Mapping Consumer Financial Services through a new lens.
Unpacking and explaining the Peak Paradox model is here, you will need this backgrounder to understand the model so that this article will make sense; it is a 5-minute read. A new way of seeing the same thing will mean we can act differently; this is the peak paradox model’s core tenet.
A recurring question on an executives mind in the finance industry is; “Why does up or cross-selling not deliver in the way we forecast or predict?” Cross-selling is foundational hypnosis for growth. H0; this customer has one product, and therefore they should want my other products; all customers need all my core finance products. With years of data, it is evident that a customer who uses my payment system does not want my other products, and after years of cross-selling we still only have 30% of customers with all products. Whilst we can conclude there is a problem with the hypothesis, we choose to ignore this fact and continue to try to upsell as we don’t have a framework to explore why! If we try a different marketing message, this one will work (what was it about repeating the same thing and expecting a different outcome?)
This article maps core consumer financial services offerings of Payment (spending), Saving (available, current, on-demand and surplus), Borrowings (mortgage, credit, debt, overdraft, loans) and Investment (long-term growth and or income) onto the Peak Paradox model.
I will unpack a delta between what a bank or financial service providers products say about their products’ purpose in marketing and terms; and the consumers’ purpose for the same products. When mapped, it is evident that cross-selling will only work in a limited capacity, and in the majority of cases, there is a misalignment.
On paper, and with years of data, our upselling hypothesis appears to be misguided as the utopia for growth. The market has introduced a plethora of new banks, neo-banks, open banking platforms, banking 1.0, 2.0, 3.0, 4.0 and more; promising digital products for a new next generation. Each new company has a model that attracts customers from accepting the tempting offers from existing providers and then upselling. We will apply the Peak Paradox model on this perplexing and thorny topic because when we can see something through a different lens, we may decide to act differently, as we have new insights.
Without a doubt, we all have a reason why upselling and cross-selling does not materialise to the level we predict/ want/ desire; but why does a customer then buy a very similar product from a different financial provider, even though we offer it? Finding the data to confirm that we have a specific, sound and justifiable explainable reason, which is different to others interruptions, leads to much tension, anxiety, stress, argument and disagreements in our teams and enterprises; both on why we miss the targets and what to do about it.
We are taking the core banking products in turn. Remember the purpose here is to provide a non-conformational way for your team to look at the same problem with a new perspective.
Payment (spending available, accessible and current cash resource). Spending maps across the entire Peak Paradox map. We need to spend to survive and therefore is essential at Peak Human Purpose as without food and water we don’t tend to last very long. Spending on luxury goods meets a requirement for being at Peak Individual Purpose where you look after yourself. Giving gifts to friends, philanthropy and donations to charity moves the coverage to Peak Society Purpose. Finally, we cannot work without payments, payments get us towards Peak Work Purpose and covering the entire map.
The observation is that, only at this moment-in-time, when you are using your payment service, can you highlight if the payment provider’s values reflect your purpose or if you feel there is a conflict. Users have started to use different payment mechanisms to reflect an alignment between their use and how they perceive the payment providers own marketing. But does that allow them to use this payment provider for everything, or do they have two or more to cope with conflicts? Can the customer hold the conflict of using the same ethical payment platform to gamble and buy adult services as they give to charity? How does the market, market payment services?
Saving (surplus). Saving tend not used for day to day survival (yes individuals often find they have to as a reality of our economic mess), therefore saving does not tend to feature towards Peak Human Purposes for most consumers. However, if savings are for a house and the house is attractive to a mate for reproduction it can be argued that there is a connection to Peak Human Purpose, but is this saving or borrowings (loans). However, savings are used to further your own individual purpose or help those closest to you, which means there is at least some societal benefit. (A gift to charity will be in payments, payments on death to a charity by a Will is a different dimension to be explored, more case-studies will help your team explore this in more detail.] Whilst not explicit, some savers understand the economics of savings by themselves leads to borrowings (lending) for others, me saving has an indirect benefit for society. Fewer savers may realise that spending savings are a better way of benefiting a societal purpose as it encourages economic activity and growth. The point is that “saving” is positioned differently on the Peak Paradox model to that of your payment service. How your company positions these products will have a direct impact on how users perceive them. Indeed how your competitor and the media report on these products directly affects user positioning. We seek the delta between your marketing, the markets positions, the media view, and the users’ own opinion.
