
“It’s crucial to really understand customers, to have a strategy that engages, and to adjust content to ensure it is dynamic and tailored in the most efficient way possible.”
According to Bain & Company, traditional banks still hold the majority of primary consumer relationships. But neobanks are beginning to act as a catalyst for change in marketing approaches and are influencing product sets from traditional banks. For customer retention to continue, marketing must become more personalised to the individual.
Campaign credentials
Towards the end of 2022, Yorkshire Building Society released a marketing campaign, named ‘Helping Real Life Happen’. It put real members at the forefront of the campaign to showcase changes the mutual had made to assist its members. The relatability of this campaign was a direct attempt to personalise the society’s marketing to members struggling in the cost-of-living crisis.
Tina Hughes, head of digital marketing at the Yorkshire, says personalisation is now “a standard tool” in bank marketing, working to replicate the friendly customer service environment that customers still expect from a traditional high street branch experience.
“Our marketing strategy is an extension of that real help, which creates a sense of familiarity, generates trust and helps customers feel valued,” she says.
“Trust” is cited as a recurring theme by consumer marketers interviewed for this feature. Many traditional banks have also made this a focus point in marketing campaigns during the ongoing cost of living squeeze.
TSB, for example, launched its ‘elephant in the room’ campaign in April 2023. It explores some of the financial struggles facing the country. The campaign encouraged people to discuss their money worries with their families and, crucially, with their banks.
In an interview with Financial Promoter, Keith Gulliver, head of brand, content and social media at TSB, said the bank had tried to reflect its “purpose” in the new campaign.
“It’s playing into that real consumer insight need that exists in the current cost of living crisis,” he says. “We often see in our research that people don’t necessarily see the difference between banks. They blend in, particularly around advertising, so we think we’ve got that cut through.”
Unlike TSB, which has enjoyed a long-time presence on the high street (albeit with periods of absence), neobanks operate as “challengers” without the legacy and name-recognition strengths of traditional banks.
As a result, they more commonly exploit digital approaches, using targeted and below-the-line marketing (eg. direct mail, events, email, socials, etc) to differentiate themselves from traditional banks, who lean more heavily on above-the-line channels, according to Karen Quinn, director of Untamed Marketing.
“Neobanks are built with strong technology that means they’re able to take advantage of more cost-effective digital marketing to deliver targeted, below-the-line, marketing,” she says. “Neobanks approach marketing differently; they’re building communities and creating conversations through different channels.”
Lisa-Marie Mallier, founder of No Fluff Communications – a PR agency for professional services companies – says neobanks have still been able to be disruptive by “challenging the norms and pushing boundaries” due to their “nimble nature” and digital prowess.
She explains: “In the race to capture the hearts and minds of consumers, it is the experience that ultimately reigns supreme. To win, traditional and neobanks must not only secure new business but seek to build unwavering loyalty and drive sustainable profitable growth through delivering exceptional customer experiences.”
Technological implications:
As of 2020, some two billion people, globally, banked online. For this to work, users must trust their bank with their data.
A 2022 Capgemini report The Customer Engagement Imperative – What banks can learn from the fintech playbook, found traditional banks still hold the advantage, however, although fintech challengers are focussed more keenly on building long-term consumer trust.
“Awareness and consumer confidence is always a barrier to entering a new market, but the success of neobanks to date proves that it is possible to gain market share as a disrupter,” says Untamed Marketing’s Quinn.
Asked whether neobanks will ever be perceived in the same way as traditional banks, Quinn says: “Yes….. As they serve their customers over time, build communities, and develop more propositions.”
Instead of viewing them as a threat, traditional banks have recognised challenger banks as a catalyst for the digital transformation that will be necessary for their own survival. But, despite this recognition, TSB’s Gulliver says the human touch will remain important, particularly for relationship marketing.
He says: “We’re constantly shifting our distribution around what the needs of our customers are, and if you take the concept of the branch out of the mix, what people are looking for is human-to-human contact.
