4 ways banks, credit unions can improve the customer experience

September 1, 2023 2:59 PM

For financial institutions of all shapes and sizes, attracting new generations of clients can be a challenge as the needs of the modern consumer evolve faster than many banks and credit unions can meet them. But executives are working to solve this gap by "humanizing" the customer experience.

A report released last month by Arizent, which publishes American Banker, surveyed roughly 5,500 bank customers for the third consecutive year to explore what factors help create the top environments for consumer banking and what motivates the choice for a primary and secondary institution of choice.

Results found that close to half of those polled from the Silent and Boomer generations selected their main financial institution based on distance and convenient locations. Contrasting that, similar percentages of younger consumers from the Generation Z and millennial age groups relied instead on the recommendations of family or friends when deciding where to bank.

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Credit unions and community banks have gained significant ground over recent years, launching bespoke services and novel campaigns built off of the feedback of customers.

But going beyond new products and geographic locations, a key factor in determining how effective banks and credit unions are in reaching new markets comes down to better meeting consumers where they are in their financial journeys, said Margaret Echelbarger, an assistant professor of marketing at Stony Brook University who studies how children develop as decision makers and enter into the economic markets.

"If they're truly interested in embracing financial inclusion, institutions need to make sure that whatever they're putting out there is something that's going to be acceptable and doable for families across the income spectrum," Echelbarger said.

Echelbarger emphasized that nurturing these connections starts in the home by "creating opportunities for not just parents to be teachers, but for children to be the teachers as well" and "engaging the entire multi-generational family in the thinking process" to foster financial education at all levels.

"It's really up to financial institutions to engage in a way that's going to resonate with those individuals across their own lifespan and across different life periods within the same home," Echelbarger said.

After the research isolated four main drivers that make up a humanized customer experience — behavioral, intellectual, emotional and sensorial — respondents weighed in on how their primary financial institution performed on each aspect.

Below are descriptions of what each driver encompasses and how banks, credit unions and other financial players are tailoring business plans to better match customer expectations.

Behavioral

Within the behavioral area, consumers weighed in on the physical and intentional ways they interact with brands, from navigating a bank's website to enrolling in new financial products.

Results found that while positive brand interactions and willingness to continually do so at regular intervals remained the top two attributes since the first iteration of the report in 2021, access to funds and digital tools declined in relevance among customers.

Streamlined online and mobile banking presences grew in significance across that same period, as credit unions received high marks across the spectrum of attributes when compared to other financial institutions.

A recent example of such a campaign includes OnPath Federal Credit Union in Metairie, Louisiana, which rolled out a Spanish-language website in July to help break down language barriers between the institution and underserved communities within its field of membership.

Jared Freeman, president and chief executive of the $620 million-asset OnPath, explained in a previous interview with American Banker that the credit union had been planning to debut such a tool for two years prior to its launch, but lacked the resources necessary for doing so until recently.

"We have a fast-growing Hispanic population in the greater New Orleans area, and so we wanted to provide all the same services and products that we brought all of our members in a way that was a little bit more inclusive for the native Spanish-speaking individuals," Freeman said.

Essential financial services are often out of reach for many non-English speaking consumers, as multilingual talent shortages continue to plague the financial services industry.

OnPath plans to further this progress through the development of a branch in the city of Kenner staffed solely by bilingual representatives, as well as bespoke lending programs for those only in possession of an Individual Taxpayer Identification Number, or ITIN.

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Intellectual

Intellectual drivers categorize a consumer's mental perception of a brand and its benefits, such as how well the institution protects customer funds or personalizes its products and services to meet individual needs.

Best in class customer service, simplified banking and trustworthiness were the top three characteristics that customers valued the most this year, while corporate dedications to ethical business practices sharply fell as a priority since 2021.

Among rising interest rates and a recent bank crisis, emphases on rewards for customer loyalty and better financial incentives when compared to competitors saw a significant jump in importance from respondents.

Despite credit card balances across the U.S. reaching a record $1 trillion last quarter, findings from a customer satisfaction study conducted by J.D. Power showed many consumers continue to opt for high fee reward programs that encourage spending.

