- As consumers increasingly expect their banks to act and interact more like top technology brands, many financial services industry firms have embraced digital transformation strategies.
- We suggest that as the digitalisation of currencies was the most widely discussed digital transformation initiative in the debate, central banks should embrace the concept rather than leave the field wide open to challengers.
- Our media analytics also imply that finance brands should embrace innovation narratives to change the perceptions of legacy banking, promote new payment offerings and exploit the same “winner takes all” principles like the big tech companies.
The financial services sector has long had a reputation as one of the most traditional industries. While numerous sectors from retail and telecommunications to construction and transport have experienced a full-on digital transformation and disruption, banks and financial institutions have always seemed to lag behind.
However, as consumers around the globe increasingly expect their banks to act and interact more like top technology brands, financial services industry firms have started to focus on becoming holistically digital, customer-facing enterprises. According to a report by Cornerstone Advisor, titled “2022 What’s Going On in Banking,” 3 in 4 banks and credit unions have embarked on a digital transformation initiative.
But how can financial services brands effetively use their digital transformation journeys as a PR and comms leverage? To find out, we analysed 1,319 English-language articles published in top-tier outlets during the last 12 months.
1. Be at the forefront of the digital money debate rather than leaving it wide open to big tech
The trust that people have long placed in banks and traditional forms of payment is increasingly being placed in digital money. And this is giving rise to a whole host of new services that are set to challenge traditional financial service providers.
In the age of virtual and cryptocurrencies, the financial system’s traditional players must get up to speed or be left behind. In fact, Digital currencies was the most widely discussed digital transformation initiative in the debate:
Most articles within that topic remarked that, faced with the urgent need to innovate, central banks are trying to develop their own currencies, which is proving to be a long and difficult process. The most popular area of research in our sample was ‘Central Bank Digital Currencies’ (CBDCs) – virtual fiat currencies whose value is guaranteed by the central banks that issue them.
Many analysts lauded the benefits of CBDCs – they would, for instance, make it possible to work on a national or supranational level and make cross-border payments without having to use different currencies. They could also facilitate money transfers by eliminating intermediaries, providing a fast and inexpensive means of exchange and improving payments and liquidity. Most importantly, they could secure financial transactions involving digital tokens.
In the transition to a cashless society, central banks should embrace the concept rather than leave the field wide open to big tech companies. And those central banks that became early adopters of the new trend were covered by media outlets as innovative and digitally-savvy – an image that usually doesn’t come to mind when we think of central banks.
For instance, The Reserve Bank of India (RBI) will launch its digital currency as a pilot project this year, The Bank of England launched a formal consultation on a UK central bank digital currency, while the European Central Bank is already exploring the introduction of a “digital euro.”
Some well-known consumer financial services brands have also managed to get media attention for tapping into the trend – for example, Visa is testing a platform that aims to support central bank digital currencies, while payment rival Mastercard already launched a similar CBDC testing platform.
2. Draft an innovation narrative to change the perceptions of legacy banking
As a digital transformation strategy is integral to business strategy, it also should be integral to corporate communications strategy – sharing how the company is using technology to differentiate in the marketplace, accelerate products’ time-to-market, and uphold its ESG commitments, to name just a few examples. An innovation story has universal appeal to all of a company’s key communications stakeholders – customers, partners, investors, and employees/prospective employees alike.
The biggest comms challenge for legacy financial services firms would be to reposition themselves as being in tune with the latest technological tendencies. A more pronounced focus on innovation might be helpful in restoring legacy banking’s damaged reputation at a time when finance brands continue to experience reputational setbacks, with customer satisfaction being at an all-time low.
To best articulate your innovation story, it’s important to “get under the hood” to understand the technologies being used in the business – and why. Differentiation and learnings are key – with everyone embracing technology for strategic advantage, dig for what is unique and what insights/learnings would be interesting to an external audience. Also take a look at innovation/technology-related coverage and social conversations of both your company and your top competitors to understand what topics are most resonant, where you overlap, and where there is an opportunity to own parts of the innovation dialogue.
Apart from central banks, which featured in the conversation mainly because of the digital currency trend, other legacy financial brands gained their media influence namely with well-placed innovation stories:
Some have done this via partnerships and acquisitions – for example, Goldman Sachs launched a groundbreaking new credit card with Apple, aiming to revolutionise the credit card experience with seamless integration into Apple’s mobile devices. Another partnership that gained media traction was between Deutsche Bank and Oracle, which announced a multi-year collaboration to modernise the bank’s database technology and accelerate its digital transformation.
Others have established separate digital operations – JPMorgan, for example, undertook its big assault on British high street banks and online lenders, with the launch of its long-planned digital retail bank Chase. The venture – JPMorgan’s first overseas retail bank – started with a smartphone app initially offering current accounts.
Meanwhile, Wells Fargo announced a totally rebuilt mobile banking experience, highlighted by the introduction of the bank’s all-new virtual assistant — Fargo. The artificial intelligence-powered virtual assistant provides personalised insights and recommendations to help the bank’s 27 million active mobile customers better manage their finances.
3. Analyse fintech’s media presence to stay relevant
Legacy financial services brands can learn a lot from the dynamic fintech brands that are using technology to fuel creativity. Even if a brand sets up efficient digital services for their customers, marketers often end up creating undifferentiated experiences giving customers no incentive to switch providers.
