What is the biggest problem facing financial services marketing today?Posted on July 12th, 2019 by Jay Thomas
In finance, marketers know the value of trust. However, consumer trust in the financial services industry is lacking.
Why is trust lacking, and what can marketers do to fix the problem?
The elephant in the room is the financial crisis of 2008. Experts point to mistrust within the banking community as the primary cause of the crisis. This mismanagement hit consumers the hardest and bred a general distrust of the financial sector. However, financial institutions recognize that trust directly impacts their ability to attract new customers. In fact, in the 2018 Edelman Trust Barometer, “41% of respondents used products/services of trusted financial services companies in the last year. Thirty-one percent recommended them to others.” Acting on this knowledge, over two-thirds of financial companies are increasing their marketing investment.
New contenders are changing the game
There’s another hurdle facing traditional financial providers. New businesses are drawing away their leery consumers. Increased competition is especially intense from financial technology, or Fintech startups. They're gaining a reputation for developing fast, innovative, and transparent products and services.
New businesses, services, and products are revolutionizing the entire financial system. Traditional financial services providers must think ahead to keep up with change. A significant part of that change is digitization. As Forrester stated in its State of Digital Banking 2018, “You don’t need a digital strategy. You need to digitize your business strategy.”
Then, there are also the evergreen challenges of financial sales and advertising. Among the roadblocks to profit are strict regulations, sophisticated consumers, and a lack of product differentiation.
Marketing in this new landscape requires constant and consistent nurturing of trust. Trust is the bedrock in communicating financial confidence to buyers.
Building and maintaining trust in the financial sector can be a challenge. Let’s look at four major hurdles banks, credit-card companies, and insurance companies face when building trust.
The problems with financial services marketing
Global commerce has become vast, varied, and complex. It continues to change faster than ever. For the marketer, an industry in flux means building trust with consumers is a constantly moving target.
How can you prove to leadership that it’s worth chasing this target and get needed buy-in? How can you show that what you’re doing will bring a higher ROI? Analyzing current issues in the financial marketing landscape will help us answer these questions.
New technology is bringing fast growth and increased competition
Finance is being taken over by technology at an unprecedented rate. By 2030, 80 percent of traditional financial service firms will become obsolete.
To stand out from the crowd, financial marketers need to reflect the modern audience and its social influences. This means embracing digital channels. For example, a full 28 percent of retail bank customers are now digital-only. As a result, many banks are dropping physical branches altogether.
Meanwhile, many finance companies have separate departments handling web, branch, and mobile banking. Some banks think digital is a new way to deliver services while others see it as a disruption. This misalignment over new technology can affect the customer. And your customers don’t want to think about channels. They only care about the service and flexibility of the solutions they subscribe to.
Startups lead to higher client expectations
Fintech startups tend to focus on a specific area or function and do it well. An excellent example of this is SoFi. This banking institution bases its lending on more than credit scores. The company takes into account cash flow, career, and education.
Companies like SoFi lack the reputation, size, and trust of legacy financial institutions. However, they are growing and raising the bar on customer service for their competitors.
People are actively comparing their financial service options. Websites that help you compare interest rates and related factors, such as comparethemarket.com, saw revenue growth of up to 14 percent in 2017. Confusing service information and a lack of transparency in pricing are no longer acceptable to consumers.
To compete with startups, traditional organizations must work harder in the shadow of the Great Recession. They must build strong, long-term relationships and understand that loyalty equals profit. When organizations prioritize company values and back them up with aligned actions, potential customers are more likely to give their trust.
Financial products are often hard to differentiate
Marketers struggle to make financial products stand out from competitors. This is because:
- Financial professionals use too much jargon.
- The benefits of financial products and services can be challenging to communicate.
- Public knowledge of finance is low. Almost 1 in 5 households report spending more than they earn.
- The quality and results of financial services can be abstract. For example, “shared risk” and “long-term returns” are important concepts, but they’re hard to care about at a visceral level.
Financial service marketers need to help consumers understand the value of their product. To do this effectively, they need to simplify their message and communicate it consistently over a variety of mediums. However, legal requirements can make this challenging.
Legal regulations and compliance limit marketing messages
Vast legal restrictions constrain financial marketers. These rules limit what they can and can’t say. Regulations protect the integrity of the financial system. And yet, compliance often requires extra steps that present challenges for marketers and slow down sales cycles.
For example, banks face a range of laws on advertising. In most cases, a lawyer, or external expert, need to see every piece of content before it's released. In response, a bank might:
- Acquire in-depth knowledge of state, federal, and international levels of regulation.
- Conduct a formal review, install sign-off processes, and create checklists for developing content.
