The profound influence of technology on society has given way to consumers who are accustomed to having everything literally at their disposal. In the financial services world, where technology is spitting out new market opportunities faster than First Union CEO Edward Crutchfield can acquire banks, consumers and financial services companies-each wedded to technology-are perfectly suited, or so it seems.
Not quite, says Hewlett-Packard general manager Mario Fontana, who argues that financial institutions are not responding to what he feels is a looming sea change in consumer behavior. "We're living in a society where people have everything, and, therefore, consume everything they don't really need," he says. "They want options."
The "multi-optional" society that Fontana talks about is the product of waning quality of life. He believes that younger consumers-children of Baby Boomers, specifically-will abandon what he terms the superficial aspects of society, returning to a much richer quality of life. These new motivations will have a significant impact on how a person manages his or her financial affairs. "People are looking for contact with meaning," he says.
It is these consumers that he contends are looking for a multi-optional financial world, one where customers are not serviced based on their assets, but on their individual preferences and behavior patterns. Fontana's thinking: Servicing customers this way will lead to deeper, more profitable relationships.
The implications of such change in consumer behavior suggests that financial institutions could profit greatly by offering three interconnected layers of customer service: highly personalized, one-to-one relationship service; performance-oriented service; and self-service, meant for "deal hounds," according to Fontana.
In a perfect, multi-optional world, financial institutions should design the first layer of service for customers who command a high degree of personalized, one-to-one service from their institution. The second layer of service is structured around those customers who demand convenience, seek out strong brand and desire an effective, hands-off relationship that is largely sustained electronically. The third layer is intended to fulfill the needs of the deal hounds, those Internet-centric customers who are not driven by relationship or brand, but lower cost.
And while most financial institutions will argue that they already offer such segmented service, Fontana says that their approach is flawed. "You can't be high-touch and Charles Schwab to the same person all at once. You will fail."
To be successful, financial institutions must adopt a business model that allows customers to participate in the layer that best suits their lifestyle. Pricing is critical; differentiation will come from services, and the focus should be on deepening the relationship through incentives and loyalty programs. "Look to retail for the success stories," he says.
Of the three interconnected layers, Fontana maintains that the second layer will be largest in terms of volume and revenue, followed by the first and third layers, respectively.
While Fontana sees promising opportunities for banks in the first and second layers, he says that the third layer of service will largely be provided by marketing companies and content aggregators. Early signs of this are evident in the market now, but Fontana contends that the pioneering efforts of companies like Intuit, for example, will be overshadowed at some point by larger information providers with extensive marketing skills.