Doug Brown:
It might not be obvious. That's why I think innovation and experimentation is really the key here. Bring people into the lab, let them bang on stuff, and do things and see what you learned that wasn't the hypothesis maybe you were after.
James Robert Lay:
Greetings and hello. I am James Robert Lay. Welcome to the 172nd episode of the Banking on Digital Growth podcast. Today's episode is part to the Exponential Insight series, and I'm excited to welcome Doug Brown to the show. Doug is the president of digital banking at NCR Corporation, and recently completed a study conducted with The Harris Poll that was framed around people's banking, relationships, and preferences. Welcome to the show, Doug.
Doug Brown:
Thanks for having me, James.
James Robert Lay:
Before we get into this conversation and the research that y'all conducted, I always like to start off on a positive note, what's good for you personally, professionally? It's your pick to get started.
Doug Brown:
Hey, I'm just really happy that I'm in tune with this younger Gen Z/millennial mix that we're going to talk about today, having two daughters that represent that age group. I think I understand some of it, some of which I don't. That's why we engage in research to unearth it. Let's share the findings today as you and I talk.
James Robert Lay:
Absolutely. That's one of the things that y'all did do over at NCR. You conducted some research with The Harris Poll framed around the relationship that people have with banking, their preferences. I'm curious, what led to this study in the first place? Why focus on this? Why now? Why is this important?
Doug Brown:
We really view it important because we want to know how people feel about their relationship with banks, credit unions, and then new alternatives, not just what they're doing, what's their sentiment about it? Where are the gaps? I think there's an emotional connection as well as physical happening. We wanted the research to go deep and understand the motivations and incentives and intentions.
James Robert Lay:
I like what you're covering, this idea of feelings and emotions, because I think it's one in the financial services space that we don't think about enough, and I understand why bankers financial brand leaders, credit union leaders, they're typically very smart, left-brain-driven people, but when we're talking about the emotive, we're talking about the right side of the brain here, people buy and they make decisions with their heart and then they justify some of that with their mind, but a lot of feelings and emotions goes into this. What are the things that you found in the study? 64% of millennial banking customers consider leaving their FI over the past year. Why is that?
Doug Brown:
The primary culprit is they find some alternative they think is better, so they're drifted away because something looks more intriguing and interesting, so they have a propensity to go look at other things, but when you get deeper into their and emotion, they would prefer to stay in the relationship that they know and trust like a bank and a credit union, but they will be tempted. That's where the challenge lies.
James Robert Lay:
Yeah, and when you look at this idea of temptation, what is tempting them away to stray, to maybe look at other alternatives? What's piquing their interest here?
Doug Brown:
Well, sometimes they can do something cooler or new, so they're interested in trying that and experimenting. I know some millennials like to go for some of the new products that are like a disposable debit card model and they can control how much they spend, so it's a forced budgeting paradigm to them. They like that. They think that's cool and different, as one example. Some people think, "I need to move money differently," so they'll try some apps that have that. Some might like to invest in crypto. There's a multiple things that are distracting and tempting, but then once they get into it, they find that it's not as easy to use, not all it was cracked up to be, or worse, they were influenced by maybe someone who's not that deeply advised on it, like their friends, and find out that wasn't the best path to take.
James Robert Lay:
Yes. The grass is not always greener on the other side and sometimes we have to learn through the school of hard knocks. I'm curious, if 64% of millennial banking customers are considering leaving over the past year, shiny object syndrome, we'll call it, what's the opportunity, or what's the opportunity for financial brands to optimize and maybe even transform operating models, business strategies to better serve younger generations of how they prefer to bank?
Doug Brown:
Yeah, I think it's about they need to unearth, what is the intrigue point? What's the attraction phenom? What is it? Then what can they do about to address it? A good example I'll bring to you is that one of our bank customers, they found that people really interested in refinancing their current cars, like a used car auto loan. At one level, you can say, "Okay, I understand that. There's something going on here," but what they found was people were really doing that because they wanted to build their credit score by having a installment loan model better than most other alternatives. When you find out what's the motivation behind it, it wasn't just simply some cash out on it, it was, "I really want to build that credit score," so when you understand the wellness aspect of what they're looking for, you're going to hit it head-on better than any fintech or an alternative model as an option.
James Robert Lay:
It's almost like identifying the problem behind the problem, or the question behind the question, what's the deeper motivation in banking on digital growth? I wrote, "People wake up and they don't say, 'I need an auto loan.' No, they say they wake up and say, 'I need a car.'" In this particular case, it wasn't even about the refi, it was about building the credit score. How can we flip that thinking within a financial brand? Because I think it comes down to human-centered growth because we get so enamored with our products, but it's like if we could put the focus on the people and serve their needs, that's where the massive growth opportunity is, right?