“Rather than thinking about the needs of what a branch might serve, it’s better to think about how we simplify the access to human-to-human and that’s why we’re investing in scaling our video banking; it is the quickest and most efficient way to get yourself in front of a human being.”
A challenger bank that is already recognising the significance of human-to-human contact is Metro Bank, which has marketed specifically to create a person-to-person led customer experience.
Danielle Lee, head of marketing at the bank, explains: “As a challenger bank on the high street we occupy a unique space. Our brand and marketing are positioned around ‘people-people banking’, which reflects our excellent customer service and a store network that’s active in its local communities.
“While neobanks can be faster to move on product development, people want more than this from their bank, such as personal service and the ability to come into store when it suits and speak to an expert without an appointment.”
While this may be true, there is also a neobank customer profile that puts significant value on digital facilitating ease of operations, such as opening an account, anytime, anywhere.
According to the aforementioned Bain & Company report, Revolut, Monzo and Starling all managed to keep their account opening failure rates below 1% or 2%, while also achieving the highest relationship net promoter scores. These results have not gone unnoticed by marketers at traditional banks, and are now acting as a driver for competitive innovation in the traditional space too.
Consumer marketing on ESG
While the concept of sustainability and ESG marketing in the B2B space is now so established that it could be considered ingrained, marketing on sustainability themes in the consumer space is still finding its way.
Within retail banking, however, it should be a priority for consumer marketers, according to the Bain & Company research. Roughly half of the consumers surveyed had a ‘favorable view’ of their bank’s ESG goals, while a quarter were completely unaware of what these goals are.
While these statistics may not make for good reading, banks are beginning to recognise ESG as key to consumer engagement, and have begun implementing it into marketing campaigns.
While digital neobanks often boast the lowest carbon footprint due to their branchless form, traditional banks recognise the vitality of implementing ESG into their processes for the sake of the environment and the consumer. It is, they say, not just a marketing ploy. And yet, these ESG considerations have the potential to market the bank in the way consumers like.
“From a customer perspective, people know ESG considerations are important, but they rely on brands to do the heavy lifting and to make it easy to make choices that support this,” says Tesco Bank’s head of brand and customer communications, Louise Mason
“Following the pandemic and the increased cost of living there’s also much better recognition of purpose-led communication and the important role it can play for customers, particularly helping those in vulnerable groups.”
For neobanks, who historically have tailored marketing campaigns to a more environmentally or socially conscious, younger, consumer base, the investment in ESG initiatives and development of more environmentally or socially aware products allows for further growth opportunities for these brands.
“Our market rates and service remain the key drive, we know this from listening to member feedback…” says Coventry Building Society’s Rachel Jones. “….but green credentials and making a real difference – not just green washing – is moving up the ranks, particularly with a younger audience. Banking decisions are starting to be made on more than just interest rate alone.”
A threat or a challenge?
Jones warns that both traditional and neobanks cannot afford to become complacent in their pursuit (and retention) of customers.
“There’s a place for different models to meet varying customer demands – it’s knowing where we all sit and meeting those demands that’s the marketing challenge,” she says.
“These are changes we need to make but we need to remain true to our audiences and keep our member needs at the heart of our activity, proactively meeting their demands through our market leading products and service.
“Savers and borrowers are very receptive to organisations that are listening to their demands and now is the time to make our ambitions clear.”
TSB’s Keith Gulliver says he recognises the strengths and weaknesses across the retail banking industry, and the position of traditional banks responding to the surge of digital challenger banks.
“We’ve got our eyes on the neobanks, but all banks have their challenges,” he concludes.
“The neobanks, from a profitability point of view and from a limited engagement point of view, are challenged with having non-primary accounts, which is tough for them to deepen their relationships with customers.”
It’s an accurate observation, according to the statistics, but that could all change in the years ahead. With the current economic landscape pushing consumers to examine every financial relationship, there is certainly an abundance of opportunity for bank marketers in the coming months.
- This article is taken from the August 2023 print edition of Financial Promoter.