Financial Access and Financial Inclusion: What you don't know about your customers and how to identify and remove invisible barriers

Alex Carriles, Chief Digital Officer and Executive Vice President, Simmons Bank

Transcription:

Alex Carriles: (00:08)
Right. So, hello everyone. My name is Alex Carriles. It's a pleasure being with you today. And I guess as you might have heard already 127 times, this in the last two days, it's really nice to see a live audience, particularly knowing that nobody's going to stand up and realize that they're in their underwear. So it's great life audience, fully dressed. Fantastic. So wanna talk to you today about knowing your customers and how to remove some invisible barriers that we might be creating when trying to work with our customers or potential customers. I'm the Chief Digital Officer at Simmons Bank. We're a $24 billion bank located in Arkansas. We operate in six states. We've been named, on the list of Forbes, best banks in America and world best banks in 2020, 2021 and 2022. So really excited to be working for Simmons.

Alex Carriles: (01:18)
I joined Simmons team in July of 2019. So I've been there a little less than three years. So it's been a really fun ride. So when I first joined the bank, what I needed to know was who are our customers? I came from BBVA, which was an international bank at millions of customers around the world at a very different, I would say customer base. So I need to understand exactly what our customers look like in order to serve them better and to be able to address them as they should. So in order to do that, start doing some research with my team. One of the things that really caught our attention in the beginning was something like this that was reported by Chris Nichols in countrying the aging community bank, customer base. You can see, it looks like the U.S median age in the country versus the average age of a community bank customer starts growing apart. So the community bank customers are aging in relation to the general population. After seeing this, we wanted to get little bit more detail and go more granular. So we look at what is the us general population? Uh, what does it look like? And it look like this, no surprises, but then we put on top of this graphic, the age distribution of community banks, and we got this.

Alex Carriles: (03:26)
Now, this is like the old jokes, good news and bad news. Good news. If you look at the right side of the graphic, we can definitely say bank with a community bank and you will live longer. Right? Said we have more, if you look at the age solution. Yeah. If you will end up living longer, if you bank with a community bank, the problem is that we do not have in general, we are not addressing that segment of the population, Gen Z and Millennials. And if you look Gen Z, the, the gap with Gen Z is even higher or greater than that, of the millennials. So what would you do felt like, okay, how are we going to fill that gap? How are we going to fill that void? What do we need to do? Well, let's see who, who we want to bring to the bank.

Alex Carriles: (04:35)
So meet Emily, our Gen Zer. So I am not going to go into all of the details, but we did a full research of what this new customer knew to the bank looked like and what we needed to do in order to make it attractive for them to bank with Siemens. And a few things really caught our attention among others. Mobile is their primary channel. So they don't go to a branch. They barely use online. You'll almost never see agency in front of a desktop or a laptop, computer laptop, maybe desktop, my God, they gonna get caught dead in front of the desktop computer to have a mobile phone that they use it pretty much for everything. Even occasionally to do voice calls, but it worked for everything else. No, just fine. They had also difficulty opening and funding their first account. And this one is really interesting. Looking at some articles from multiple sources. We found that the vast majority of people under 23 abandoned an account opening process when they got to the funding stage. Why? You guys know why?

Alex Carriles: (06:24)
I'm sorry...

Alex Carriles: (06:26)
No, but that's a good answer, but that was not it. Yes, they, if they have paid for money, that would a possibility. But why, if I'm opening an account online, I suddenly basically shut down and say, I'm not going to continue with this process. They just abandon the application.

Alex Carriles: (06:56)
Some you have to go and put in the brick and mortar. And that by the way will be an absolute horrific experience for Gen Zer. Completely agree with you. Cuz what is the other option that you have to fund an account? ACH you transfer, use your credit or debit card. Okay.I'm going to leave it at that because I'm going to come back to that thought a little later and that's going to be get interesting in a few moments, they also have self learning financial skills. So they know something, but most importantly, they think they know something. So what they understand or the way they understand things is going to be more important than the way things really are. So how we talk to this generation is going to be really important, why they wouldn't open an account because they don't want to be taking advantage of by hidden fees.