Doug Brown:
It is. We have to challenge ourselves. You said it on the front end of this, unwire our left brain and get to the right brain, the sentiment side of it, and learn to ask, "What are they really after?" Don't lead with, "Oh, yeah, I got a rate on a loan for you. What are you trying to accomplish?" Once you understand that, right, and they'll tell you, that's the amazing thing about this generation that we found in the research, too, they're willing to offer you coaching and guidance as to how to approach them, so we need to be open ears, open eyes, open heart, listen, and act.
James Robert Lay:
I think, and you queued on this, too, in your opening remarks, we don't know what we don't know. Don't be afraid to ask. Don't be afraid to have these conversations because I think with this specific generation, millennials and maybe even more so Gen Z, they have grown up in a digital world. They are sharing literally everything with the world, their thoughts, their feelings, their emotions. I'm curious, what might be a big misunderstanding that financial brands have about millennials they maybe have about Gen Z? Because even millennial and Gen Z, I think we use them in the same sentence a lot, but they're very different in their own thinking, am I right?
Doug Brown:
They are because they have different milestone life events going on, where they're at when it comes to homeownership and family and the like, so you're exactly right, there's a big difference in there. I think it comes down to sniff that out, understand it. It might not be obvious. That's why I think innovation and experimentation is really the key here. Bring people into the lab, let them bang on stuff, and do things and see what you learn that wasn't the hypothesis maybe you were after.
James Robert Lay:
I like that, bring people into the lab to collaborate together because I think innovation done in a bubble, it doesn't serve the greater good.
Doug Brown:
It's horrible.
James Robert Lay:
Now, we can co-create, we can collaborate. I'm curious. One of the things you note is this idea of a digital-first mindset. What is a digital-first mindset? What does that actually mean?
Doug Brown:
Yeah, literally, it means not digital-only, it means digital everywhere. For a bank and credit union model, whenever I'm servicing you, James, I want you to feel like it's a digital, cool experience. Whether you're coming into the branch, or you're calling the call center, or you're working on the app on the phone, in every one of those channel instances, we want it to be digitalized and cool, and so we call that "digital-first" for simplicity's sake. What does that mean? That means that I have a lot of data to help bring to you, what's relevant. I know you, I personalize it, and you just feel a connection is what it's about, so having that connection everywhere you've interacted with the bank or the credit union, that's digital-first.
James Robert Lay:
I want to come back to a point you made previous, too, because you mentioned that people are looking, they're flirting outside of their current relationship. More than half of banking customers, 59% according to the research that y'all did, said that people have relationships with more than one financial institution outside of their PFI, outside of their primary financial institution. What's the threat here? What should financial brands be thinking about when it comes to not just acquiring, because I think that's only one half of the equation, but more so, retaining those relationships over time using data?
Doug Brown:
Yeah, the danger, of course, is that first part is they're sampling something else. They're more vulnerable to distraction. Something positive or negative's going to intrigue them, so that's not good. I would say you got to raise the bar in what you're doing. Don't give them a justification or a reason, right, to jump over there. Then what they're doing, what are they doing it? Why are they doing it? What do they see over there they're not seeing in you? Also, in our research, you'll find, James, is that a number of times, the banks and credit union actually had the thing they went looked before, they just didn't know the banks and credit unions had it.
James Robert Lay:
They didn't know it.
Doug Brown:
That's right.
James Robert Lay:
Yeah.
Doug Brown:
That's the paradox of they don't think to ask you, they don't discover it, so now, it's incumbent on you to make them aware, lead them to it. When you do, I think you minimize that risk of they're going to be tempted away.
James Robert Lay:
Well, I think one of those areas that you covered in the research, you said 78% of Americans would rather use an FI than a tech company for PFM, for personal financial management capability, but if people don't know that exists, then they're going to go out looking elsewhere. Then you also mentioned that 73% of Americans would rather use an FI than a tech company for buy-now-pay-later services. What's the opportunity here back to your point of, we need to create some awareness around this, maybe bring some new capabilities? But when thinking about elements like PFM, like buy now pay later, what's the opportunity for financial brands to be thinking about?
Doug Brown:
Well, I think they're in the best position to know a lot about these customers to bring it forward to them, so recommending and proposing a buy now, pay later when it makes sense. It doesn't always make sense. I think the banks and credit unions have a unique option of knowing more about you, a more holistic relationship that they can propose it at the right time, and then they can also expand. By the way, that will help you with going back to the credit-score-building example, wellness, cashflow management, the needs that they have, again, because they have a longitudinal relationship over time. Therefore, they're going to be better positioned to give you better things, so I think the onus is on the industry to come forward, recommend, and propose at the right time, whether that's buy now, pay later, or these other examples. I'm sure we'll talk about as we're going today.
