Gamification in banking: The rise of the ‘experiential’ bank

Banking is no longer somewhere you go but something you do.”

These words from author and fintech CEO Brett King are a good starting point to understand the challenges facing the financial industry as it prepares for the very near future.

In the last few years, banks have been under constant threat. Competition from fintechs, much more nimble and able to create top-notch customer experiences, has forced banks to rethink the way they approach customer service. Regulatory changes, such as the upcoming PSD2, have also created conditions pushing banks to evolve in an environment they control less and less.

In their quest to redefine and extend the role they play in their customers’ lives, many banks have turned to gamification, which has the potential to transform the procedural act of banking into an experience much more in line with today’s consumer preferences.

Banking is a chore

Let’s face it; most consumers see banking as a tedious if necessary activity. In part, it’s because “the benefits of a well-chosen financial product are not immediately available,” says Mike Kernot from UK research consultancy BRDC Continental. “Financial products are great enablers for us but ‘unlocking’ them can be terrifyingly boring.”

Reshaping the landscape
But banking doesn’t have to be a chore. The success of Virgin Money lounges, where “there is no attempt  made to sell banking services,” certainly proves that a bank no longer needs to look like a bank.

While it’s clear that a space with free Wi-Fi, refreshments, newspapers, televisions, and even a piano or a bowling alley, must fill customers with delight, some might wonder how it can help a bank capture more customers if it doesn’t sell any services? But it does.

According to Jayne-Anne Gadhia, Virgin Money’s Chief Executive, the company recorded a 200% increase in sales at Money Stores located near lounges. Ultimately, they’re being used to “drive customer advocacy… and drive down the cost of marketing to attract new customers.”

But perhaps more importantly, Virgin has succeeded in fostering higher customer engagement by turning the traditional banking approach on its head. What they have accomplished by reimagining the physical banking environment, many others have achieved using gamification to transform the digital banking landscape and experience.

What is gamification?

Gamification is the process of taking something that already exists and integrating game mechanics into it to motivate participation, engagement, and loyalty.

The reward system
The progressive reward system used to engage consumers in a non-game context is very similar to the one used to capture the loyalty of video game players. It includes the following broad categories:

  • Points: Used as a form of currency or progress that taps into people’s natural compulsion to gather resources or move forward. The collection of points or percentages on a progress bar ensures that users persevere.
  • Rewards: An end point or milestone that gives meaning to active participation. They ensure that users don’t lose interest along the way. For example, the user might receive extra points toward their goal.
  • Badges: A special form of reward used as an added incentive for accomplishing certain tasks and attaining specific goals. A badge is a public way of displaying achievements such as going from the Marathon (42km) to the Earth badge (12,862km) on Fitbit.
  • Leaderboard: A way to foster competition and empowerment that can lead to more engagement and advocacy, as users want to share their success.

Linkedin at the forefront
Banks should look to social media platforms like Linkedin to see how they’ve made tedious tasks more palatable. The work-related networking service has gone to great length to add gamification elements to its interface right from the get go.

Creating a new profile can be time-consuming and many consumers balk at the idea. However, they’re a great source of data for companies and can drive engagement because once customers have invested into the process, they don’t want to abandon it.

With that in mind, Linkedin uses a mix of gamification elements to lead users along the way. First, the “profile completeness bar not only displays the percentage of profile completion, it also motivates us to get there,” says gamification firm Captain Up, with simple sentences that inform us of the benefits of not giving up.

Then, users are prompted to list their skills to participate in the “endorsement game.” This, according to Captain Up, leads to increased engagement as each member is endorsed by others and vice-versa. It also leads to a sense of community.

Finally, Linkedin also uses various ranking systems and emails of congratulations for those with the most viewed profiles. In essence, the network uses a mix of points, rewards, badges and leaderboard to foster traffic and engagement from its users.

Feedback keeps the wheel turning
Unseen through this whole process is the feedback loop, a concept borrowed from the field of artificial intelligence. When players/consumers/users perform an action, answer a question or complete a task, they receive either positive or negative feedback.