Alex Carriles: (08:09)
And if the information on products and services is not available on, on the channel that they're using in this case, mobile, most likely they will basically not open an account with us. Okay. So we decided that we're going to focus on Gen Z. Why Gen Z? I mean, besides, because that's the gap that we have, does it make it a valuable customer? Does it make it for an interesting customer? Well, if you look at the annual debit card transactions by customer H in this graphic, you will see that more than half of their lifetime transactions happen happened before they are 40. So if our average customer is coming into the bank at the age of 40 or older, we've already lost half of the lifetime value that they could add to the bank via interchange. And that is significant.

Alex Carriles: (09:17)
So we have two things here. First, the younger, those customers come to the bank, you'll be able to benefit from, that interchange income, but also nearly 75% of gen Zs. And millennials would consider getting all of their financial services from a single bank. So if we get there first and they open their first account with us, the likelihood of having a lifetime customer, it's pretty high, especially if we give them what they're looking after, if we keep them happy. So remember one of the key items, they like to do things in mobile. So we went mobile first. No, we went beyond that. We went mobile only like what you out of your mind? Well, maybe what we did was on our website. If you go to our website and try to open an account, on your desktop computer, we will flat out tell you, no, you want to open it, get your phone, get the camera, scan the QR code and open it.

Alex Carriles: (10:40)
Why? Because we know that's the best experience that we can give you. And we're gonna tell you why number two. Well, isn't that too extreme two years ago, I would never have dreamt of doing anything like this will be unthinkable today. You go to a cracker barrel in parts of rural Tennessee, and then you'll see grandma getting her mobile phone out and scanning the QR code on the table to order, to get the menu. And even now play their games that they used to have, you know, with a little wooden sticks. Now they all have a virtual version. And everybody now is used to using those secure codes. So very natural, very normal. You know, how many people have complained about not being able to open an account online zero? Like I think nobody, not by phone, not by email, nobody. Why, if you're opening an account online and you're going to do something digitally, most likely you will do it on your phone once you go to that webpage actually. So if you're navigating, Siemens, one.com on your mobile device, you will see the open button. So you will be able to open it. And why do we do that? Because there are several things that we can do that we couldn't do on any other channel. For example, who likes, please raise your hand. If you like filling out forms on your mobile phone's keyboard.

Alex Carriles: (12:41)
Hey, well, that's perfect. Glad to see that I'm in a completely normal group, nobody obsess with wanting to do something weird with their phone. So yes, nobody likes doing that. So why do we make them use a mobile device? Because we can leverage, for example, the camera and scan the back of your driver's license and then get all of that data in a digital format on from the QR code. So now I have your name, your address, date of birth, your ID number, expiration date, basically got everything. All you need to type is your social security number, your phone number and your email address. You're ready to go. Those three things are now. We got everything. And then what do we do after you enter that information? You accept the terms and conditions and you are done. Maybe I'm missing a step. You guys think I'm missing a step?

Alex Carriles: (13:52)
Well, going back at that step a little later. So gen Z again, we mentioned that 98% of gen Z on a smartphone, 33% of gen Z and young millennials don't have enough credit history to be fully identifiable by outof wallet questions. Therefore, by having the driver's license serve as the method of, uh, identification, we eliminate having to ask those pesky out of wallet questions, and we know that your driver's license is real because we connect to the DMV that issued that driver's license. But what if somebody found a driver's license on the sidewalk and tried to open an account, please raise your hand. If you have found a driver's license on the sidewalk in last year. Yeah. That's what I thought, but that's the excuse that I get all the time. Like, but what if I find one? Well, the worst case scenario is that you might actually end up opening an account for somebody, but you won't be able to change any of the information. So what good will it, do to a foster to open such an account and two out of three gen Z account applications fail at funding. Why? When this is their first account, if you are opening an account online, and this is your first account, pretty much none of the top 20 banks in this country will let you open an account.

