In this Step 3 of our 4-part series called Beyond Compliance, we look at how to aquire more customers by taking authentication beyond compliance and turning engagement into action.
The short step from engagement to action
What good is engagement? There are many examples of startups in recent years that have managed to win in the attention economy, and then struggled to turn that attention and engagement into profit. Twitter was launched in 2006 and had to wait 13 years to be profitable, well after it was an established platform.
Engagement is vital, but alone it is not enough. Engagement needs to become action, where customers buy and make use of profitable services.
No step in this journey is unimportant. Onboarding is a necessary step one, minimizing abandonment as much as possible. Regular engagement is also necessary, as no business wants to be one of the installed but abandoned apps on a device—one piece of research showed that after a month of being installed, only around 3% of apps are regularly used.
If we can overcome these hurdles, once a customer has been onboarded and is engaging regularly, it means every engagement is an opportunity for action, and ideally a transaction which results in revenue. But if a business cannot move its customers from engagement to transaction, then all the previous effort is essentially wasted.
New banks and moving beyond engagement
We can see a perfect example of this need in action with the neobanks that have won so many customers in the last decade. Behind this success is several factors—a complacent retail banking sector, good marketing, and appealing to young people who wanted something different.
But arguably the biggest factor is that these banks have taken an innovative approach to onboarding, with slick application processes that can be completed on mobile devices, the integration of digital ID schemes, and video liveness checks all making the process simple. Onboarding is generally fast, which means new customers don’t have to wait long until using the service.
Engagement is also high, with many customers using their banking apps every day to check balances and recent transactions. The hard work these banks have put into their user interfaces has paid off, and they are winning the attention economy.
But it’s only recently that some of these banks have been able to say that they are profitable. Part of this is the high cost of customer acquisition, but it’s also because the products that get customers onboarded, such as current accounts, are not very profitable on their own. To be profitable, they have had to both introduce new products, such as loans and premium accounts, and move customers from engagement to action.
There is also the example of how the new demand for Strong Customer Authentication (SCA) is affecting retail. Online and mobile retailers have for years faced the problem of abandoned baskets, where the customer selects items to buy but in the end, makes the choice not to check out. The customer is engaging, but ultimately not taking the final action of buying. A poor SCA experience will only make this problem worse.
How to make the final step from engagement to action
The problem with the step from engagement to action is that it is not a single step. It is three steps that need to be taken one at a time, at the customers’ pace.
Engagement and building loyalty
This is the first step, where customers start to use a service more and more. Customers return to the service and are engaged, but they neither fully trust or distrust the service. They’re likely to use it for low-risk transactions. The better the service is and the more accessible it is, the more likely they are to stick with it.
Ask most people if they enjoyed an “intimate” relationship with their financial services providers and they’d probably laugh—they have a business relationship and their intimate relationships lie elsewhere. And yet we trust our banks to keep not just our money safe, but also share valuable information. We trust that our data won’t be sold on or used for ill purposes. The more people interact with providers, the more intimacy they build with this provider, and the more they will use it for services beyond the basics.
A good example of this in action are neobanks being used for public transport fares. In some cities, challenger banks are commonly used as second bank accounts, only for paying daily fares through contactless tapping in and out of barriers. It’s not profitable for the bank, but it does work as a wedge into the customer’s daily routine. As time goes on, some customers will want the convenience offered as their main bank account.
Finally customers will, at their own pace, be ready to take the action that providers need, that shift to profitable services. For example, someone signing up with a challenger bank may need a good amount of time using the service before they are happy having their salary paid to that account, or taking out a loan with that provider. It’s not that they are averse to the idea, but expecting that instant level of trust is a big ask.