Banks and Financial Institutions (FIs) have been trying to gain customers and increase market share in the retail customer segment. Traditionally, a bank’s distribution channel via extensive branch network used to guarantee that the prospects could always reach the bank and do business with them. Now, because of digital disruption, prospects are seeking banks in new channels, especially on mobile. Banks need to become ubiquitous throughout all possible channels.
As per a survey, Angry Birds was downloaded more than 300 million times and is played by more than 30 million people daily. The website TheFunTheory.com demonstrates several scenarios where human behavior has been positively impacted by using gamification. The above examples draw more curiosity when it is known that these games do not provide any tangible rewards. This implies that fun works, and it can be very instrumental in bringing about a positive transformation.
Why Gamification in Banking?
For most of us, financial health is of paramount importance, yet we find banking dull and uninteresting. Most of us use our bank’s websites and mobile apps only for our transactional needs. Since banks and financial services companies manage our financial information, they are in an enviable position to create the maximum impact on their customers using gamification.
Driving loyalty in new customer segments: Over the next few years, Gen X and Gen Y groups will constitute two-thirds of the US population and will be the strategic customer segment for banks and FIs, according to a Cisco survey. There is a tectonic shift in their banking needs making the “one-size-fits-all” approach increasingly irrelevant. This segment of customers is tech savvy and need to have banking-related information at their fingertips, eliminating the need to go into a physical bank.
The new segment stresses a lot of emphasis on socialization. They often ignore the marketing messages targeted at individuals in favor of social consensus. Maintaining loyalty in this customer segment will become an uphill task. Gamification facilitates socialization and enables better engagement of the customers. Gamification can serve as a good loyalty management tool to build foundational relationships.
Differentiation: Mobile banking has been in existence for a few years now and will mature soon. Most banks ranging from community Banks to credit unions to the big commercial banks offer basic mobile banking services, making it a utility service to the customers. The services offered include basic needs such as account inquiry, amount transfer, check payments, locating bank’s point of presence (POP), customer service, and more. Though there is some differentiation in these services, this is likely to get blurred over time. Gamification embedded in mobile applications can serve as a competitive edge in enhancing the engagement with customers and will be instrumental in causing customer defection from competitors.
Thin spread in retail services: With low-interest rates and burgeoning costs, the spread in retail banking services has not provided lot of reason to cheer. For many banks, the margins in retail banking have been in the single digits. As per a report by Deloitte, branches remain the largest distribution channel, and their ubiquitous presence still remains a differentiating factor. However, consumers’ reliance on branches has significantly reduced. This has caused a shift in the banks and FI’s as they try to reduce their branches to cut costs. Banks can use this engagement model to understand the customers better and provide necessary assistance instead of adhering to brick and mortar POP. This also boosts the banks’ bottom line and provides access to a larger customer base, which provides opportunity to cross-sell to further secure the relationship.
Need for personal financial management (PFM) services: PFM services can be more productively served by gamification. Good PFM applications can help customers manage finances much better by analyzing expenses, tracking portfolios across various financial institutions, and managing personal budgets. A good gamification application has a dual purpose. It engages the customer and helps him or her manage finances. More than a dozen non-banking PFM sites have mushroomed in the recent past. Since banks have better access to customer’s financial data, this service might be best served by them. PNC Bank’s Virtual Wallet an example of a valuable tool for these customers and this will undoubtedly cause a differentiating factor.
Value-add services: Gamification is also leveraged to propagate financial literacy among customers. Some businesses have followed Bank of America’s lead to propagate financial literacy to their retail customers, like their venture with Khan Academy as an example.
As per the sixth annual national survey assessing household savings, the average US citizen is not saving enough. Sites like Feed the Pig have emerged to serve this need, but banks and FIs that have direct access to consumer finances can certainly play a role in helping this area.
While banks have been struggling for eyeballs and wallet share, gamification can indeed become a useful tool to help meet this expectation. With the help of analytics, banks can quickly analyze and categorize customers into various business segments for personalized marketing experiences. The financial institutions can leverage the customer data to offer real-time data feeds into gamified applications to make personal finance interesting and fun while at the same time engaging their customers. This facilitates the banks and FIs to develop stronger long-term relationships with their customers and improve sales and capital positions.