In 1931, the Commonwealth Bank of Australia proved it was way ahead of the pack in the loyalty game by launching a bank account aimed at kids, with schools channelling their deposits. Fast forward nearly 90 years and CBA is still reaping the rewards – 69 per cent of the Australian population has a CBA bank account.
To put a value on its canny move, analysts estimate that about an eighth of the bank’s market cap today – A$125.3bn – is attributable to its foresight in looking to the next generation of customers all those decades ago.
It’s proven to be a stunningly successful campaign. But what’s even more amazing is that so few rivals have followed suit. The result is declining bank loyalty around the world with each new generation.
A Gallup poll in the UK earlier this year found that the younger the adult customer, the less likely they were to take out products such as loans, mortgages and credit cards with their primary bank. Of equal concern is that the youngest group – the millennials – switch their primary bank two-and-a-half times more often than preceding generations of baby boomers, traditionalists and Gen Xers. This is having a huge impact on profitability.
For a bank, a customer’s peak profitability is when they take out loans – student, car, home – from their early 20s to aged 40 or so. Without loyalty, customers shop around, taking their high-margin business wherever they see fit. But the CBA experience shows that by engaging customers from an early age, the chances are they will remain loyal during this important period.
Thanks to the ubiquity and popularity of mobile phones and tablets, we believe at Moroku that it should be far easier to emulate CBA’s success with young customers today than in 1931.
In China, 90 per cent of teenagers access the internet via their smartphones and 64 per cent of primary school-aged children have smartphones. In Germany, about half of all children between 6 and 13 have a phone, while in the US, 95 per cent of teenagers have access to a smartphone. With such widespread access, it makes sense for banks to develop an attractive app that parents are happy to install for their kids to use. The key for this segment is to make it fun.
If something boring like banking can be made enjoyable, kids flock to it. That’s certainly our experience with ChoreScout, our white-label banking app aimed at parents of kids from four to 15 that is showing extraordinary levels of engagement.
Children as young as six are using the app every day, setting and fulfilling lengthy savings goals – up to nine months long. That’s likely the start of good financial habits. And when one kid starts using it, their siblings do, too, along with extended members of the family who want to give rewards and encourage financial responsibility.
It works like this. The parents set up the app and allocate chores or targets for the kids, which are shown on the ChoreScout app. The kids do the chores and report back to the parents. At the end of the week, the parents tally up their offspring’s efforts and make the appropriate payment – all on the mobile phone app.
Meanwhile, the kids set savings goals. When they earn money, they can allocate it towards the goals or as spending money. But we’ve made it fun, more like a game. Built on the Moroku GameSystem there’s a healthy roadmap of game elements and mini games with, for example, weekly payments arriving in a space ship to be “shot” into either “savings stars” or “spending black holes”.
In a little over 12 months since we opened for business, four Australian banks have launched accounts based on the ChoreScout technology, with eight more lined up to launch before Christmas 2018. At a cost of just $5 per family a year, the banks see it as a low-cost way of using their current customers – parents – to build a whole new brand category – child banking. And because the bank is targeting its existing customers with children, the acquisition costs are low. It’s a long-term investment that, if CBA’s experience is anything to go by, will help them recruit and retain the next generation.
There’s also good news about the cost of developing and launching a ChoreScout service. Since July, ChoreScout has been available on Temenos MarketPlace. That means the technology is fully compatible with the Temenos core banking platform. As a white-label solution, all the bank has to do is create the brand and the strategy and Moroku will get your app into the stores for download, making it fast and cheap to market.
Other accounts aimed at parents with children are failing to see the kind of engagement ChoreScout achieves because they haven’t made money fun. They’ve focused on ease of use – which is yesterday’s news. In today’s market, fun to use is the new design paradigm. And at ChoreScout we take fun really seriously.
Colin Weir is chief executive of Moroku