This is the first of two posts on financial services branding, co-authored with Ross Republic’s brand transformation lead Terry Tyrrell. You can find the second one here.
In the digital banking era, a brand is only as good as its product
Brand strategy defines what makes a company relevant to its target audience and how it differentiates in the markets it operates in. The standard playbook for brand differentiation is to create aspirational associations around a company’s offering, which over time boost margins and customer loyalty.
In banking, however, this mechanism was rarely utilised, as Terry points out: “Brand building was historically not an important cornerstone for competitive advantage, typically relegated to superficial and short-lived communications and advertising campaigns with little substance in terms of reasons to believe.”
Shareholder value was mainly generated via fortifying superior real estate presence and pushing generic financial products through linear distribution channels, i.e. branches and direct sales networks.
The high barriers of entry due to complex regulation and high switching costs for customers made this model bulletproof. Terry clarifies: “For legacy financial services companies, aspirational associations and substantiated competitive advantages beyond product perks and pricing, were difficult to achieve.”
Top-down corporate brands have been dominating the traditional banking landscape, with reputations damaged through false claims exposed during the 2007 – 2008 financial crisis. Only a few have managed to recover.
Due to changing regulations, the barriers of entry into financial services have significantly dropped. That’s how new fintech challengers emerged, with digital product innovation, customer-centricity and agility at their core. They built their brand by radically focusing on a subset of users and providing a superior digital customer experience.
Offering financial services through digital channels clearly served unmet user needs. For example, fintech companies whose initial product offering was a current account or credit card have collectively added 54 million user accounts globally.