The landscape in which banks operate and the ways customers engage with banking services have experienced profound and sweeping changes. As a result, the approaches used for customer acquisition in banking must undergo a parallel evolution.
Traditionally, customers decided about banks based on interest rates and the range of services offered. However, today’s customers expect more. They demand not only competitive rates and diverse services but also robust customer support, engaging experiences, and personalised offers that cater to their individual needs.
The scope of customer acquisition in banking extends well beyond merely opening new accounts. It now encompasses attracting individuals to avail of various services such as loans and credit cards. Given the many choices available to customers, persuading them to commit to a specific service is a significant challenge.
To remain relevant in this shifting landscape, banks are employing a diverse array of strategies to attract new customers on a daily basis. This heightened effort, however, is leading to increased costs associated with Customer Acquisition (CAC).
This article explores the effective ways in which banks can mitigate the escalating expenses linked to customer acquisition in banking while staying competitive and responsive to changing customer expectations.
What is Customer Acquisition Cost in Banking?
CAC, short for Customer Acquisition Cost, represents the money a business invests to gain a new customer. For banks and credit unions, this means getting new clients interested in their services by showcasing their advantages over other financial institutions. However, financial service providers must balance competitive products with an easy customer experience. CAC includes the resources and time spent on getting new customers, like marketing campaigns, customer interactions, and promotions.
What Are Some Examples of Customer Acquisition Costs in Banking?
Customers want products and digital banking convenience. To successfully acquire them, banks and credit unions use various methods to highlight their benefits. Here are some examples of costs for customer acquisition in banking:
- Types of ads
- Displays in their physical locations
- Promotions at the point of purchase
- Social media campaigns for digital banking
- Direct mail and email campaigns
- Website costs for features that help get customers on board, like digital onboarding processes
Three Strategies for Lowering Customer Acquisition Costs in Banking
Here are three straightforward measures to refine customer acquisition strategies and potentially decrease a bank’s CAC:
1. Minimise Friction
Streamline customer experiences by considering methods to save their time and effort. Identify points of friction and analyse where customers tend to abandon their journey. The goal is to reduce the steps required to achieve an objective.
One of the challenges banks face is customers dropping out during the final stages of engagement. A survey revealed that 40% of consumers abandon the onboarding process with a bank. The primary reasons for this include a lengthy process, time-consuming authentication, and complexities in form filling.
To combat this issue (thus potentially lowering the bank’s CAC), banks can:
- Offer digital processes, enabling customers to apply online and access services from their own environment.
- Utilise live chats for customer engagement and employ conversational formats for form completion, veering away from traditionally extensive forms.
- Communicate in simple, everyday language to ensure clarity and comprehension, avoiding excessive use of jargon.
- Pre-fill customer details, especially when upselling to existing customers with available information.
- Automate KYC and ID verification by integrating facial recognition and fingerprint technology for swift identity confirmation.
- Leverage automation tools such as conversational and generative AI to expedite processes and enhance efficiency for customers. According to Juniper Research, the adoption of AI-powered solutions within the banking sector is projected to generate cost savings exceeding $7.3 billion by this year.
Suggested Reading: 10 Conversational AI Use Cases in Banking to Streamline Operations
2. Incorporate Personalisation
Tailoring sales pitches with a personalised touch increases the likelihood of closing deals. Personalising the customer’s interaction with the bank not only resonates positively but also showcases a deep understanding of their needs, fostering leads and stronger relationships.
Methods to introduce personalisation into customer acquisition strategies for potential CAC reduction include:
- Addressing customers by their names, imbuing a human touch in conversations.
- Adopting a conversational tone rather than relying on complex “bank language” enhances understanding and adoption of offers.
- Listening to customer’s needs and recommending services aligned with their requirements, establishing trust and long-term relationships.
- Segregating customers based on demographics and delivering customised messages and advertisements.
- Optimising Generative AI to add more context over every customer query and have automated conversations sound more human!
3. Stay Present
Prospective customers require nurturing during the pre-sale phase; they seek information about the company and its services. One effective approach is to be available to answer their inquiries anytime, anywhere.
Though customers currently communicate with banks via email or phone calls, the landscape is evolving. Millennials and Gen Z prefer messaging over traditional phone calls. Banks that bridge this communication gap and integrate new messaging channels can potentially reduce CAC.
Actions to enhance customer acquisition strategies encompass:
- Maintaining a robust social media presence, allowing leads to engage through their preferred channels.
- Embracing the rise of banking chatbots, amalgamating messaging with automation to scale pre-and post-sale support.
- Supporting customer queries across various channels, including integrating live chat with social media and platforms like WhatsApp.
Elevating Customer Experience to Reduce Customer Acquisition Costs in Banking
Customers remember how you make them feel. By minimising friction, personalising experiences, and offering continual presence, banks can create favourable impressions and cultivate enduring relationships whilst also lowering their costs.
Happy customers are loyal customers as they advocate for your business through word-of-mouth. In order to get more happy customers and elevate your customer experiences, choose Verloop.io’s AI powered automation solutions for your business.
Our support solutions will not only help you reduce the CAC involved but also increase the customer’s lifetime value. (CLV)
Schedule a demo with us today and get started!