Borrowings (mortgage, credit, debt, overdraft, loans) Brownings at a consumer retail banking level, because the terms and conditions are for an individual or a couple who equally take on the responsibility, meaning that Borrowings are for Individual needs more than society. Since the use of borrowings that a requester has is vetted by the provider, a company’s processes and regulation (compliance) mean that borrowings focus on Peak Individual Purpose. Borrowings give the person(s) more agency, and one can argue more freedom, but that depends on responsible lending to ensure that levels of debt are not a burden, which sadly is not always the case. Borrowings to give to someone else still has to be repaid and when you look at the terms and the processes; borrowing to give away is not an acceptable practice - whereas guarantees are.
Therefore, borrowings have a different position on the Peak Paradox model. There is a position where lending does support more basic human survival (payday loans), but this creates tension and conflicts in the users of borrowing products between two Peak Purposes. Debt can also be used as part of a personal guarantee to provide working capital for a business or enterprise. This means that borrowings are dragged towards Peak Work Purpose, and depending on if the Borrowings are for growth (thriving) or survival creates different tensions again. Consider, customers are not buying a specific product; they are buying a generic idea. When these ideas become confused, it creates tensions. We might like to give them cool marketing names to deceive ourselves to what is being offered, but it is quite evident in the terms.
Investment (long-term growth and or income from the investment - capital at risk). The final bucket considered here. Pre-crypto, climate and ethical investing; investment occupied an area between Peak Individual Purpose and Peak Work Purpose, with variance in risk and return creating an area. As real-time trading led to no responsibility for the shareholder, the area has shifted towards Peak Individual Purpose. Crypto, angel, seed and start-up investing has pushed the upper boundary even further to Peak Individual. However, social and impact investing (labelled here as ESG for convenience) has created a broader and wider market. Those who seek more ethical ideals that align with their own position of the map means the investment is also firmly heading into Peak Society Purpose. Such diversity. The same questions need to be reflected on: how is the positioning of investment products aligned to the individual’s need and purpose? Is there a gap between brand, marketing and overall positioning?
What do we learn?
Financial services are a very cluttered landscape. Just offering slicker, quicker, faster, less paperwork, and sexy digital services are avoiding the very core of the problem that the Peak Paradox model exposes. Yes, we can play with terms and marketing. We can create great names, become ever more personalised and seemingly more differentiated in niche services, but fundamentally avoid the conflicts and tensions this creates.
Innovation. A term on the lips of every board, executive and management personnel in the finance industry. We have to be more innovative. We have clearly been more “clever” in how we bundle, describe, consider risk and differentiate our core products. Still, we appear not to have aligned our corporate purpose, with our products’ purpose with the customers’ purpose for financial services. Perhaps we should look at innovation in this area.
Positioning. Suppose we attracted a customer with a faster payment method for essential services, positioned towards Peak Human Purpose and Peak Social Purpose. Why would that customer naturally consider other series until you have either developed trust or re-educated them on your brand position? Fabulous branding for new customers’ attraction may generate the numbers and look good in the business plan until you need that same “easy to attract customer” to buy something else.
This is tricky as it might mean rewriting marketing and positioning, and will the marketing/branding team understand this, given that it could affect their KPI’s and bonus? Such actions also require time and reflection, always the most precious things in an early-stage growth company, as far too many jobs to be done.
There a delta between an individual consumers perspective of the financial products they are using, the marketing position/ branding you offer and different core products align to other areas meaning that there is unlikely to be a natural cross-selling opportunity, with one exception. There is an alignment of all the products focussed at Peak Individual Purpose. Maybe that is why High Net Wealth (HNW) teams, wealth management and those looking after the ultra-wealthy in banks appear to have a very successful, and aligned business.
Trust. This asks how to explore the alignment between your product's purpose and the consumer purpose and how this correlates to the “trust” in your brand. If there is a high R2 does it lead to a propensity to utilise more than one product from a financial institute?
We need to add pensions, tax, gifts, inheritance, B2B, business, corporate and many other financial services to complete the picture, and then the role of the regulator and whose purpose they are working to protect! Anyone up for mapping one company's financial products?