James Robert Lay:
I think you talk about buy now, pay later and PFM making recommendations. It's a proactive stance in the relationship not being so reactive. That's where even utilizing some data, we can make recommendations down to a person's financial journey that they're taking at an individual level. Other opportunities that I think when reading through the research here that I saw was, and I found it interesting, three in five Americans, or 62% would rather use an FI over a tech company for crypto capabilities. Why do you think that is?
Doug Brown:
Well, I think because crypto is so new, it's kind of scary in a lot of ways. We hear about it from our taxi drivers and our barbers are walking around, but you don't really know what it's about, so you want to go to someone in the know. Banks and credit union fit that market, so I think that's one reason.
Doug Brown:
Secondly, is crypto, you're opening yourself up to a lot of data has to be provided. Who do you trust? You usually trust your bank when it comes to financial data. You trust your doctor with your medical data. You're not so keen to drop that stuff on you out random third-party things on the web and on apps, so that's a big driver of it.
Doug Brown:
Interesting, too, further in that study is that millennials and Gen Z scored even higher than the average. They've said, "I trust the bank and credit union," at 66 versus the 62, on average, so the ones who are always skittish and skeptical, right, like my daughters, they are the ones who actually were saying, "You know what? I want it from the name and brand I trust." Very trusting.
James Robert Lay:
Right. It is, because they already have that established relationship, and you see a lot of like a Coinbase, for example, coming to market, and then there's the whole point of aggregation there. But then there's also the threat of the relationship, but then there's the trust aspect and element that, you know what, I've had this relationship with my financial brand since I was five, six, seven, eight years old. Now, I don't know, I'm not feeling so confident going out to one of these other players. It's interesting, the psychology that's coming into some of this. What else surprised you when going through the data and what was shared from more of a feelings-and-emotion side of things?
Doug Brown:
We were talking earlier as we started the conversation classics and the classic paradigm still matters, I'll say.
James Robert Lay:
Yes.
Doug Brown:
To give you one example is initially, the Gen Z/millennials were really driven toward Venmo for money movement, like, "This is cool. We all have Venmo. Venmo's a bank, right?" Well, no, not really. They didn't discover that until they graduated from college, they get off campus, and realize, "I have to send money to people other than on the campus," and it's like, oh, guess what? The rest of the world and a lot of business is not on Venmo. What is? Zelle is, though, however, and so once they start using it, they're realizing, it's like, "Well, that's cool, and it does it the same way, and it's even less hassle for me and more reliable, right?"
Doug Brown:
That's where an example of they still, they begin to appreciate reliability, consistency, and those things are really valuable. There's a little bit of awakening, awareness has to go on with them. I think when you look at that age demographic, and I think it's reflective of all age demographics, when you go up the curve further, it's Gen X like myself, or boomers, it's like, hey, we actually all have similar needs, and that's what draws us in. Again, it's like, how do we bring it forward, make you aware of it, easy to use, no friction, no hassle? At the end of the day, we all love no hassle, I think no matter what age demo you are, so let's tap into that hierarchy need there.
James Robert Lay:
Yes. It is. It is the pattern matching. It's the pattern matching that comes back to basic human psychology. We all have questions and concerns on one side, we all have hopes and dreams on the other. As financial brands, the opportunity is to use technology to provide prescriptions, cures, solutions to people's biggest pain points to help them move beyond the present moment to get to a bigger, better brighter future on the other side. Speaking about a bigger, better, brighter future, what do you see coming out of this research as some of the biggest opportunities that are available for creation, to create something new, or to capitalize on something that we already have available at a financial brand?
Doug Brown:
I think there's a lot of availability for just payments, money movement concepts. We were teasing out some of them minutes ago. But people want this just, "I want a simple way of when I have to pay somebody, I don't need to understand bank terms." Again, let's unwire ourselves from this language of banks, of ACH.
James Robert Lay:
I call it, yeah, ACH, banker-nese, right? What does that even mean, ACH? Continue.
Doug Brown:
Yeah, I think it's like, "Let's get out of that nomenclature. What is it you want to do?" "I want to send some money to somebody that needs to get there this quickly. I might be willing to pay for it. I want it free," just simplifying the whole paradigm, fundamentally, that's what is boiling through here, especially when they're finding about they were going somewhere else to go used something that already existed, and they either thought a major big bank had it, or it was a fintech. I think there's a lot here, it just gets back to how do we break through the noise, get them to see it, and make sure that the value proposition lines up to their, their needs hierarchy, talking about psychology here, that it's hitting the mark of where they're wanting to be met.
James Robert Lay:
Absolutely. I think that idea of breaking through the noise, one of the best ways that I see to break through the noise, particularly internally because I feel like as financial brands, we probably make things more complex than what they need to be. That's the neat thing with digital. Digital is a multiplier. It will multiply simplicity, but it will also multiply complexity on the other end of the spectrum. Thinking about the research, the findings, the opportunities, back to your point on money movement, payments, what might be some roadblocks that we can be aware of that could prevent us from maximizing some of these findings, these learnings from the research here?
