As back-to-school season begins, a smart, but perhaps not financially savvy, group of first-time college students will be applying for credit and debit cards. Banks need to be prepared to hand-hold and educate this customer segment a little more than other segments. They also need to be prepared to communicate with them in a language and manner that they understand and respond best to.
First-time students will typically be of a generation that grew up on instant communication, on 140-character messages and on communications that do away with professional niceties such as "dear sir" and "yours sincerely." This market segment expects to be engaged with in a way that matches their mobile way of life.
The challenge for banks is to give this group access to financial products while at the same time informing and engaging them to help them manage their finances. A fast-growing software-services category that helps banks do this is known as engagement communications.
Engagement communications is the blending of advances in communications — such as voice messaging, short messaging service, e-mail, web portals — with a human touch. It involves creating timely and meaningful points of engagement with customers through digital, but personalized, communications.
Before engagement communications there was simple message notification — standard, impersonal voice mails or e-mails blasted out to consumers issuing orders or directives. Engagement communications however involves tailored, campaign-based outreach that fosters dialogue. While outgoing messages can be scaled to the thousands and hundreds of thousands, each is delivered and experienced in a tailored and personalized manner.
In the case of engaging students and intervening before they default on loans or become delinquent on their credit cards, engagement communications presents a compelling solution.
For example, SMS alerts direct to students' phones — reminding them of monthly payment dates, providing updates on balances, giving early warning when balances get high, or reminding about a late payment — create strong points of intervention that help modify financial behavior. By connecting with customers in their style and their lingua franca, you are more engaging and create a more productive dialogue.
"I gtg b4 it gets ne l8r" may be gobbledygook to most in financial services organizations, but it's the native language of this group of students (the translation is: "I have to go before it gets any later").
Here are some examples of how you might communicate more effectively with members of this segment by speaking their language:
• Dntbl8 w student loan 2moro — don't be late with your student loan payment tomorrow.
• Dnt 4get mnthly ccard pymnt — don't forget your monthly credit card payment.
• Pls call ur bank ASYGT — please call the bank and soon as you receive this message.
• WOOt ur pymnt all up 2d8 — congratulations! All your payments are up to date.
• CTO [URL with offer from bank] — check this out [linking to a URL with a bank promotion].
• If u r hvg $ P call us 4a 121 — if you are having financial problems, please call us for a personal discussion.
While texting and SMS messaging may not appear serious or formal, there is a very serious side to using this form of engagement. In early 2008, only 15% of freshmen had a zero balance — a dramatic shift from 69% in 2004. In April 2008 60% of undergrads experienced surprise at how high their balance had reached, and 40% said they had charged items knowing they didn't have the money to pay the bill.
Only 17% of students said they regularly paid off all cards each month, while 82% carried balances and thus incurred finance charges each month. Instant updates and early engagement play a critical role in helping customers, particularly new, young customers, in managing their finances and in creating positive financial and payment behaviors.