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Is Digital Transformation Causing Digital Disengagement?

One core variable rules marketing in retail banking: customer lifetime value, and it’s well-known that cultivating customer engagement is the key to maximising customer lifetime value. That’s why digital transformation initiatives have strived to engage with customers via their digital channels of choice: email, text messages, web portal, mobile apps and so on.

In that regard, the first generation of digital transformation could be considered a success: customers now overwhelmingly handle their finances online, and show no signs of stopping.

However, digital transformation has also largely commoditised retail bank offerings and lowered the bar for what makes a financial institution a ‘bank” — giving rise to neobanks and leveling the playing field among large and small financial institutions. With dozens of options available at their fingertips, customers are no longer beholden to their tried-and-true neighbourhood bank and are increasingly exploring alternatives that complement their digital-first lifestyles. For those financial institutions struggling to maintain customer loyalty, the pressure is on to adapt and improve customer experience (CX) initiatives in this new age.

The customer engagement challenge

Many financial institutions have fallen into a survivorship bias trap of focusing customer marketing on desired business outcomes rather than the unique needs of their customers. Too often, financial institutions view their customers as another audience to sell new products or services to, without taking a holistic picture of their current needs and future aspirations.

Trying to encapsulate each customer’s life into a journey is a mistake — rather, it’s crucial for banks to consider the customer relationship through the lens of a lifecycle rather than a journey. Analyst firm Gartner refers to the current state of engagement as an ’empathy vacuum’ — the void created by the engineered insincerity of the customer management industrial complex.

“Nearly three-quarters of consumers want their digital experiences to feel personal — meaningful, relevant, and timely, rather than ‘personalised'”

Partially to blame is the lack of technology focused on building actual relationships rather than subjecting customers to a never-ending stream of ‘campaigns’. But to point the finger at technology alone doesn’t address the underlying issue: cross-departmental collaboration is also needed to improve the customer relationship gap. Customers want to feel known and appreciated, and rising to their needs requires both technological and organisational change.

We are entering an era of customer disengagement; a total erosion of consumer trust. Consumers are more distrusting of brands now than ever before, and when that trust is broken, they disengage and churn.

Tend to your customers

Retail banking institutions need to reframe how they’re prioritising existing customers. Simply stated: The cost of a disengaged customer is significantly greater than the value of a newly acquired one. To determine their relationship with existing customers, technology and marketing teams at banks must partner to assess their current outreach tools and strategies, and ask themselves the following:

  • Does the customer feel as though interactions with our bank enhance their life?
  • What is the ratio between outreach and engagement (a nice way of asking ‘are we inadvertently spamming our customers?’)?
  • Are we engaging appropriately, based on where customers are in their relationship with our brand?
  • How do we continue to earn each customer’s trust?
  • When a customer does meaningfully engage, what is the next mutually beneficial experience I can offer them?

How institutions approach these questions is foundational for keeping customers meaningfully engaged. As customer needs continue to morph over time, the cracks in the ways that financial institutions are maintaining customer relationships are being exposed – what can banks do, then, to enhance customer loyalty?

Nearly three-quarters of consumers want their digital experiences to feel personal — meaningful, relevant, and timely, rather than ‘personalised’. This presents a huge opportunity for banks to take a one-to-one lifecycle approach towards communications and marketing, rather than broadcasting a series of transactional campaigns to customers that ‘nurture’ them at various points along some pre-defined ‘journey’.

Customer marketing vs. engagement – a highwire act

Establishing meaningful touchpoints with existing customers and adapting to their changing needs – especially during times of instability – is crucial because it exudes a sense of value. But there’s a balance to be struck between establishing regular touchpoints with customers and overwhelming them with offerings.

Overcommunication can send the customer on their way towards being disengaged, opting out of communications, and possibly taking their business elsewhere.

When a customer decides to opt out of communication from a bank, they’ve essentially cut themselves off from future opportunities to learn about or interact with new products or services. An opted-out customer becomes more difficult and expensive to engage with than a prospective customer.

Consider a customer that logs into their bank’s portal seeking information on auto loans. Thereafter, the bank begins sending them marketing messages about unrelated home loans or mortgages as part of a cross-sell campaign. Instead of guiding the customer on their car-buying path, the bank has usurped the engagement in an attempt to achieve additional business outcomes (rather than focus on addressing their customer’s unique needs).

Financial institutions should learn from, rather than dictate, how customers engage with information. Feeds, such as those we engage with via social media platforms like LinkedIn, Instagram and even TikTok, offer a good example. Feeds serve relevant content in a way that’s familiar to today’s digital users. They are self-contained, sorted in the order most relevant to the user and only catalyse the user to engage when their algorithms identify a highly relevant engagement opportunity.

By utilising feeds for customer engagement, banks can create a similar stream of content that the aforementioned social platforms curate to ensure the user experience is contextually relevant and calls to action feel like they are useful and easy. Such feeds help develop a relationship between the bank and each customer, and create a constantly-changing value-add through meaningful content and experiences. This approach of ‘loving’ your customers is what helps create customers for life.

Striking this balance requires a rethinking of the customer engagement model, but it’s crucial for retail banks seeking to create differentiated lifetime relationships. Consumers are loudly declaring they want personalised content delivered with tact and relevance – it’s up to financial institutions to listen and act accordingly.


  • Matt Gillin is the CEO and co-founder of Relay Network, the customer engagement platform built to help enterprises create customers for life in the digital age by delivering personal 1:1 experiences at scale.

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