Bank of the West Gets Serious About Digital Engagement

 © Can Stock Photo Inc. / deandrobotIt’s become a truism that digital banking customers are your best customers, but Bank of the West and Fiserv have the data to back up that assumption — and to do something about it.

Digital banking features cost money — your vendor may charge a per-user fee to institute the latest “must-have” feature, and it adds up. Digital can also save money, by diverting costly service calls or teller transactions to a few clicks on an app.

Beyond that, the increased engagement of digital banking delivers revenue to banks in the form of new products and lower attrition, according to a whitepaper released this summer by Bank of the West and Fiserv. San Francisco-based Bank of the West is a subsidiary of BNP Paribas.

Approximately 412,000 Bank of the West customers participated in the study from August 2013 to August 2015. The study explored two questions:

  1. Does the increased customer engagement seen with digital customers translate into incremental value?
  2. Does digital customer value differ by customer segment or degree of digital engagement?

Based on the study results and the recency, frequency, and value of transactions, the customer base was segmented into three broad categories:

  • Minimally engaged (40%)
  • Moderately engaged (30%)
  • Highly engaged (30%)

The study concluded that “customers who enroll in digital banking result in higher value for the bank in terms of revenue, level of engagement, and loyalty.”

Digital Bank of the West customers increased incremental revenue at double the rate of nondigital customers — 10.7% vs. 4.5%.

Product adoption also increased at a far more rapid rate for the digital group — 58.4% vs. less than 1%. Digital customers also had a lower attrition rate than nondigital — 8.9% vs. 13.8%.

“This study validates long-held hypotheses around the value of digital,” said Jamie Armistead, Bank of the West executive vice president and head of digital channels. The higher revenue and lower attrition has been part of the bank’s standard analytics for some time, Armistead said, but what is new is the finer granularity around digital engagement.

The degree of digital engagement, in other words, is what informs the revenue and attrition, and the bank is preparing to take advantage of that. Armistead noted that the bank is preparing a “digital index” to track a user’s digital engagement.

For example, a customer may use mobile and online banking plus bill pay, but not RDC and other features. This customer would have a score of 3 out of a possible 8 or 10, Armistead said. Customers could be marked green (using all digital products); yellow (using some digital products); or red (using no digital products).

“Now that we’ve proven the hypothesis [about digital engagement meaning more revenue and lower attrition], we need more to get collectively on board to drive digital engagement,” Armistead said. “So we want to tell everyone, ‘Let’s talk about these services every time we have a chance.'”

To learn more about digital banking, join us at Bank Innovation Israel this November 1-3 in Tel Aviv. Learn more and register here.

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