Prizeout Partners CUSO launched on Feb. 21 through the collaboration of the New York-based advertising technology firm Prizeout and nine credit unions across the country. The organization, which is designed to work with the Prizeout platform, allows participating institutions to sell electronic gift cards to members through online or mobile platforms.

"For about a decade we've been looking for a product that benefits our members and our local businesses, and when we heard about this technology we realized it fit the bill not just for us, but other credit unions — especially during tougher economic times," Amy Sink, CEO of Interra Credit Union in Goshen, Indiana, said in an earlier interview with American Banker.

Members have the potential to earn a bonus exceeding the cash value of the card, of which a percentage is split between Prizeout and the participating credit union at the point of redemption as added revenue.

Other examples include Navy Federal Credit Union in Vienna, Virginia, which plans to add 18 new branch locations over the next two years due to a large demand across all age groups.

"Our members have expressed in surveys and everyday interactions with the credit union that they want the personal touch and detailed assistance branches can provide, in addition to the convenience of online and mobile banking. ... Through this continued strategy, we have learned that our investment in our growing branch network is needed for our members," said Keith Hoskins, executive vice president of branch operations for the $165.3 billion-asset credit union.

Navy Federal recently launched a new initiative where member service representatives visit elementary schools across the U.S. to teach students about financial wellness and promote smart savings habits.

Emotional

Consumer feelings fall under the emotional driver, and range from stress to confidence and excitement.

Sentiments of freedom regarding managing finances and reassurance that deposits are secure remained the two most important attributes valued by customers for the past three years. Respondents additionally remarked that feeling understood by their institution was more important this year than ever before.

It was in this area that credit unions excelled when compared to challenger banks and other players, scoring high satisfaction marks across all attributes.

Community Financial Credit Union in Plymouth, Michigan, debuted its partnership with NINE Design and Homes earlier this year to help highlight its Path to Homeownership mortgage, which it tailored for members struggling with purchasing their first home.

The $1.6 billion-asset CFCU's program considers past rent payments, does not require a minimum credit score and has a low or no down payment, helping minimize points of friction for underserved members and widen the potential audience.

"[When] we designed this special-purpose credit program, it was really about identifying these challenges that we've seen and being able to talk to people that are paying their rent all the time, but aren't building equity as homeowners or seeing a positive impact for regular payments on their credit that they should be," Tansley Stearns, president and CEO of CFCU, said in a past interview.

Similar efforts include that of the $4 billion-asset United Federal Credit Union in Saint Joseph, Michigan, which began offering its Nevada membership access to down-payment assistance in June with the help of the Nevada Housing Division.

The agency's Home Is Possible for First-Time Homebuyers program offers borrowers interest-free funding up to 4% of the total loan amount, with an option for aid forgiveness if they remain in the home for seven years.

Sensorial

The remaining attributes that fall within the sensorial area involve visual, auditory and olfactory brand cues, including office and marketing designs.

Positive recommendations from close acquaintances along with the availability of digital spaces and platforms that appeal to consumers topped the list of characteristics ranked by importance, while physically appealing environments dropped in value among respondents.

While credit unions scored highly in the first two, challenger institutions seemed to receive decent marks across the remaining attributes.

To help promote the brand and generate positive sentiments, banks and credit unions alike have been cooking up food-oriented marketing campaigns and even building hybridized branch cafes.

The Oshkosh, Wisconsin-based Verve, a Credit Union, has been running its "pumpkin spice loan" campaign since 2014, after years of witnessing the name's popularity rise as a part of Starbucks' menu since 2003.

While the $1.5 billion-asset credit union's seasonal lending product relates to the food item in name only, executives remarked that younger consumers have continued to respond positively to the campaign.

"The main goal was to create memorable, attention-grabbing campaigns that aligned well with our brand, were easy to understand and resonated well with consumers. … Using humor, creative campaign names and direct URLs allowed us to break through and gain attention," Anna Allen, vice president of marketing for Verve, said in an earlier interview with American Banker.