In the pursuit of deposits, some financial institutions are exploring a distinct digital brand. Marcus by Goldman Sachs is an example of a “purpose-built” brand connected to an established bank. Goldman Sachs decided it wanted to attract more retail customers and created Marcus to help them do that.
This approach offers a lot of room for exploration and growth. You don’t need to throw away the credibility and balance sheet of your current institution to spin up a new brand. It’s an opportunity to start fresh, using the expertise from your existing institution to build a nimbler, more innovative one. The magic of digital banking allows both realities to exist without harming either one.
Once upon a time, a proposition like spinning up a digital brand would have required immense capital and a commitment to building the technology stack in-house. Today, there are many fintech vendors offering plug-and-play solutions so you can shop “off the shelf” and create a banking experience that fits your goals — with one significant caveat: Profitability. It’s not sustainable to operate loss-making experiments indefinitely. The need for careful planning on the front end can’t be overstated. According to consulting firm Bain, many institutions and their digital brands are grappling with the issue of ROI right now.
If legacy financial institutions have the energy and impetus to spin up a purpose-built, digital brand, they will also do well to chart a path to profitability. Here’s some of what it takes to do that and achieve the ROI your shareholders will demand.
There are four areas that financial institutions should assess when preparing to launch a purpose-built digital brand.
- Don’t be generic: Target audience and value proposition
Perhaps the worst thing you could do is launch a generic digital brand. Consumers are savvy and selective about the brands they associate with. If you want to win their loyalty and dollars, you’ll need a deep understanding of your target audience, also known as your audience avatar. Look for subcultures or niches with unmet needs and learn everything you can about them. Greenwood, whose customers are largely Black and Latino, is an excellent example of a brand that is built around unmet needs in a community that’s been overlooked by many financial institutions. Wave is another, focusing on small or micro-business owners who need invoicing, bookkeeping and banking services. In the case of Wave, the business checking account is free, and they only charge for the value-added services that businesses would be paying for anyway, such as credit card processing and instant transfers.
That’s where the value proposition comes into play. If you’re able to develop products and a customer experience that resonates with a specific demographic, you’ll find surprising opportunities.
- Look for the overlap: Distribution channels and customer touchpoints
Using your audience avatar and value proposition, you can look for places where affinity and convenience overlap. If your target audience shows high loyalty to specific brands or channels, investigate how you can align your brand and integrate your products in ways that create a win-win. This could mean partnering with a regional grocery chain to provide rewards or a large employer to offer bespoke benefits such as financial planning or insurance.
Researching the behaviors of your target market will prepare you to create marketing, social media and communication plans that resonate and build trust. This includes the decision to leverage the parent institution’s reputation or not. Trust is painstaking to build, but depending on how your target audience perceives the parent institution’s brand, you may be wise to work from a place of vital authenticity — in other words, avoid any impression of “new look, old bank.”
- Stick the landing: Technology for the front line and the back office
If you’re going to launch a digitally driven banking experience, you need to stick the landing when it comes to tech. This applies to the IT stack your staff will use and the user experience for every account holder.
Although APIs and modern software systems increasingly drive the world of fintech and bank tech, the reality of integration is never as smooth as it looks on paper.
You’ll have to manage the creative tension between due diligence prior to release and constant improvement in the marketplace. Do your best to test drive the user experience before you launch and accept that some problems only show up once you’re outside the safety of the sandbox.
- Assess your offerings: Product and revenue diversification
You may have heard the saying “a solution in search of a problem,” especially in connecting with certain startups or technology innovations. Lots of venture capital has been torched trying to unearth worthy problems for novel solutions. Financial institutions launching purpose-built digital brands don’t have the luxury of excess cash.
You’ll need to curate the products and services that your digital bank brand will bring to market. Create onramps for high-profit products like wealth advising or credit, but also be willing to cultivate trust and loyalty with apparent loss leaders. Fortunately some products, such as high-yield savings accounts, are structured to attract consumers and preserve your margins.
Build to suit, not for certainty
Digital bank brands can provide a lot of room to diversify your revenue streams and develop new partnerships that will fuel innovation and growth. It’s similar to the way some car manufacturers approach racing development. They always hope to operate a profitable racing team by winning on the track, but the larger company still wins when proven technologies or inventions can be repurposed for mainstream production.
As you plan your new digital brand, give your team the license to get creative and make mistakes. You already have an institution built on a rock-solid foundation; now is the time to see what happens when you’re willing to try something new.
Kathleen Craig, a former community banker from Michigan, is founder and CEO of Plinqit, a fintech focused on customer attraction, retention and financial wellness via its savings platform.