- Add required statements, logos, and seals to advertising material, such as a declaration of FDIC or Equal Housing Lender.
- Avoid breaching Fair Lending laws.
- Keep abreast of channel-specific regulation, like terms and conditions for “one-click” financial products.
How can you proceed confidently despite the challenges? How do you find the solutions that build trust, get buy-in from leaders, and grow your revenue?
The ROBO Economy report showed that 82% of smartphone users research on their phone before making in-store purchases, and 45% read reviews before making a purchase. One way financial institutions can take advantage of these trends is through digital marketing. Today, companies are using digital marketing to create brand awareness and build trust through helpful content. Let’s examine some financial institutions that are doing it right.
What are some examples of good financial services marketing?
To be successful at financial services marketing, you need to understand your customer. This means positioning your service or product where the buyers are.
More than half of B2B buyers depend on content for their buying decisions. They want clear, concise, and educational content that prepares them for decision making. Where do they go for this content?
- Industry publications. Professionals look to industry publications to improve their skills and keep up with trends. Targeting a specific industry or demographic like seniors or doctors can exponentially improve the effectiveness of your outreach. Seek out online and print periodicals. Their publishers are usually looking for contributions from guest writers or thought leaders.
- Events. In-person events are great for building relationships and trust. Getting to know your buyers on a personal level helps you gain a deeper understanding of their mindset. What are their concerns, hopes, and aspirations for the quarter? The knowledge will help you speak directly to your prospects pain points.
- Digital presence. Your website is often the first point of contact and a validation tool for your prospects. Your website should be aligned with your company values and current marketing message. This will help maintain consistency across your branding.
Taking an agile approach to FinTech marketing will help your organization adapt quickly and ensure consistency across your marketing efforts. How can you create a solution for marketing that connects with today’s audiences?
Financial marketing by point-of-sale micro-lender Affirm
In 2012, Affirm partnered with thousands of shops to offer simple point-of-sale loans. Since then, the company has grown rapidly. To date, it has provided more than 1 million loans.
Affirm didn’t reinvent the finance wheel. Short-term lending at the point of sale is not new. So, what makes Affirm so successful? Marketing.
Affirm has a good communication strategy. Its main selling point is its straightforward, easy-to-understand terms. The customer chooses the repayment schedule, and Affirm states the amount of interest. There are no other fees, including prepayment or late fees. By dealing honestly and transparently with customers, Affirm is already outperforming others in the market.
Along with lending, Affirm gives a boost to merchants. How? It provides shopkeepers with marketing data. Affirm shows them who’s buying, what they’re buying, and where.
Traditional credit lenders had no idea about their customers. They didn’t know why consumers needed the money or how would they use it. “We’re not just seen as a payment method anymore,” explained Ryan Metcalf, former director of international markets at Affirm. “We are a marketing lever that provides a lot of data and analytics about how people buy.”
Affirm has brought retailers, customers, and the lender closer together. The company has built trust through simple communication. Affirm’s system has distributed data and generated new revenue streams for itself and others. In a few steps, Affirm significantly improved its financial services marketing. How can you do the same?
Steps to improve your financial services marketing
Improving your marketing is one of the best things you can do. You’ll improve your company’s image, gain more customers, and build a stronger foundation for your business. Here are a few steps towards outperforming your competitors:
- Improve the customer experience. The growth of interactive technology has changed the relationship between lenders and clients. Customers now judge an organization’s performance on more than commercial metrics. They give more weight to service, experience, and speed than ever before.
- Build loyalty. It’s business 101, keeping existing customers is more valuable than trying to gain new ones. Make sure you take care of your current client base before attempting to expand your reach.
- Grow into transparency. Consumers are looking for companies that they can trust. This requires open and honest communication. It also means that organizations are expected to fulfill their promises and make ethical choices.
- Gather data insights. How consumers interact with companies online is infinitely complex. Knowing all touchpoints at all times is too much for any one person. You need to build platforms and create processes that filter data into valuable insights. These insights can then be used to guide your marketing.
Financial services and marketing come together
Amid rapid changes in finance, trust is more important than ever. People can’t trust what they don’t understand.
Nearly half of all American households can't pay for an unexpected $400 expense without having to borrow money or sell something. Over half worry about running out of money in retirement.
It’s fallen upon marketers to not only promote and sell, but educate. This includes providing expert content that speaks to the circumstances of the customer. In this landscape, it’s not an option to ignore FinTech marketing. How will you get yours up to speed?
Financial institutions that align sales, marketing, and legal build trust and reputation through valuable content. Our eBook, The Huge Cost of the Status Quo in Sales Support, exposes the dangers of misalignment and how you can protect your organization.