Alex Carriles: (15:34)
Why? Because you are forced to fund it with a transfer, an ACH, a credit card or a debit card. What are you telling those young customers? I don't know you and I don't care that you don't have an account. We've always done it like this. We're not going to change for you. That's the message what we wanted to do. I mean, I remember when my daughter got her first paycheck from a summer job, like, what do I do with this? Like open an account. And the reality was that she couldn't open an account because she did it to have another account to fund it. So what do you do? Well, as a good parent, you'll might enter your credentials and use that to connect your account, to help her fund it. But now it's getting even worse because now you have solutions. For example, like plaid, which is great, don't get me wrong. It's fantastic. But now it's also validating that the name is the same and that is the same person. So if the parent is trying to help their children to fund their account, by linking their, the parents' accounts, it's not gonna work. So it's getting even worse for those young customers. So what we did, number three, we completely eliminated the funding stage. In our account. Opening process said, you enter your information by scanning your driver's license. You accept the terms and conditions and voila. Congratulations here to your account. Start using it.

Alex Carriles: (17:34)
This dries, most of the traditional bankers crazy, oh my God, you are not asking for funding. Who, what is gonna happen? An account with no money. It's like, guys, why do we need to put money on day money? Why don't you expect the customer to know how to put money on day two, day three and for the rest of their lives, you expect the initial funding to last a lifetime? No! Then that means that there are ways to put money after today. So what do you need to do it today? So you want to open an account? Here's your account. And now you have the freedom to do whatever you want with that account. You can use cash and go to an ATM or go to a branch. You can have a Venmo account and transfer from Venmo directly to your account, get Zell from a friend or family, send you money.

Alex Carriles: (18:41)
It goes directly to your account. You receive your paycheck, take a picture, mobile deposit, you funded your account, print the direct deposit, form, give it to your employer. And now you have direct deposit. And by the way, we also give those customer or customers from this product, the early access to their payroll. Cuz we know that with this product, unlike every other product that we had at the bank, every other checking solution, this one has the highest penetration of direct deposit, cuz that's a great way to fund your new account.

Alex Carriles: (19:23)
And we want to also talk to the customer in their own language. I mean, we didn't want to use kind of stuffy language and jargon with our younger customers. So we have fun things like, help keep our lawyers happy and agree to these terms. Honestly, I can't believe that that made it to compliance and legal and they approved that. I like, that's okay. It's like, okay, good. So have things like, Hey let's shake hands. Wasn't that easy and have an emoji. How many emojis have you seen on other banking applications? I mean really trying to connect with these customers. So what happened? What was the end of the story we tried to learn about the customer, tried to see what were their needs, try to address those needs. Try to address the friction points that they had and what happened. This is what our age distribution and this data is real looked at the applicants that we were getting online for our customers.

Alex Carriles: (20:43)
After we launched coin, it looked like this the following week, literally this is a week before, to a week after median age, it was 40, went down to 31, gen Z, under 29, got pretty much less than 20%. Look at the age distribution. The vast majority are now gen Z and millennials. And again, this is not the overall population. This is a snapshot of a week of applications the week before snapshot of a week of applications the week after. So we think that this solution really hidden the right note with these customers. And hopefully this will help us drive adoption in this age group and help, basically normalize the age distribution in our bank. Otherwise 10 years from now, the number one cause of attrition is going to be deaf and we don't want to run out of customers. We don't want to, basically not be there to serve their needs. And I think that with this, we'll be able to address them. And I wanted to leave enough time for questions because I know that this there's some, items in the presentation that made a little controversial. So I'll be more than happy to answer any questions you may have. Yes.

Alex Carriles: (22:40)
Sean, I'm just curious, go back to that last, did you do any sort of marketing or educating the public about this or is that how many accounts are being turned away? That, snapshot right there

Alex Carriles: (22:56)
That is basically people that were not, I think that number one turned away, run away. At least two thirds of all applicants was, in that age group weren't able to apply because of the funding. Once we removed the funding stage, now they were able to apply just, that was like one of the biggest pieces, the biggest differentiators between any traditional account and what we had here. Just eliminating that funding stage. Oh, and by the way, you, I don't know if anybody's wondering how many accounts remain unfunded.