Doug Brown:
One example might be that we need to just get away from the conventional patterns, like people have always done it this way. Therefore, they're going to know to do it. For example, we know what bill pay is. You know what? Millennial and Gen Z don't really understand bill pay, "What is that? I don't even look at bills," and so why do we keep forcing a paradigm that's outdated itself, right? It's, in many ways, a dinosaur. I need to send money to somebody because I owe them. That's what they're thinking.
James Robert Lay:
It's money movement, yep.
Doug Brown:
Yeah, money movement, exactly. Not bill pay. What does that mean? That means we need to unwire the experience and not say, "Are you interested in bill pay today, or a bank-to-bank transfer?" Again, we're speaking a language that's a dead language in many ways.
James Robert Lay:
Right.
Doug Brown:
The wake-up call to us is break through that, approach them for what it is on their terms, they get it. When you do that, they're wanting to come to the banks and the credit unions. That's what the research validates, right? Two-thirds-plus in every one of the instances we're talking about today saying, "That's where I want to go because I know it's going to be important it gets done, it gets done right."
James Robert Lay:
The roadblock is being aware of how we're thinking, being aware of how we're communicating, and does that truly resonate to the other side of the equation. I think even when I wrote Banking on Digital Growth, this is a book about communication, this is a book about conversations, just how we communicate, how we have conversations. That's transformed over the years. Doug, this has been a great conversation. I'm curious, let's get real practical here as we begin to wrap up. I always like to send the dear listener off with a very practical, an action item, something that they can apply going forward on their own journeys of growth. Thinking about the research that you've conducted and some of the opportunities here, what would be a very small, simple, next best step that they can take because all transformation that leads to future growth begins with something very small, very simple? What can they do next?
Doug Brown:
James, I would suggest listen to the signal coming from the target audience that you're after. They're saying it loud and clear to us that we have the capacity to hear it and turn it around. Experimentation's a good thing. Innovation is about not just what you do, how you do it. Start small, bring a few in, and see what you can learn from it, and then act on it. Don't just make it a science experiment, stops there. What are you going to do in the follow-up phase and the like? It's a discipline you got to keep exercising. That'd be my guidance.
James Robert Lay:
Question for you on this, because this has come up in a couple of other recent conversations that I'm hearing some patterns here around innovation, for example, and I think you can maybe expand upon this. We touched on it before about bringing people into the lab, we'll call them "client" or "customer" or "member advisory boards" that bring people in to have these and really facilitate these conversations maybe on a quarterly basis or bi-annual basis, at least just on a minimum, just an annual basis. What's your take on that? Because there's no better way to get close to someone than to have dialogue and discussion and discourse.
Doug Brown:
Yeah, I think some people exercise that, but again, they're too limiting in the selection bias that goes on. They go get their customers and just ask the current customers. Okay, that's a portion of it, but let's go grab some random college students, put them in a room, and talk about these topics and see what they say and offer us, so I think there's, again, where we're biased, culturally, legacy thinking, break out of that, make it half-and-half. What you begin to see, too, is that the current customers also really have a low awareness of new things of what else they could want, so they're usually the worst ones to ask. At the same time... Yeah.
James Robert Lay:
That's a great point because it's like people don't know what they want if they haven't seen something else outside of that horizon. I like that perspective. Go and maybe draw from a larger pool of people, is that what I'm hearing from you?
Doug Brown:
Yeah, precisely. One of the things we like to do, for example, is hey, let's not talk about banking, but if banking could be like Chick-fil-A, or another vertical that we serve at NCR, and what you find is there's so much similarity in the needs hierarchy, the articulation of what they're asking for, and again, it's not in the traditional wheelhouse, it's look to other industries of what's happening and influencing this behavior. That's what digital's about. Digital is our pervasive lifestyle for you and me and everyone listening today.
James Robert Lay:
Looking outside to grow inside, finding ideas and inspiration, even from other verticals that we could bring in to optimize and level up our own experiences. Doug, this has been a great conversation. If someone wants to continue the dialogue, the discussion, even get the research because I think that it's important research here, what's the best way for them to A, reach out and say hello to you, B, get the research?
Doug Brown:
Yeah, find us www.ncr.com, digital banking, and look for me on LinkedIn, Douglas Brown.
James Robert Lay:
Connect with Doug. Learn from Doug. Get the research, for sure. Empower, elevate your own financial brand. Doug, thank you so much for joining me on another episode of Banking on Digital Growth. This has been a lot of fun today.
Doug Brown:
Thanks, James. Appreciate it.
James Robert Lay:
As always, and until next time, be well, do good, and make your bed.
