With the amount of competition in the financial industry these days, attracting and keeping customers is a critical goal of any successful company. If a business wants to stay competitive, it needs to develop strategies for promoting and maintaining customer loyalty.
One area to focus on is key moments of customer tension. In these moments, customers will attach strong emotions to the experience, and remember the outcome, good or bad. Digital tools provide new ways of smoothly navigating these moments of tension.
To learn more about how companies can leverage digital innovation to improve the customer experience, PaymentsJournal sat down with Chris Harris, the senior director of Marketing at Ondot Systems. Joining us was Aaron McPherson, VP of Research Operations at Mercator Advisory Group.
During the conversation, McPherson and Harris identify key moments where a bank or financial institution has an opportunity to promote customer loyalty, and they discuss potential avenues for doing so.
Using mobile apps to fix compromised cards
A significant portion of cardholders have experienced a moment where their card has been stolen, lost, or otherwise compromised. Data from Mercator Advisory Group indicates that nearly 30% of consumers have had their credit cards compromised in some way during the past year.
McPherson explained that there are three main scenarios that play out in this space. First, the person could have actually lost their physical wallet, a scary moment that many of us have dealt with before. Or a person might notice a fraudulent purchase made to one of their accounts. Finally, an issuer might reach out to the consumer to alert them about a suspicious charge.
In all three scenarios, the consumer is faced with stress and a potentially cumbersome process of calling different banks, canceling cards, and going through the refund process. Harris sketched out solutions that would help mitigate stress and make it easier for the consumer to control the situation.
By using a mobile app, a consumer could have the ability to track the activity on their card in real time, said Harris. Through the app, they could also have the ability to shut down their card to stop further purchases, while also being able to review all charges in order to determine if a dispute needs to be initiated.
Harris explained that many banks don’t currently offer these features in one place. “Each of these capabilities is a fairly different type of feature,” he said. They might be scattered around the corners of a moble app, if available at all. Customers end up phoning a call center and waiting for an agent. Thus combining them in one place is a great opportunity for banks looking to help their customers.
When it comes to fraudulent purchases, one major problem is that customer often don’t recognize their transactions. Therefore, Harris argued that there’s room to improve the information provided to the consumer.
For example, a purchase from a vending machine might be charged under a random company name in another state that the customer is wholly unfamiliar with. But if that customer was instead presented with clean information about the company and where the purchase was made—perhaps even marked on a map– they’d be more likely to recognize their own purchases. Harris also pointed out that banks should allow customers to get alerts about their spending, allowing them to immediately review it to determine if it’s theirs or not.
McPherson agreed, explaining the issuers would benefit from these tools as well, since the chargeback process can be very expensive for them.
Another pain point for many consumers is dealing with having their card declined while trying to make a purchase. One way to improve the situation is to provide real-time information to the person, explaining why the transaction did not go through.
Harris reasoned that regardless of why the card was declined, instant communication would make the situation better. If there are insufficient funds, for example, Harris pointed out the bank could immediately offer an overdraft protection.
More important is to avoid the decline in the first place. Harris explained how declines typically occur because the person lacks the necessary funds or because the purchase departs from typical shopping patterns.
In the latter case, verifying the customer’s location would help avoid the decline. If the mobile app could use the person’s location data on their phone, the bank could determine that the cardholder is in the same location as the card.
Such a solution “enhances the customer relationship because you’re not declining the transaction, and it saves the issuer money,” said Harris.
Often times, when a customer has a card declined, they simply switch to another one. “Our research shows that two thirds of consumers have two or more cards, and a third of them have three or more cards,” said McPherson. “We’ve seen some indicators that attrition rates do go up in cases where people are declined.”
Improving the traveling experience:
The third moment Harris and McPherson discussed was related to traveling. Many people have their cards declined while traveling overseas. McPherson noted that credit cards are more likely than debit cards to be declined during in-person purchases while abroad. The inverse is true for e-commerce: debit cards are more likely to be rejected.
In either case, there are steps a bank can take to assist traveling customers. One solution is to use mobile location data to detect when a customer is traveling and prompt them to enable spending in that location. That type of flexibility makes spend during travel much more convenient for customers and builds loyalty. For online transactions, card controls allow customer to enable or disable online and cross border transactions, providing a signal to the issuer about their spend intent.
McPherson noted that his research indicated that younger consumers are more in favor of having account controls, such as the one listed above, meaning that banks that offer them will attract a coveted consumer segment.
Streamlining the onboarding experience:
The final area where digital tools can improve customer experience is in the onboarding process. For many credit cards, the process of applying for a card, getting approved, and physically being able to use it can take weeks.
In contrast, the Apple Card can be set up and ready to go within minutes.
From Harris’ perspective, this streamlined onboarding process will soon become the norm. “Large banks are certainly going to be pursuing this and banks that don’t have it are going to struggle with the ability to attract new customers,” he said, noting that this is particularly true for customers who are used to doing everything on mobile phones, such as millennials and Gen Z.
He said the onboarding process is also important because a successful go of it can lead to future sales down the line. Put another way, if a customer is satisfied with how easy it was to get one credit card, it’s likely they’ll keep doing business with that company.
While developing these solutions may seem like an insurmountable task for many smaller businesses, Harris pointed that a variety of fintechs exist that will partner with small companies to develop these solutions.
Even businesses that rely on legacy systems can collaborate with fintechs to offer digital solutions befitting of the modern payments industry.
If a company wants to stay competitive, it should consider offering mobile apps that allow customers to track their purchases, easily shut down stolen or lost cards, and interact with real-time messaging about declines or travel notices. Crucially, all these features should be in one place, so in the moments that matter, customers can easily control their finances.
“The more that issuers can use that sort of technology, the more they’ll grow, and the more they’ll have competitive success,” concluded McPherson.