Consumer surveys2 have indicated time and again the usefulness of product bundles in the banking sector and their direct correlation to customer retention and loyalty. While banks acknowledge the significance of bundling, effectively utilizing them to enhance customer loyalty has been a multifaceted challenge.
Firstly, neobanks and other non-traditional players entice customers, particularly Gen-Zers and millennials, away from traditional banks by offering digitally sophisticated and highly convenient services. Secondly, the rise of e-wallets for payments has disrupted traditional channels, assigning regulatory functions to banks, thus widening the gap between a bank and its customers. Thirdly, customers prefer using super apps as a single window to access various services such as booking movie tickets, flights, restaurant reservations, and peer-to-peer money transfers.
The choice of banking products and services is based on the need, age, lifestyle, and preference of the customer. For example, the customer may choose a credit card from bank one, make payments through an e-wallet, and avail loans from a third bank. This proliferation has resulted in severe fragmentation of banking services and a loss of visibility into customer transactions and data. Customer loyalty, a key element of a successful banking operation, has therefore become almost non-existent.
A 360-degree picture of the customer goes beyond mere payment and transaction data. It involves diving deeper to gather meaningful insights into the customer’s life stage and relevant goals to predict intent. Understanding the customer context—where they stand in their life or business journey—is crucial to creating and offering relevant bundles to the customer. This contextual understanding empowers banks to treat every customer as a distinct ‘segment of one’ and offer highly personalized bundles.
Emerging business paradigms such as Banking-as-a-Service (BaaS) and Open Banking underscore the pivotal role of collaboration within the banking ecosystem. Through strategic partnerships, banks can equip themselves to quickly introduce innovative packages and bundles via non-banking channels and third-party collaborations. Proactivity on the part of the bank ensures customer retention, as they can offer relevant services through diverse channels. The essence of a successful ecosystem partnership lies in executing these alignments securely and with agility through API-based integration and data exchange, fostering trust and loyalty among both partners and customers. By navigating these collaborations effectively, banks can lead the change while ensuring sustained relevance and competitiveness in a dynamic financial landscape.
Digitally native banks are shifting customers from traditional banks and fostering ecosystem partnerships, presenting a challenge for traditional banks hindered by legacy architecture. This architecture limits the understanding of customers and hampers proactive ecosystem leadership. However, by adopting digital technologies, traditional banks can offer bundled, personalized services, enhancing the customer experience. Recognizing the need for technology modernization, these banks face the formidable task of overhauling entrenched systems. The key lies in choosing the right technology partner, one with a deep understanding of modernizing legacy systems and capable of synergizing with the bank. This collaboration is crucial for risk mitigation and maximizing the benefits of digital transformation, ultimately leading to digital resilience, customer-centricity, and ecosystem leadership for traditional banks.
Why Banks Must Prioritize Bundling Strategies to Retain Customers and Grow Revenues.
Why Banks Must Prioritize Bundling Strategies to Retain Customers and Grow Revenues.
