Digital Approaches to Differentiation

By Robb Gaynor

Marketers know that it’s not enough to simply be better. Sad as it is, those with truly better products don’t always win. In fact, the marginal advances companies make seeking to become “the best” usually create additional costs that make it difficult to do business profitably. Unless they also differentiate.

Bank products and services are highly commoditized.

Banks face an ongoing struggle to identify what they can offer that’s different from their competitors. Cell providers face a similar challenge. They are also commoditized, constantly striving to appear different from one another. Bundled pricing, phone upgrade packages, rollover minutes—these all began as attempts to be different. And they illustrate how hard it is to sustain differentiation.

In the past two to three years, banks have used mobile banking as a way to differentiate. Some have even launched innovative services within mobile offerings, such as debit card on/off switches and photo bill pay.

But that hasn’t kept them different for long.

As of June 2016, more than 80% of banks between $50 million and $15 billion in assets had a mobile banking app in the App Store. And, they basically all do the same thing. But the news is not all bad.

In the past two years, approximately 15% of the mobile banking apps in the App Store have switched from one software vendor to another. That is a high number of banks switching providers—and it’s driven by the desire to be different.

Initially, many banks published really basic mobile apps that tended to all look the same. That’s because the apps were provided by large software companies that cranked out a commodity product to get as many banks live as possible. These banks now want their mobile offerings to to look different, and to have unique features. In other words, now that first-gen mobile banking has become commoditized, everyone is now seeking differentiation.

So what can make you different?

Instead of scrambling for the next technological bandwagon to jump on, think about novel ways to use the technology. Consider the many banks that have started participating in Apple Pay or one of the other “Pays.” That approach might work, but unfortunately, so far it has shown slightly lackluster results. And, given the penetration of the “Pays,” it’s no longer possible to be first and different here. But the technology does present an opportunity to get creative with different ways of using a mobile wallet.

Rather than focusing on helping consumers pay at the point-of-sale, for example, why not help the business customer? After all, the most successful mobile wallet is Starbucks’ mobile wallet app.

What if a bank could help its local business customers publish a mobile wallet app in the App Store?

One already has. Redding Bank of Commerce in the Central Valley of California has helped one of its business customers publish its own mobile wallet. This business manages dozens of homeowners associations and has a lock box challenge, in that it receives too many physical checks each month. The bank determined that if the members of the HOAs could use an app to make those payments, everyone would save time and money and the consumer would get a cool app. Redding Bank of Commerce is turning its local businesses into a Starbucks look-alike with its own own mobile wallet.

This is the essence of differentiation. While most banks prioritize strategies to help their retail customers, one bank’s decision to focus on business customers creates instant differentiation. A highly commoditized service like business deposit and loans is now very different. What other banks are helping local businesses publish apps? None. Redding Bank now has a serious differentiator.

Is it sustainable? It’s hard to say.

But for now, when Redding Bank goes out to sell to a local business against both national money center banks and local competitors, they demonstrate that they are highly innovative. Simple. Will it work? It may be that the stand-alone single business model of a mobile wallet will be obsolete once the payment infrastructure catches up in the next year or two and the “Pays” become more viable. But for now, this bank is significantly different. It took a well-understood concept, stood it on it’s head, and gained differentiation.

There are countless other examples of banks using their digital offerings to stand out.

For instance, consider a bank’s radical overhaul to its Internet Banking (IB) site to make it look modern. The reality is that IB user interfaces are over a decade old, and are truly tired. Why not do what Southwest and Amazon have done and make the website project the simple, graceful experience of a mobile device? It can be done. Internet banking is really cluttered (and just simply awful). Somerset Trust in Pennslyvainia has taken this approach. Its new Internet banking site looks exactly like its mobile app. Mobile on the desktop, now that is different too. While others are pursuing an Internet design with elements of the mobile design, commonly referred to as “mobile-first” design, Somerset is going after “mobile-only.” Everything looks like mobile. This simple design trick brings them differentiation.

Examples abound—banks can be different. Using cool new technologies, they can take a slight left turn away from their competitors. They can use the tried-and-true marketing techniques that other industries leverage so well to seek differentiation in a highly commoditized market. The community banks that figure this out will become the leaders in their local markets.

It is an exciting time to be a bank marketer or executive, as the old idea of following the crowd for safety in numbers is gone. Now, everyone seeks to please their customers—both consumers and businesses—with services that help them differentiate too. And, keep in mind, when Redding Bank published that app for its business customer, that local business became the first in the market to have an app and to launch an exciting digital strategy to grow the business. Lesson learned.

Robb Gaynor is chief product officer of Malauzai, a developer of mobile and Internet banking solutions for community financial institutions. Email: robb.gaynor@malauzai.com.

Online training in digital, mobile and social media from ABA.

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