How digital transformation leads to increased revenue
Ensuring you have a seamless digital experience for your customers is essential to improving your share of wallet and revenue.
Backbase is on a mission to re-architect banking around the customer.
Banks are in a position to really enhance their offerings and truly engage customers in this new engagement banking era. Firms like Amazon have revolutionized funnel optimization by putting the customer at the heart of their operation. Because of this, most consumers are now accustomed to simple onboarding processes and intuitive user interfaces.
So what exactly does this mean for financial institutions? Well, it’s an opportunity to transform their digital offerings and ultimately increase revenue, share of wallet, and customer satisfaction.
Digital onboarding improves account sign-ups
One of the most straightforward ways in which banks can see a return on their digital sales investment is through an increase in account sign-ups.
That’s because digital onboarding makes the experience of applying for an account much easier. Customers can complete the process online or via their mobile, and they can even start it on one channel and finish on another without having to resubmit any of their information.
That saves the customer the time and inconvenience of having to stop by a branch to hand over paper copies of ID documents. It also reduces the abandonment rate which can cost several hundred dollars per dropout.
A recent study by the Boston Consulting Group found that banks with strong digital sales processes and seamless onboarding can boost conversion rates by 10-15% in the first year. There’s also often a 20% improvement in satisfaction with the customer journey, which translates to an additional increase in revenue of up to 15%.
These statistics highlight just how crucial it is to make sure your digital onboarding journey is as simple and quick as possible for your customers.
Increase your share of wallet with digital capabilities
Once a seamless onboarding experience has been created digitally, the next part to focus on is how to increase the number of products your customer has with your bank. This may include products like loans and credit cards and can be achieved through cross-selling and upselling.
Backbase CEO, Jouk Pleiter, and Robert Soetens, Backbase Digital Sales Product Director discuss the return on investment for digital sales.
To put this in context, the average customer typically owns seven products: three with their primary bank and the rest with different providers. However, research by the RFI Group shows that customers who’re highly digitally engaged hold four products with their main provider and up to 12 in total. Incidentally, they usually purchase more profitable products from other banks. That’s revenue that you’re missing out on if your digital sales process fails to keep your customers engaged.
One way to improve engagement is through personalization. You can use digital channels to build up a profile of your customers by capturing a wide range of data, which allows more effective targeting of new products. For instance, you can target customers who reliably pay off credit cards with other providers from their current account with a similar product. According to research firm Experian, tailored offers boost revenue by up to 19%.
By focusing on enhancing your engagement with digital offerings, your Net Promoter Scores (NPS) will also improve as a result. This is a measurement of whether a customer will recommend a product or service to a friend. Those digitally engaged customers are more than four times as likely to endorse their main bank compared to those who stick to more traditional channels.
Lower operating costs with digital sales
Another way banks can generate more revenue is by discovering how digital sales processes can cut costs.
Most of the time banks and credit unions rely on manual processes which are not only inefficient and labor-intensive but also very expensive.
One way to cut costs is by reducing your cost per contact. McKinsey & Co. estimates that the cost per customer of opening an account is USD $300. That figure consists of operational expenses such as branch staff and printed forms which are quickly becoming obsolete.
However, McKinsey claims that the cost per customer could drop to as little as $5 for challenger banks that complete the sign-up process within their apps.
Needless to say, the lower the cost, the quicker a customer becomes profitable once
you start to cross-sell bank products.