Banking

Making a game of customer acquisition

Banks are borrowing tactics from online games to make financial education more stimulating.

During the pandemic, one third of consumers have engaged with video games, some hosted on a cloud, or watched a virtual sporting event, according to Deloitte’s 2020 digital media trends survey. The interest spans all ages, with 64% of U.S. adults regularly playing video games, reports the Entertainment Software Association.

“Consumers’ brains are already trained on these experiences,” said Nick Maynard, a senior vice president at Commonwealth, a nonprofit in Boston that builds solutions to meet the needs of the financially vulnerable.

Ally Financial capitalized on the hype around video games most literally, by building an island in Animal Crossing: New Horizons. Dozens of other financial institutions, including BayPort Credit Union, are working with fintech partners to provide gamified financial education, which includes taking pop quizzes on the customer’s own spending habits and on broader financial information in order to reap rewards.

Incorporating games and rewards into financial lessons can reinforce financial literacy concepts for customers of all ages. Gamification, which is loosely defined as an interactive, immersive experience that motivates users to learn by completing activities, is also one way to continue financial education outreach during the pandemic, especially if previous efforts took place in person.

Gamification is particularly important for capturing the attention of younger demographics. As baby boomers retire and Generation Z becomes wealthier, banks can’t ignore this influx of young customers, said Julia Carreon, co-founder of Veritas Wealth Partners in Austin, Tex., and a former head of digital and desktop for Wells Fargo Private Bank.

“Banks have become sanguine to the threat of disruption because there hasn’t been generation turnover in sheer numbers,” she said. “That creates a stew unlike one we’ve seen before and an urgent need for banks to modernize at a much higher pace.”

Bolun Li, the Gen Z-age co-founder and CEO of financial education app Zogo Finance, recalls an episode from high school that exemplifies his frustrations with existing efforts to teach young customers about personal finance.

“A local bank came into school and gave a presentation about financial education,” he said. “Every kid was looking at their phone, texting each other, not paying attention.”

One solution for banks is to partner with a fintech that has already done the legwork of making personal finance fun, either as a cobranded app, such as Zogo, or a white-label solution, such as Flourish. BayPort Credit Union, in Newport News, Va., is one financial institution turning to Zogo in 2020 to keep up momentum with its financial education programming, after the pandemic stalled its planned workshops in coffee shops and breweries.

Products like Flourish, “could be a path forward,” said Maynard. “A bank doesn’t have to figure out how to build a gamified widget, but partner with fintechs with the technology to deploy to their customers.”

Flourish came to life in 2018 as a direct-to-consumer app, but the company soon started licensing its technology to banks, fintechs and credit unions at the end of 2019. Currently, the Berkeley, Calif.-based company partners with BancoSol in Bolivia and will shortly announce its first U.S. customer, a top-15 U.S. bank.

“We’re bringing positive money habits to the end consumer and helping the institutions drive deposits and have more profitable customers, especially those new to financial services,” said Pedro Moura, co-founder and CEO of Flourish. “For the end user, their bank is helping them better manage their money.”

Flourish consists of three modules. A rewards engine entices users with, say, cashback or sweepstakes in exchange for exhibiting positive behaviors such as on-time payments. (Banks provide the prizes.) An automated savings feature lets users customize rules, such as transferring $10 every time their favorite sports team wins a game or they hit 10,000 steps, as long as this action doesn’t trigger an overdraft. A financial knowledge section turns the user’s spending patterns into trivia with questions like, “How much do you think you spent on Uber Eats in the last three months?”

“If you answer correctly, it’s tied to the rewards engine,” said Moura. “If you’re wrong, you get to know your spending habits.” Bank partners can also devise their own questions, on topics such as demystifying credit or buying a home.

Zogo Finance, in Durham, N.C., also partners with banks to promote financial education among their customers — and hopefully catch the attention of prospective customers. The app launched in November 2019 and has 76 financial institutions as clients; most are credit unions, but Zogo has also landed a top-five U.S. bank and a global credit card company.

The founders, two of whom are Duke University graduates (the third attended University of North Carolina), consulted with behavioral economics researchers at Duke to design the app. All three are in their early and mid 20s.

When users download the Zogo app through the App Store or Google Play, they can enter an access code from their financial institution, where they will see the logo and customized content. The app breaks down financial topics into 300 modules consisting of five “snippets,” or tweet-sized facts, and five quiz questions, where correct answers are rewarded with points in the form of pineapples. Pineapples can be redeemed for gift cards, charitable donations, and rewards from a partnered financial institution, such as a deposit into the user’s bank account. But racking up too many wrong answers will kick the user out of the app for four hours.

“A lot [of institutions] use it as a branding tool,” said Li. “Others use it as a lead generation or acquisition tool.” Financial institutions can market the partnership directly to their customers or supply a list of ZIP codes to Zogo. When new users in that ZIP code download the app — even if they are not an existing customer — they will see the sponsoring institution’s logo.

“Our mission is to help financial institutions learn about and engage with the younger demographic,” said Li. “We believe the next generation won’t pick neobanks, they will pick traditional financial institutions.”

BayPort Credit Union, with assets of more than $1.9 billion, launched its partnership with Zogo in April. The company advertised its Zogo connection online and on television (the latter of which accounted for 82% of adoption), and arranged for new users within BayPort zip codes to automatically see the BayPort-branded version of the app. The credit union inserted custom modules, covering fun facts about BayPort, the credit union’s 90-year history, and the importance of getting preapproved before visiting a car dealership.

Although gamification apps are typically pitched to Gen Z, Nancy Porter, vice president of marketing at BayPort, finds the appeal is broader. Millennials make up 40% of the credit union’s Zogo users, while Generation X comes next at 24%.

She said BayPort has reached its goal of acquiring 4,000 Zogo users, with about 1,500 of them being nonmembers.

“It’s one of several tools we have as a credit union to show our commitment to the community, that we place member education first and foremost,” said Porter. “We hope it’s a stepping-stone to help people.”



 

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