Alex Carriles: (23:38)
We give our customers three pay periods. So that's 45 days to fund their account at day. We keep sending him in messages. Hey Lucy, thank you for banking with Siemens. Do you know that you can fund your account by using mobile deposit? Do you know that you can transfer money with Zell? Do you know that you can use Venmo? You can, you can use whatever you like. So to keep them, from fulfilling that account at day 45, you didn't fund your account. We give you enough time to fund it. You didn't, that means that you weren't really going to use it. That number is 1.02%. So we recover 66. We lost 1.02. I think it was a good trade off. Any other question, comments? This is your opportunity to ask, what you wanted to know when we're afraid to ask about gen Z and under checking accounts. Yes,

Speaker 3: (24:45)
Because of the recording, we're asking, use the microphone questions.

Speaker 4: (24:50)
Thanks. Any difference in attrition on this demographic versus the other ones?

Alex Carriles: (24:55)
Yes. Great question. What we saw and again is a newer product we've added for about a year. Looking at, the numbers from a similar product that we had before with different demographic. I would say it's not exact numbers, but we'll literally just review this about two weeks ago. I would say that this is about 25% of the attrition that we had on, on our other accounts. So 75% better than other accounts. And it's the other funny thing is that the average balances are higher, but gen Zs have no money. Well go figure they're getting it somehow because these accounts have a higher balance than our other traditional accounts, which is also a really nice surprise higher adoption also on a direct deposit, which is also a great way to show their stability. Yes.

Speaker 5: (26:10)
Okay. I've got a couple questions. The first one is, when you pitch this idea to your leadership at the bank, how did they react? And you know, how did you get this through? And then the second question is, you know, standing up your mobile app, how long did that take? Were you able to do it quickly? Did you have to, you know, buy new technology and buy new systems? Was this a, you know, two year project, six month project, three month project?

Alex Carriles: (26:43)
Great. Thank you. I would say that first time I pitched this thing was with my previous employer, told them we wanted to do this. And basically the reaction was, are you out of your mind, why do you want to open accounts with no money and the classic nobody is going to fund it? Like, yes, because I think that everybody loves wasting time opening an account if they're never going to use it because it's so fun to go and open accounts online, right? Like why, why would you do that if you didn't intend to fund it, but Hey, it was a pretty, arduous, discussion. So I thought when I joined Siemens, first thing I said was when we launched, our next product, one of the things that we, I mean, and this is even before doing the full study, we already thought we need to test this out and we need to make sure that this is something that really adds value.

Alex Carriles: (27:52)
So we saw when we saw the opportunity of doing it, like we need to bring this up and I have to admit that I presented this to our chairman and presented to the board. They go like, oh, okay. You think it's good? Like, I think it's going to be great. Okay. Let's do it like, alright, I think it was maybe the newness of the whole thing that felt like, Hey, maybe I'll fail and we can get rid of him faster, but I'm just kidding. Fortunately, it worked out really well. And the second part was, oh, the technology we worked with, one of our partners that also happens to be the provider of our core banking solution with Jack Henry. And they had an account opening process.

Alex Carriles: (28:42)
We didn't like it as it was the way it was when we looked at it the first time. So we worked with them to really modify Polish it, customize it to exactly what we wanted and change the flows, remove steps. And we were able to customize it to basically exactly what we wanted. And the whole process took, I would say from starting the project to launching it about six months. And we, when we launched it, we did it, we were extremely cautious. We wanted to control the release and the volume that we were putting through because you only get one chance to get it right. If you fail in terms of risk, fraud or compliance, basically that's the case of death for your project. So we wanted to get it right. Slow into the, the launch. And once we had all of the pieces in place and we knew that it was dialed in, then we really started hitting our marketing, campaigns to drive customers. Anything else? I think we have like 16 seconds. Right. All right. Well thank you so much and enjoy the rest of your week.