Feedback is crucial in any game-based system because it educates users on the one hand, and keeps them coming for more on the other, as they continue to try to get positive feedback to earn points, “level up” and get to the top of the leaderboard.

Ultimately, gamification taps into people’s aspirations and insecurities. Human beings are driven by their desire to feel empowered whether it’s through their achievements, influence, possessions or other form of self-esteem currency. They also need to feel like they belong and matter. All these factors have been found to trigger interest, excitement, pleasure and even, euphoria in gaming.

So how can banks use gamification to trigger engagement and tap into their customers’ evolving preferences?

Gamification being driven by new consumers preferences

The use of gamification in a financial context didn’t come “out of the blue.” It was driven by a number of factors. First, the changing preferences of consumers and their desire to use tools that fit better into their everyday lives, which in this day and age means digital tools, opened the door to fintechs.

Fintechs, naturally suited to gamification
Unbridled by the many regulations that frame the operations of traditional banks, fintechs, which were already embedded into the digital world, have been very adept at responding to the needs of consumers for financial digital services that come replete with superior customer experiences.

For these reasons, gamification comes a lot more naturally to fintechs than it does to high street banks. Moven, for example, is the first branchless, paperless, and even plasticless bank. Billing itself as a “Fitbit for your wallet,” it takes full advantage of existing digital tools, such as smart watches and AI-driven apps, to turn banking into a game.

“We’re trying to get you to compete with your average monthly spend every month, to reduce that spend over time,” explains CEO Brett King. “Messages pop up if spending is trending high, or if a frugal month allows $100 to be socked away in a stash account.”

Should Millennials be the only target?
Moven, like many other fintechs, doesn’t hide the fact that they’re catering to the needs of Millennials; that demographic group between 18 and 34, that has grown up with digital technology and is “two to three times more likely than consumers older than 55 to want more digital interactions,” according to Accenture.

Spanish bank BBVA won the 2013 “Best Use of Engagement Techniques in Consumer-Facing Applications” Award for creating a gamified Facebook app, which attracted more than 100,000 players in its first six months. This takes advantages of the fact that 39% of Millennials are “open to interacting with a company through a messaging app.”

The game rewards customers with points whenever they use one of the bank’s services on Facebook, such as paying bills or making account inquiries. The points can be accumulated and used to download music, and buy film and La Liga football tickets.

While all statistics point to the millennial generation as spearheading digital innovation, it doesn’t mean that older consumers are technophobes. In fact, they are very open to the idea of experimenting with new options and using new channels, found Accenture.

With everyone else focusing their attention on Millennials, there’s an untapped potential for traditional banks to educate and convert older customers to digital banking, which could go a long way to gain their loyalty.

This means there’s an incentive for banks to develop gamification strategies to create customer engagement as it touches on a much broader market than first appears.

Creating lasting connections through gamification

Gamification is tailor-made to foster customer engagement. It creates “an emotional connection with the audience,” says influencer marketer Kristen Matthews, and this can lead “to a longer relationship as opposed to simple brand awareness.”

The Connected Customer research shows that customer engagement is the product of a mix of logical and emotional drivers but as a customer progresses “towards commitment and loyalty, emotions play the bigger role.”

By tapping into a customer’s sense of pleasure, amusement, achievement or empowerment, through gamified apps, banks can create lasting bonds. As an added bonus, gamification can “help users achieve very difficult goals and tasks” thus playing an important role in that customer’s life.

Gamification is a powerful tool that should be used wisely

Gamification is an effective way for banks to both attract new customers and retain current ones by tapping into their emotions and becoming more of a partner in their everyday lives, which is a sure path to engagement, according to The Connected Customer.

That said gamification should be used appropriately. “Many companies have begun to believe that people will readily do their bidding by simply slapping some meaningless badges, points and leaderboards onto their website,” explains Brian Burke, an industry analyst at Gartner. “Think of the audience as players not puppets.”

Apps that educate consumers about managing their money, and keep them on track, are particularly good at transforming the tedious act of banking into an exciting and rewarding experience.