Traditional ways of attracting new customers and gaining market share are becoming increasingly less effective.
Strategies like opening a new branch, raising savings rates, mailings and Facebook campaigns result in diminishing returns.
The old way of doing business is fading away: conventional sales to existing customers are getting less effective. Customers are just not entering branches as frequently and thus person-to-person sales are declining.
Put simply, the cost of sales is going up and sales return is going down.
While this is a common story across the banking industry, it’s a problem for Disney, Ford, and other major brands as well.
Different Businesses, Same Problem
You’re probably wondering: How is my financial institution like Disney?
Millions of people visit Disney parks and subscribe to Disney services. However, Disney has no direct way to affect its customer base. Disney knows it has brand fans but in reality, they have no relationship with customers.
As a result, Disney must spend millions on advertising and marketing to keep their existing customers returning – and then millions more on data analytics from companies like Facebook and Google to better understand their own customers. Because of this weakness, Disney is not a threat to Apple, Amazon, or Google – and in many ways is defenseless. But that’s all about to change.
Social Tokens: Community Reinvestment That Benefits Everybody
Within the next 36 months, some well-known brands will be introducing something very interesting and transformational: Social Tokens.
Decentralized Finance (DeFi) technology has matured enough for companies to issue branded Social Tokens on their own blockchains into networked communities. Each company will approach this idea with its own characteristics and customers in mind.
What are social tokens?
Social tokens are fungible tokens that may be owned by ‘friends” of a brand and traded to other friends.
Sounds like a fancy frequent flyer program, and in some ways it is. However, Social Tokens offer far more value to the brand and its customers.
Banking Benefits of Social Tokens
What’s this have to do with banking?
Everything!
Banks have had a difficult time attracting new business. Why?
- few customers save with banks because of saving rates
- fewer customers are using loan products
- even fewer are using insurance and investment products
Simply put, people use banks so they can efficiently participate in the economy. The best customers have learned long ago then can get better mortgage rates, savings rates, insurance premiums and investment vehicles from other financial services companies.
So how can financial institutions provide valuable services based on relationships? How can they create more valuable and relevant products for our customers?
That’s where Social Tokens come in.
Imagine if your credit union issues a social token to each member as a thank-you for being a member,
and then provides additional tokens (or fractions) for good behaviors such as on-time payments,
large deposits, member referrals, etc..
When a good member occasionally has an overdraft, late payment or other problem, they could use a token
rather than pay a fee. It gives the member some control over their privacy and circumstances without
seeking permission from the credit union.
Don’t worry – there will be plenty of members without tokens who will still pay fees.
Rewards & Incentives That Build Community
We can expand the concept of Social Tokens:
- Allow members to contribute tokens for charitable purposes, such as when another customer needs medical assistance. Credit Union members can donate CU social tokens to support this member and the CU will convert those gifts into cash.
- Perhaps members wish to support the credit union’s approved charities and community reinvestment initiatives.
Now we’re building relationships.
Let’s take it one step further.
We can create a true credit union community involved in functions and decisions that directly affect them:
- Members with high token levels (good behaviors) get access to privileged services, discounted products, and in person services.
- For those high token customers, the credit union provides an extraordinary level of convenience like bookkeeping and tax reporting support. The CU has all their financial information, savings, loans, mortgage, investments and is their charitable vehicle, and as a result, bookkeeping becomes less complex.
Social Tokens: For the Long Haul
Let’s go the extra mile: extended members are part of the community, too.
Many of us keep our banking relationships long after we leave our hometowns. It’s our connection back to our home community.
Imagine how empowered and grateful members will be if they can contribute tokens back to their high school sports boosters, community art centers and sick friends.
What do we get in return? A lot:
- A strong relationship with our best customers
- Efficient mechanisms for encouraging good behaviors
- Explicit approval for additional services
- Increased support for community reinvestment
- “Raving fans” who will promote the credit union’s mission and refer high quality new members…
We’ve given a new dimension to Knowing Your Customer!
Let’s connect and discuss this amazing opportunity further!