We recently caught up with Bradley Leimer, Head of Innovation at Santander North America, to talk about the future of banking. He shared with us his insights and explained how certain fintech solutions are set to create a new era of empowerment for financial customers.
To start with, we asked Leimer what’s the biggest disconnect between what financial institutions are currently doing and what they should be doing.
“I don’t know if it’s a complete disconnect, but I think we need to reimagine how banks can truly enrich customers’ lives,” Leimer said, referencing the industry’s over-reliance on fee income and over-fixation on regulation as excuses for not developing new ways to add value. Leimer added that “we don’t always think of customers at the heart of our decisions – we say we do, but in practice we often fall short.” As a result he sees that “there’s an opportunity for banks to do more to give back – to provide a more expansive customer value proposition.”
For Leimer, the difference lies in the time horizon of strategic planning and product development. He said that as financial services have focused on short-term gains, they have perhaps irreversibly damaged customer loyalty and soured the opportunity of longer-term multi-generational relationships. “This is a critical time, post-financial crisis,” Leimer said. “There was something like seven billion dollars invested in fintech globally last year and double that pouring in this year. These companies are driving costs toward zero in many critical areas like payments, foreign exchange and money management as they are adding significant customer value. Banks are at risk of losing more than just loyalty to these fintech startups.”
To fix this loyalty problem, Leimer said that “banks need to make customer lifetime value actually translate to a lifetime value from the financial provider – not the other way around.” The idea of lifetime customer relationships means broadening the focus beyond “segmented cross sells for the first six months.” If banks were to approach customer loyalty as Amazon does, for example, Leimer said that “they would consider more ways to be part of everyday life – to be a ubiquitous provider of daily value based on their personal needs, habits, and preferences.”
Leimer added there’s even more to this equationthan lifelong engagement — something deeper, more impactful in the end. “Consider the impact of mPesa in Africa – the ubiquitous ability to send and receive money through a mobile device. And then start adding the power of global crowdfunding and micro-loans, literally the shifting of wealth-driven opportunity, of value between one section of global society toward powering the entrepreneurial spirit of another. That is more than life changing; that is society changing. And the world becomes better for it.”
Returning to the level of traditional banking, Leimer expanded on what he calls “a vision of leveling economic empowerment through technology and pervasive digital education.” He said that financial institutions must be advocates for their account holders by helping them grow multi-generational wealth, whether it’s an individual, household, or business. “We’ve long given wealthy households and businesses access to private bankers and specialized wealth management services, but we are now in an era where technology can level this playing field. Everyone should be able to get access to personalized tools and advice that helps wealth creation. This is most effective when managing the spend side of a budget to maximize day-to-day savings, as income levels have remained relatively flat. But it has a lot to do with access to credit as well. We need to look at the whole of the individual’s financial need, and technology is finally at a point where it can solve this societal enigma – economic inequality, or the ‘wealth gap.’”
When we asked how financial institutions could begin making these deeper connections, Leimer talked about leveraging data analytics to interact with account holders at very granular levels. He characterized it as providing a personalized financial assistant who looks after your best interest. Banks and credit unions could give perpetual feedback through artificial intelligence and learning algorithms that meet the daily needs of specific account holders – not just segments. “While the income gap is a broader issue to tackle,” Leimer said, “societal imbalance, gender and racial wage equality, educational access, those are critical pieces – you have to be realistic in tackling something more tangible – and that is the secret of growing wealth begins by enforcing good spending habits over longer time periods thereby maximizing opportunities for generational wealth creation.”
“Our financial applications could offer continual feedback, a life-cycle analysis equivalent to that of an ‘annual check-up’ with the doctor – but in this case it’s a constant monitoring of your finances like we’re seeing in health-based applications in wearables and what we’ll eventually see in technology-driven personalized medicine,” he said. “Our applications, our products and partnerships should enhance systematic savings opportunities by giving personalized feedback into what is happening and make a deeper connection into their lives by providing real-time contextual advice."
