How to Lose a Customer with 1 Email
Using BaaS technology to expand your ability to attract more customers & deposits is a great goal. But do you also use technology to make your differentiation digital?
Photo by Dan Mall on Unsplash
A Meat, Chicken & Fish Story
For the last year or so, I’ve purchased meat and fish from a specialty shop that sells meat, poultry, fish of all kinds. – from steak to alligator. Yes, a butcher shop but bit different. No butcher on-site and all of the food is frozen. High quality, a bit more expensive but I could taste the difference. More importantly, my son, a chef, preferred the meat and started making requests for meat I couldn’t get at my other grocery haunts. Duck, bison, venison. Maybe if I traveled to Reading Terminal Market in Center City or to the Italian Market in South Philadelphia – but both markets were out of my way. Since this store was close to a large grocery store chain I went to, I added it to my weekly grocery shopping. I talked with the staff who were helpful & knowledgeable about various cuts of meat.
Last week, I got an email from the company that owns the chain that they were closing my store in 4 days, but I was welcome to use other stores that were, in fact, much farther away or buy my food online. I was surprised as I had just been to the store a day or two before and there wasn’t a single sign about the impending closing.
I sent off an email to a contact@ account expressing my sorrow about the store and that I would not be able to continue to shop there because the other stores “near me” were at least 20 minutes farther from my house. I was stunned when a customer service person replied. I could become a member for a monthly fee and shop online for the meats and fish I liked to buy in the store.
Let’s forget for a minute that shopping for food in person can be very different than shopping online. For me, at least, food shopping is a tactile and olfactory experience. How does the avocado look? Is there a lot of fat on this piece of steak? What does the cheese smell like?
After a few minutes thought, I started to laugh. I am sure the store closing was a good business decision for this company. To be honest, I was often the only shopper in the store. And, I’m sure the company via this customer service person thought they was offering me a cool digital way to do the same thing I was doing before: buying steak, chicken thighs and salmon filets.
But what the company was doing was changing their competition. Before this email, this store was the only one I considered for the regular meat and fish as well as the more exotic (to me) products my son wanted to try (his duck pate is very good). The Italian Market in South Philly or Reading Terminal Market in Center City or even Northeast Philly were too far for me to go for weekly shopping trips.
Now this store is in competition with all the other digital providers of the same products who want my business. I’ll be comparing on products, of course, but also, maybe primarily, on price. I’d be paying for the opportunity to shop online.
Does Banking as a Service Encourage Commodification of Your Services?
Of course, I’ve been reading Jason Mikula’s book Banking as a Service (which The Fintech Book Club will be discussing on Friday January 17th). One of the things he writes about is community banks in the US jumping on the BaaS bandwagon to increase their deposits and the consequences of using BaaS to do that. With this customer service email reply, I realized that the same thing happens to community banks (and regional banks) as they use BaaS to “go national.” This nationwide expansion also opens them up to competition with other national banks like Chase, Bank of America, Well Fargo and other community banks around the country.
True, community banks compete with these national banks on the ground too, but the differentiation matters more on the ground. A community bank has a presence in customers’ neighborhoods. They fund small businesses and construction projects in the customers’ neighborhood. They host workshops on financial literacy and advising. They sponsor neighborhood events. This part of the community bank mission & differentiation is lost in a “digital only” relationship. More importantly, this differentiation probably matters much less to new customers who live 750, 1000 miles away from the bank’s headquarters than the savings, car loan, mortgage or CD rate the bank offers. How does the rate of a product I want compare with other banks? By using BaaS to attract more deposits, a bank offers only commodities services.
In the same way, this store brand has lost its differentiation with me. By closing this one store, this company changed the nature of its offerings and competition. The store is no longer competing just with Reading Terminal or the Italian Market but with every digital meat and fish provider that any search engine or GenAI can bring up.
Since I’m not keen to shop online for chicken thighs, I’m seriously thinking about upending my entire grocery routine to shop at Reading Terminal. After all, I can get all my groceries in one place as well as a good coffee, pretzel and cheesesteak as well as fresh meat, poultry and fish. This might be a Philly thing.
Takeaways
Financial institutions
When you go “digital only” your financial institution is changing its competitive landscape. This should not be news to you. When digital is the only way your customers can engage with your products and services, your FI is competing not only with larger national financial institutions but also with all the other FIs local (and otherwise) to your prospective customers.
In this new competitive landscape, your bank can risk becoming just another commodity provider of services.
“Digital” does not have to mean diluting your brand. Digital technologies are tools. How can you use BaaS & other tools to maintain or even highlight your FI’s mission & differentiation in every channel and with every new fintech capability you deliver to your customers – wherever they are?
Providers:
Can your platforms, tools, software meet the challenge for “digital only” banking?
Can they enable financial institutions to take their missions digital? To better help them create the processes, products and services that reflect their mission rather than just another bank offering the same car loan, BNPL, mortgages?
Who writes PivotAssets?
I’m an independent analyst, strategic advisor & consultant (& a former Gartner analyst). I’ve worked in and covered the banking industry for over 2 decades.
My aim is not to confirm what you know (and you are plenty smart!) but to challenge you & give you a fresh perspective & analysis on the transformation that is —and isn’t happening - in the industry.
How can I help you?
Want more insights and analysis on small innovations, ghosting customers, hidden tribes and leveraging your bank’s legacy? Need help positioning your digital banking solution or fintech to meet the demands of today’s banking environment? I have my own firm PivotAssets.
I can analyze your GTM strategy or sales or VC presentation, help you prepare for your first vendor briefing or your first funding pitch meeting. I also write piece of thought leadership relevant to your business, solutions or technology. I also organize and moderate webinars series, podcast or panel.
Contact me at stessa@pivotassets.co or via LinkedIn.
I’m also available for inquiry and strategy sessions via Third Eye Advisory.
Me, Elsewhere
Did you miss the last Fintech Book Club? We discussed David Birch & Victoria Richardson’s Money in the Metaverse.
I’m an expert advisor at Third Eye Advisory.
I spoke with Theodora Lau and Barb Maclean on their podcast One Vision about smart banking & hidden tribes.