The great digital shift has brought us all onto our mobile devices. But as we become ever connected with financial services firms through phones, tablets and laptops, banking has lagged a bit. As PYMNTS research has shown, roughly 45 percent of account holders use online and mobile channels for banking most or all of the time.
But a third of users surveyed have signaled dissatisfaction with their mobile banking apps. Those stats signal some room for improvement.
LendingClub CEO Scott Sanborn told Karen Webster that financial services can get a boost from embracing an outcome-based approach to banking that leverages the device as a conduit for improving consumers’ financial health rather than focusing on discrete banking services. “The biggest thing they have to do is move organizationally to a ‘customer-first’ mindset powered by a single view of the customer,” he told Webster.
To get there requires grappling with legacy technologies (read: technical debt), moving beyond the branch experience and harnessing data to create a personalized experience.
As Sanborn has said in past company earnings calls, banking is no longer defined by a place where people go, but is about what they do. “Banks spend a lot of money on advertising, but at the end of the day, experience is a huge driver of choice – and a big driver of choice has often been convenience,” he noted.
The pandemic has shaken up just what it means to have a “convenient” banking experience. Convenience used to be about the branch, and about having a branch in close proximity to the house. Now, it’s all about the mobile banking interaction that, increasingly, should “deliver on the customer-focused outcome” that the individual wanted from the bank in the first place, according to Sanborn.
He termed this outcome-based approach a “know-me experience” that stretches, end to end, across a banking app, where financial services providers can anticipate the consumer’s immediate needs, as well as what they might need down the line. After all, said Sanborn, the online banking experience matters for everyone, but what matters within that experience can be wildly different depending on the day or the use case.
That outcome-based approach has yet to crystallize in financial services, which is why so many people have different relationships with a slew of providers, taking a bit of what they need from each of them. They might use one bank for checking and savings, another for a mortgage and yet another for an auto loan, for example.
The technical debt is a challenge in crafting the connected ecosystem, said Sanborn, where a financial institution (FI) might serve as a single point of contact. Banks have grown through acquisitions, and have had to embrace multiple legacy technology systems. “Silos form around products as opposed to customers – and that makes it harder to stay focused on them,” he said, with a holistic view.
By way of contrast, explained Sanborn, digitally native firms such as LendingClub have been able to organize their efforts with the customer in mind, and always at the center of design. That’s helped in part by the collection of 140 billion data cells over 14 years.
LendingClub’s customer base might be defined as “highly banked,” he said, but they are not getting the most they could get from their financial products and services. He pointed out that the company’s business model is predicated on helping consumers get better control over their debt – and boost their credit scores in the process.
A Hybrid Approach – For Now
The fact that LendingClub has a number of avenues for customer interaction – via phone and chat, said Sanborn – speaks to a hybrid approach that still remains critical. In some cases, customers are not ready to go 100 percent digital yet (indeed, some loans, such as auto loans, still must be done with physical paper, even if they do not need a “wet signature” done in a branch setting).
“Is it possible to be fully digital? Is it desirable for all customers? Not yet. But it’s sure headed that way,” said Sanborn. Though there are still use cases that require person-to-person contact, he said, online financial services marketplaces like LendingClub’s have been evolving into connected economy ecosystems.
“The marketplace has enabled us to assemble a ‘funding ecosystem,’ with everything from regional and community banks that will provide capital for loans to high-credit quality consumers, to asset managers and hedge funds that are willing to take on more risk in exchange for a higher yield, so we’re able to serve a broad range of customers” powered through data underpinning every interaction, he said.
Beyond credit activities, said Sanborn, data makes it possible for LendingClub to help consumers with spending and saving. The customer who comes to LendingClub to pay off their credit card debt can also be prodded into saving money on an auto loan, putting those savings automatically into a separate account that grows over time and improves their financial health.
The holistic approach can also help LendingClub reach out to Gen Z consumers, for example, who thus far have relied on Zelle and Venmo as their sole conduits of online banking. “As they move forward and further into their financial lives, they’re going to need more from their bank,” he told Webster. “They’re going to need help and support on a variety of other services … You’ve got to both align around the customer and create incentives for the company that align with the customer outcomes, as opposed to only the company’s financial outcomes.”