Leimer said that he has met a few companies that are working on problems like this. Wallet AI was one that he was excited about (“they really have the opportunity to make a difference in people’s finances”) — and he added that “singular savings vehicles like newly launched Digit are offering simple, engaging experiences that offer transactional-based savings opportunities. I really like how they have deployed their savings algorithm. It’s a start to a grand experiment that must be undertaken.”
“Mass personalization tied to permission-based money movement is going to change this industry so dramatically that we will not recognize it within the next decade,” Leimer said. “There’s going to be an explosion of opportunities in the ways banks are connected into our communities and help grow household wealth. This is and will continue to be a global phenomenon as the idea of ‘community’ continues to expand due to social media and growing connectivity. This is what the Gates Foundation sees, and this is what banks should be looking at as well.”
Leimer then talked about how firms like Cardlytics and Level Up are building personalized preference engines that can, if properly deployed, drive customer spend in positive ways. “Imagine rewarding customers through loyalty programs that get them to in fact spend less, or at least spend more intelligently – by shifting where they shop to maximize value of good delivered.” As transactional reward programs mature, Leimer said, banks have the opportunity to use personal data to drive deeper loyalty through spend analysis by offering merchant agnostic tools and advice to maximize spend. This drives more meaningful value.
In other words, Leimer is talking about completely new revenue streams, all based on data. “It’s shifting the idea of the way that revenue occurs within a bank,” he said. “It’s not just through credit. It’s through services, it’s through leveraging data to partners through intelligent opt-in design ties to merchant loyalty, it’s through making personal insights available and maximizing the spend side of the household balance sheet.” Under this model, financial institutions could use the enormous amounts of data they’re sitting on to provide different types of value for account holders. In fact, Leimer said, if financial institutions can prove that their account holders save hundreds of dollars a year by participating in an advocacy program like this, their account holders should be willing to pay for these services. At that point, financial institutions could grow income from partnering retailers and from consumers as well. “It doesn’t seem far-fetched,” Leimer said. “Amazon has offered Prime under the same premise for years. Prime is (or at least can be) much more than free shipping.”
“If banks can’t offer something more valuable than Amazon Prime, then we’re probably in the wrong business,” Leimer said. “I think we just need to retool our mindsets and put the customer at the heart of these decisions. What is at stake, in my opinion, is literally the future of the financial services model. The wolves are at the door.”
With long-term advocacy programs like this, the incentives of financial institutions will be aligned with the incentives of account holders, and long-term relationships can develop. Essentially, the service Leimer envisions will “give people the tools necessary to fight against the bad habits they’ve learned on the spend side, and help maximize positive behavior on the save side – thereby building real generational wealth.”
In the end, consumers are always looking to find more income. They’ve struggled to have healthier financial lives, especially during the recent downturn. “We need to be part of that solution,” Leimer said. “Or else we’re going to lose big portions of our traditional customer base, not to mention a growing under-banked population tied to a digital divide. Imagine the possible improvements to health care if we were brutally honest and told people they were fat and could live longer if they simply changed bad habits – and then truly showed them how. We need to do the same in financial services – and provide the tools to a skinnier (and wealthier) you at the same time. That’s life-changing.”
It’s also about long-term thinking. “Look at the moonshot technology companies like Google, Amazon and Apple and others and what they’re focused on - that’s what I want to see from financial services,” Leimer said. “I want to see banks not just rebuilding the core, but rebuilding the core value proposition for the customers so it benefits all customers in the long term. And this focus will indeed benefit the bank as that customer seeks credit, as they experience life events, and as they interact with their personal data each and every day. It’s time to truly build that everyday bank for everyday people. I’m more excited about the future of financial service than ever before.”
For more details about how financial institutions can cultivate long lasting relationships with its account holders click the link below to download The Banker's Guide to Digital Advocacy white paper.