The Attention Economy
Almost 20 years ago, Davenport and Beck1 pointed out that the scarcest resource in today’s market is not ideas or talent, it’s the customer’s attention. ‘Fail to attract and retain your customer’s attention and you fall hopelessly behind’, was their message.
The message seems to have sunk in at Banks. Open Banking has led to a flurry of vendors that either attempt to disrupt traditional banking and steal customers or provide technology that allows existing banks to compete for this ‘attention currency’.
Open Banking provides (or it will in the future in Australia) secure ways for customers or trusted agents to access their banking data. This is to allow the development of tools that help customers in a variety of ways; we look at several examples below. These tools, typically mobile apps, steal the customer’s attention, as they are innovative, solve problems with the old ways of managing money and are frictionless to use. When coupled with a new start-up bank which has no legacy systems to manage, they are a direct threat to the established banks.
The banks are responding in kind, they are aggressively adding functionality to their online banking apps in an attempt to become “pull” destinations for their customers - to give them reasons to visit the app that are not just transactional. The battle for customer attention and engagement is well and truly on. As customers we are excited by the wealth of creativity being demonstrated by these disruptors and the benefits they give us in exchange for our attention.
Developers have not been idly waiting for Open Banking availability before investing, far from it. ‘Screen Scraping’ has allowed third party service providers to gain access to banking data without the APIs of Open Banking. Customers provide their Identification and passwords and the apps emulate the customer to gather the required data. This has enabled ‘middleware’ that simplifies the task for developers of a diverse range of products. Plaid is probably the most famous as they were recently acquired by Visa for US$5.3 billion.
The future is not in Screen Scraping however, with the European regulators making it against the rules to access banking data in this way with the customer not present after 14 March 2020 under the Strong Customer Authentication regulations.
So what attention competition are the banks facing?
Some interesting examples as illustrations;
Trim monitors your spending and matches you with merchant offers that save you money – a common function in several of these apps. Advertisers are particularly interested in channels that have customer’s attention.
Dave is described as “…an AI dressed up in a bear suit saving you from the evils of expensive overdraft fees.” by TechCrunch. Dave offers short term loans, based on your transaction history without overdraft fees or pay day lending interest rates.
The start-up bank Revolut offers to provide its budgeting and saving functionality to all of a customer’s accounts, whether with them or competitor banks.
What are the established banks doing in reply?
They have the distinct advantage of already having access to customer data, albeit often through inflexible legacy systems. Many of them are responding in kind…
There are platform suppliers assisting the banks as they strive to give customers reason to pay attention to them. Money Thor provides customers with budgeting flexibility, ‘nudges’ to promote good financial habits and a personalisation capability that allows the bank to present relevant offers based on the merchants/categories the customer has recently shopped in. They are being implemented in a few Australian and Kiwi banks currently so we can expect more merchant funded offers appearing in our banking apps.
Flybits goes a little further, allowing its banking customers to incorporate external data into the app to provide additional value (and gain more attention). Customers of TD Bank in Toronto for example, can be told their commuter train is delayed by their banking app – the goal is to be the customers’ digital concierge. The Velocity Frequent Flyer program has an API that would allow a bank to display point balances and flight times in their app, perhaps we will start to see similar offerings for Australian customers?
The Australian banks are increasingly active in this area
Some examples from CBA which allows customers to budget by spending category, prompts to remind customers of up-coming bills and helps pro-actively manage saving and spending; others banks may offer similar functionality;.
And a brand new credit card reward scheme with generous cashback (by Australian standards).
Westpac recently trialled an initiative called ‘Priority You’ in one state, with rewards determined by the level of engagement customers have with the bank, not just their spending.
We must admit to feeling good about the banks looking to reward customers for more than credit card spending; much of this functionality assists customers in generally managing their money better.
So, lots of activity and investment in becoming the app of first choice in the financial life of customers.
What’s at stake?
The winners will get the chance to build trust with their customers, increase the depth of the relationship, leading to more loyalty customers.
Also catering to a wider view of the customer’s life and interests could remove the need for an Open Banking disrupter to sit between the bank and the customer to provide innovative life-services…
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- Davenport and Beck. The Attention Economy