How can banks put the retail back into retail banking?

25 July 2012

United Kingdom

Paul Race



It's probably fair to say that around 90 percent of customers who go into a retail shop will purchase something, and so are profitable. Unfortunately, the same can't be said for retail banks. How can banks tackle this problem and make their walk-in customers more profitable?

Something that's struck me recently is that perhaps retail banking could be learning more from the real retailers about how to put the retail back into retail banking ...

In this and my next post, I'm going to be looking at the number of ways in which banks might learn from retailers in order to help grow their top line.

First, let's focus on the product.

Admittedly banks have it slightly tougher than other retailers because it's far easier to add excitement and emotion to buying a car, clothes, the latest piece of technology, etc., than it is a bank product, which is simply a way of allowing you to do something else. However, there is still something to learn here, because if banks can create emotion, people are more likely to buy.

There are a number of ways to do this. Some banks aim to make their branches more sensory — for example, adding scents such as "fresh coffee" or "cut grass" to different areas of the branch, or going further and really creating an experience for the customer, as Vancouver-based North Shore Credit Union did with their "financial spa."

Making the products more tactile is another way to add emotional context and some banks now package certain products — literally — putting them into boxes and adding physical items like USBs or other extras. Giving customers the ability to personalize their credit card is also a nice touch that can help create that greater sense of attachment.

Some are now going further and are realizing the benefits of adding 'extras' to their products that strike an emotional chord with customers. The Co-operative Bank is a good example of this: They are targeting environmentally conscious customers by giving them the chance to protect a third of an acre of Indonesian rainforest when they first spend on their card. For every £100 ($155) spent the bank also donates 25p (39 cents) to the RSPB's Indonesian Rainforest project.

The second issue in terms of product is that banks don't make it particularly easy for themselves. A high street retailer's products are simple, whereas banks' products are driven towards complexity because of regulation. The amount of documentation the customer needs to provide, and small print they need to read is hardly enticing. Even if you want to buy an ISA (Individual Savings Account) over the phone or on the Internet, it takes such a long time.

Ask any retailer and they'll tell you that as soon as you generate anything that lacks consumer understanding then you've lost value and you're selling only on price.  As soon as you're selling only on price and are competing against very similar products, you've got little differentiation and can be fairly sure that won't get you very far.

Banks need to take a leaf out of the retailer's book and add variety. If this can't be done in terms of product, then what about in terms of brand offering and branch location? Some existing bank brands such as Co-op, have again found success by bringing their stores into retail spaces such as chemists (pharmacies) and even funeral care centers.

As more and more non-traditional bank players launch banking services, and integrate them into their existing retail offering, traditional banks are going to have to keep a watchful eye. Perhaps they should start playing them at their own game to see if they can pick up a few more tricks of the retail trade ...

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