Cuscal News - Edition 27 - Emerging themes for 2012
It's that time of year when we turn our eyes to the future to predict those opportunities and threats that will shape the evolution of our businesses.
Against a backdrop of a volatile economy where our sector continues to face challenges in terms of access to funding, increasing regulation and competition from new and non-traditional sector participants - think PayPal and Google - I wanted to offer some themes to consider as you develop your strategy and future plans.
The ideas presented below are not necessarily new but they have significant implications for consumer behaviour, and how to retail to prospective customers.
1. A new community of customers
Many retail organisations are grappling with how to attract the emerging generations as their future customers, and many of you have told me that you are facing the same challenge. As baby boomers age, it is imperative that we find a way to engage with their children and particularly Generation Y as they come into their prime years of their earning life.
The challenge here is that Generation X and Y have a different concept of community - the foundation of many credit unions' value proposition. Rather than relying upon geographically- or profession-based communities, these generations bond in communities of interest, which are knitted together by social networks.
How do you reach out to these groups when they are less involved in their local community, or local industry, than their parents? How do you develop your distribution strategy and services that afford them mobility and flexibility in what they buy and where they pay for goods and services? How do you uphold the value of personalised member service, when their idea of convenience is not to pop to a local branch, but to open a mobile application on their smartphone?
Statistics suggest that mobile transactions will exceed internet transactions by 2015, and more than 50% of generation Y will be using mobile banking . With a high rate of smartphone usage in this country and applications like CBA's Kaching already out in the Australian marketplace, it is easy to believe in this prediction.
2. What is the value of utility?
The baby boomers are known for valuing security when it came to choosing a financial institution to bank with. This may be in part because they were the children of a wartime generation, but unlike their parents, they have to rely less on defined pension plans and social security services, rather saving their own wealth for retirement.
Interestingly, the concept of banking with organisations with a solid financial stronghold and historic reputation is not one that motivates the emerging generations in the same way it did their parents. Rather, these technology- and materially-oriented generations are looking for products and services, which afford them convenience, speed, functionality and style.
Consider the success of PayPal. It is not the 'steady and sure' reputation of this financial service that has accelerated its adoption, but rather that is offers a quick, convenient and secure way of buying online.
The value of utility is different for Generations Y and beyond, than it was for their parents. And although the steadfastness of financial services firms in Australia will continue to be underpinned by heavy regulation, those organisations that build functionality into their products and services , which meets the new generation's demand for convenience, speed and style, will fair better in the game.
In-demand product innovation will be squarely focused upon mobile, contactless and real-time payments, plus the greater personalisation of products, the customisation of marketing as well as ancillary services such as fraud management.
3. Distribution and promotion - preference towards online
Online purchasing is finally coming of age in Australia. Of course, this is to the consternation of many in retail locally who have not updated their service model to capture an online-buying marketplace. It has truly become a global marketplace for everyday consumer good and services.
Here are a few recent statistics, which offered me perspective on how online and mobile purchasing is continuing to boom. On Black Friday, the day after Thanksgiving and the traditional start of Christmas trading in the US, IBM recorded a 24.3 percent increase in online purchasing compared to the same day last year. Mobile retail buying itself increased by 14.3 percent, with iPhone and iPad consumers collectively accounting for 10.2 percent of all online retail traffic. On the same day, PayPal recorded a six-fold increase in its mobile payment volume compared to last year. PayPal says payment volume on the day was more than double the average Friday spend.
Investing in online and mobile as a distribution channel will be important for those servicing the younger generations. As an example, St George's mobile channel has the equivalent transaction traffic to 40 of its branches and 30 percent of ANZ's online traffic comes from its GoMoney mobile application .
On the branch as a channel… I think the 'experiential' retail practices being offered by the likes of Apple can provide inspiration for how to set up the in-branch experience. HSBC in the UK has branches that offer service more akin to that received at a restaurant than a traditional line-up-at-the-counter bank branch. Personal and friendly service is already in the DNA of our sector, so credit unions are already well-placed to offer these sorts of human and unique in-store experiences.
Advertising via online and mobile channels is another quickly evolving area that deserves consideration. Online advertising has progressed from basic search-engine optimisation to personalised advertising, where cookie-collecting websites offer tailored advertising based upon an individual's previous browsing activity. The next step is the ability to the right offers to individuals at the right time. An example might be the ability to offer individuals mortgage refinancing, at the point at which they are looking for a new property, or a car loan at the point at which they receive a bonus or a pay rise. Those organisations who get this right, will have an opportunity with those generations who value 'instant gratification'.
In terms of mobile perspective, location-based services that offer consumers the right product at the right time, or mobile applications that deliver a value-added service, such as a budgeting or expense tracking application.
In summary, I think the retail sector offers us many lessons to draw from. Getting to know and understand emerging target audiences, including generation Y, and developing a compelling value proposition that meets their needs is a big but exciting challenge. Evolving traditional services into an online and mobile environment, in order to meet target audiences where they work and play, will be important. This is why we see mobile payments, real-time payments and personalisation of products and services, including to online behavioural patters, as growing areas of product and service development.
iSource: ABA, Neilsen Research, Javelin Strategy and Research
This edition of
Cuscal News features several articles relating to cards products, including new Visa marketing updates; the announcement of Coles contactless payments; Vigil update and the rediATM Prosperity Survey.
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This article was published in Cuscal News, the online newsletter keeping you informed.
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