Are bank marketers tone-deaf?

Why do Kiwis feel like they're being sold to, not served?

New Zealanders appear to be lukewarm on bank marketing and it’s difficult to see those responsible breaking through the trust firewall any time soon. Consumers are least satisfied with banks that use intrusive marketing tactics or lack transparency in their communication.

This comes on the background of the finding that smaller banks are outperforming larger players when it comes to customer satisfaction. A survey, conducted by Consumer NZ in 2023, found that consumers are particularly happy with smaller banks' focus on customer service, personalisation, and responsible lending practices, whereas larger banks, such as ANZ and Westpac, are often criticised for their high fees, lack of transparency, and impersonal marketing tactics.

An earlier New Zealand Consumer Survey in 2022, conducted by the Ministry of Business, Innovation & Employment, found that 67% of consumers reported taking action to resolve their most recent issue with a financial service provider, and were most likely to take action when they felt they had been treated unfairly or when they were dissatisfied with the outcome of their complaint. Conversely, consumers were less likely to take action if they were unsure of what to do or if they felt their complaint would not be effective.

These surveys suggest that New Zealand consumers are generally becoming more sophisticated and demanding when it comes to bank marketing. They are looking for banks that offer personalised, transparent, and value-added services. They are also increasingly critical of banks that use intrusive or deceptive marketing tactics.

Areas of dissatisfaction include the lack of personalisation, where many consumers feel banks' marketing is generic and doesn't address their individual needs and financial goals. They balk at receiving offers for products or services they don't need or can't afford and find this frustrating. They often feel bombarded with emails, phone calls, and other marketing messages from their banks, and some marketing materials are seen as unclear or misleading about fees, terms, and conditions.

Consumers want banks to prioritise building relationships and providing good customer service, not just pushing products at a time when branches are being closed and more interactions are handled online, often with long waiting times.

There are several attributes that banks need to focus on, some of the most important include making it easy for people to handle their most frequent transactions; resolving issues efficiently; fostering a complete trust in the relationship; charging fair rates and fees for services provided; and understanding people’s unique situation and needs.

Building strong data analytics capabilities is crucial for banks in today's competitive landscape. New tools are constantly emerging, offering exciting possibilities for enhancing the value extracted from data. Here are some ways banks can leverage these tools to improve their data analytics.

Migrating data and analytics onto cloud platforms provides several advantages like allowing banks to scale their analytics infrastructure elastically, handling data spikes more efficiently and cost-effectively. Cloud-based tools are accessible from anywhere, improving collaboration and agility in data analysis. Cloud platforms offer pre-built models and tools for machine learning, artificial intelligence, and natural language processing, enabling more sophisticated data analysis.

AI algorithms can analyse vast amounts of transaction data to identify fraudulent patterns in real-time, preventing financial losses, and AI-powered risk assessment models can help banks make informed lending decisions and personalise loan offerings.

Machine learning can be used to segment customers based on their financial behaviour and preferences, enabling targeted marketing and product recommendations. Investing in data quality tools ensures the accuracy and consistency of data, leading to more reliable insights and effective decision-making.

Real-time data integration tools enable banks to analyse data as it's generated, providing up-to-date insights for more immediate and informed actions.

Training employees across departments on data interpretation and utilisation fosters a data-driven culture where insights inform decision-making at all levels. Establishing clear communication channels between data analysts and business stakeholders ensures that insights are translated into actionable strategies, and tracking the impact of data-driven initiatives on key metrics demonstrates the value of analytics and encourages continued investment.

Emerging Technologies such as blockchain can enhance data security and transparency, particularly in areas like cross-border payments and trade finance, and while still in its initial stages, quantum computing has the potential to revolutionise financial modelling and risk analysis by handling complex calculations much faster.

By strategically adopting new tools and fostering a data-driven culture, banks can unlock the potential of data analytics to gain competitive advantages, improve customer experiences, and navigate the evolving financial landscape effectively.

As of today, there is no single, overarching investigation by the Commerce Commission into New Zealand banking, however, the Commission is currently engaged in several initiatives and studies related to the banking sector. Launched in June 2023 at the request of the previous government, this comprehensive study aims to assess the level of competition in the personal banking market.

It will examine factors like current and deposit accounts; overdraft account services; personal loans; and mortgage and credit card lending. The Commission is currently gathering information from stakeholders and the public and a draft report is expected in March 2024, with the final report due by August 2024.

This study could potentially lead to recommendations for improving competition and consumer outcomes in the personal banking sector.

The Commerce Commission regularly investigates potential breaches of competition and consumer protection laws in the banking sector and a recent example resulted in ANZ Bank, in 2023, agreeing to pay up to $18.5 million to customers after admitting to misleading conduct related to loan interest rates.

The Commission continues to monitor the banking sector for potential anti-competitive behaviour and unfair practices.

The New Zealand banking industry is poised for significant changes over the next decade, driven by a confluence of technological advancements, regulatory shifts, and demographic and economic trends.

Open banking will usher in a new era of competition and innovation, allowing third-party developers to create financial products and services using customer data with consent. This could disrupt traditional banking models and lead to more personalised and convenient financial experiences.

FinTech startups continue to challenge traditional banks with agile platforms and innovative offerings. Banks will need to embrace digital transformation and adopt innovative technologies to compete effectively. Artificial Intelligence (AI) and Machine Learning (ML) will be harnessed for fraud detection, personalised marketing, and risk management, leading to more efficient and data-driven operations.

The government and regulators are likely to implement policies promoting financial inclusion for underserved communities, potentially leading to new product offerings and partnerships. Implementation of the Consumer Data Rights (CDR) will give consumers greater control over their data and encourage data portability, empowering them to make informed financial decisions.

The aging population will create a growing demand for retirement planning and wealth management services. Banks will need to adapt their offerings to cater to this segment. At the same time, younger generations are likely to prioritise sustainability, personalised experiences, and digital convenience. Banks will need to cater to these preferences to attract and retain customers.

Global economic challenges could also impact the banking sector, requiring banks to adopt robust risk management strategies and adapt to changing market conditions. Banks will also face increasing pressure to address climate change and other social issues, potentially influencing their investment strategies and lending practices.

The potential impacts of these changes could well result in consolidation in the banking sector. Smaller banks may struggle to compete with larger players and the influx of FinTech firms, potentially leading to mergers and acquisitions. We might see the emergence of niche banks focusing on specific customer segments or specialized services.

Banks will prioritise digital platforms, personalised services, and data-driven insights to differentiate themselves and improve customer satisfaction, and we will see a greater emphasis on financial literacy and inclusion, with Initiatives undertaken to educate consumers about managing their finances effectively and ensuring access to financial services for all.

Overall, the New Zealand banking landscape is about to undergo a significant transformation. While challenges exist, these changes also present exciting opportunities for innovation, improved customer experiences, and a more inclusive financial system.