Executives often lament that commercial banking products are commoditized. Product differences are really just pricing details on a term sheet.
It’s probably cold comfort, then, that in a recent CEB survey, bank customers ranked low prices as one of their top three criteria for making financial purchases.
But there’s also good (and surprising) news in that data too. Price is only one criterion for making buying decisions, and not the primary one.
In fact, customers’ top reason for making a financial purchase is whether the provider “offers products and services that meet my business needs.” To get out of the price-based competition trap, banks must differentiate and compete in the very part of the business that the industry has ceded as being commoditized: product.
Differentiated products are distinct in two ways. They uniquely help the customer manage their business, and they are embedded in the customer’s workflow, available on demand.
Understand what customers value: Until recently, customers mainly valued — and paid for — access to the bank’s balance sheet. But today’s customers are more sophisticated and have more choices, both from the sheer number of competitors, and from a burgeoning set of digital products that aim to solve specific CFO or business owner problems.
When CFOs have access to services like Aria, Stripe or Dwolla, offering simple access to the balance sheet isn’t enough to bring in new bank revenue. CEB data clearly show that commercial banking customers look for banks to give them the ability to manage their businesses better.
Embed product in customer workflows: The definition of products that help banks differentiate their offer from competitors’ is now intertwined with new technological capabilities, and the ability to provide a digital service.
Traditionally, customers have gone to the branch or met with their relationship managers when they needed a financial solution. Now, customers are beginning to expect banks to deliver products digitally. And while most banks invest in online or mobile capabilities, some banks are moving beyond simply upgrading the channel to embed their product directly into the customer’s workflow or home life.
For example, UK-based Starling Bank was the latest in a series of firms to announce experimentation with voice-based account look-up and payments. Starling is using Google Home technology.
How Differentiated Products Can Help Business Banking Customers
Differentiated products are essentially a new type of bank capability: digital products that continually help customers manage their businesses. And there are three ways that these products help businesses hit their goals.
Data and data analysis: The product gives the customer information, such as benchmarking data with high-quality analysis, that they wouldn’t otherwise have access to.
Access to a professional network: The product helps the customer make connections to other professionals and businesses, such as through a vendor marketplace.
Process improvement tool: The product enables the customer to execute a business process, such as inventory management.
Examples of Differentiated Products
In a review of the largest 100 banks’ product suites, CEB found several examples of differentiated products offered to commercial banking customers. Here are two examples, including how each product helps the customer manage their business outcomes:
BizSmart, from UOB, integrates payroll, accounting, inventory, and resourcing into a single software tool with some automation features.
What customers value: Work
Databank, from Westpac, is a secure and anonymous data exchange. With their customers’ permission, companies can exchange their customer data with other companies’ customer data to use in marketing personalization programs.
What customers value: Data, Connections, and Work.