Successful fintechs don’t shy away from being playful with their customers – anything from interactive app interfaces, and navigation buttons to the browsing style within the app can form part of the distinctive digital assets of the brand.
To ensure the brand is not lost in the technicalities of building a tech product, it is important to bring company stakeholders, strategists, creative technologists and developers to the same table. Breaking away from templatised approaches to customer experience and building collaborative platforms are some of the lessons fintech brands have to offer.
A good example of how being playful with customers resulted in increased media influence was Revolut. The fintech was recently in the news as its ambition to be the world’s fintech super app led it to focus on younger people. It rebranded its Revolut Junior service for children and teenagers under the age of 18 to Revolut <18 and gave users the option to revamp their debit cards by adding drawings, text and emoji.
This helped Revolut become the most influential challenger bank in our research sample:
Other recent examples of fintech-led disruption include apps related to impact investing, which address rising consumer interest and help support the move toward environmental, social and governance (ESG) priorities. Fintech has helped democratize financial services by broadening customers’ access to capital and banking products.
Fintech advancements in P2P lending have given small businesses more options for growth funding, while traditional financial institutions may have considered such businesses too high risk. Some fintech startups are dedicated to helping those struggling with student loans to access repayment and refinancing options, while others promote ESG initiatives via impacting investing. Impact investing has become many people’s first foray into investment, especially for millennial and Gen Z customers.
Customers similarly want banks to focus on ESG and may leave banks that don’t prioritize it. Moving forward, banks should consider incorporating robust ESG initiatives into all aspects of business, from loans issuance to internal hiring practices and beyond, in order to support long-term value creation.
4. Promote new payment offerings
Many articles in our research sample stated that the fastest area of change in banking is around the way people pay. While cash is still used for many transactions, the skyrocketing use of cashless and contactless payments is occurring with all segments of consumers and within all industries. And the use of digital payments is no longer just for young, tech-smart consumers, but increasingly reflects the attitudes and functional needs of shoppers across generations, according to McKinsey’s Digital Payments Survey.
Accenture found that seven out of ten banking executives believe that transforming the payment industry is at the core of their larger digital banking transformation programs. Unfortunately, while financial institutions recognise the need for innovative thinking and redesigning their payment programs, few have yet taken the steps necessary to measurably benefit from this changing landscape. To succeed, financial institutions will need to invest in both the development of new technologies and the talent to keep those products current and seamless.
Usage of ‘Buy-now, pay-later’ payment schemes in particular have rocketed as a result of the rise in e-commerce during the COVID-19 pandemic. The ‘BNPL’ model is a way for consumers to spread the payment load more simply and less painfully than when using a credit card and it also enables retailers to encourage purchases that consumers might otherwise defer. The growth of BNPL options reflects a shift from consumer-funded credit to merchant-funded credit.
Consumers are using these instalment-based payment options for both big-ticket and everyday items – even groceries – in markets where the concept is more developed. For younger consumers, BNPL offers a viable alternative to a credit card and, already, ‘traditional’ BNPL players are facing challenges from next-generation fintechs.
A good example of a payment campaign came from Swedish BNPL fintech Klarna. The firm launched the world’s first bot-free sneaker raffle as part of its campaign Heartbeats 4 Sneakers, generating huge PR and views on YouTube. It offered consumers the chance to use their heartbeat to win the best sneakers of the last decade, curated in partnership with sneaker blog Highsnobiety.
Once finished, the raffle transformed into Sneaker Deal Week, using the same technology to generate deals at Klarna’s partner sneaker retailers. The raffle was designed to drive word of mouth, generating peer-to- peer recommendations, social sharing, user-generated content and press attention. Over 500,000 people visited the campaign website in under a fortnight and led to a direct sales increase of up to 40% during the same period of two weeks among Klarna’s featured retail partners.
5. Exploit the same “winner takes all” principles like the big tech companies
Apart from officials, the most influential spokesperson in the debate was Jamie Dimon, CEO of JPMorgan:
Jamie Dimon made his reputation decades ago as a cold-blooded, by-the-numbers banking executive. But his tone has changed. The longtime chief executive of JPMorgan said at an investor event recently: “What we’re not going to do is hamstring ourselves to meet an overhead target.” Higher spending lies behind the more blasé attitude.
Dimon announced the company would increase its technology budget to a whopping $12 billion, up 26% from 2020. His investment will expand Chase’s digital app and service portfolio to compete with young, digitally agile fintech startups and respond to consumers’ demands for disruptive digital experiences that better their daily lives.
What Dimon and his team are trying to do is think like the big tech companies, such as Amazon and Google-owner Alphabet, and exploit the same “winner takes all” principles that helped them dominate in their fields. The main message was that everything it is doing will increase market share and revenue gains across its businesses in the longer term.
Adopting a big tech attitude is an important step in banking’s digital transformation journey. They should consider that for big tech, it’s not about moving money or payments, it’s about delivering services that are as frictionless as possible to increase the quality of the banking experience and exceed customer expectations.
To that point, there’s an interesting finding in the most recent communications management literature: actual technological advancement attracts attention from consumers that cannot be purchased with greater marketing investments. This implies that consumers appreciate the costly and uncertain R&D efforts and value those firms that constantly offer innovation.