Facebook Zero Friction Report: Mobile Can Help Financial Sector Net Over $327 Billion In Sales
*This is a sponsored article by Facebook
The financial industry in India has recorded strong growth in recent years due to disruptive/innovative business models and greater digital adoption. This growth is not stagnating anytime soon.
The retail credit (loans) outstanding is expected to grow at around 15 percent per annum to $725 billion by 2022. The insurance industry is expected to grow at around 15 percent p.a. to $160 billion by 2022. Not to be left behind, the credit card transaction market is poised to grow at around 20 percent to $143 billion by 2022. This is a great opportunity for banks, NBFCs and insurance companies to increase their market share or simply benefit from a larger pie. At the same time, these brands need to devise the right marketing strategy not only to encourage consumers to buy their financial products but also to reduce prospects from dropping out during the purchase process.
Facebook, in association with Nielsen and KPMG, commissioned a study to understand the reasons for dropouts during the purchase journey of a financial product. The study covered credits card, insurance, and retail loans. The resulting report titled “Eliminating Friction in Financial Services Path to Purchase” breaks down the purchase journey of a financial product and identifies reasons for dropouts in each phase. The report also looks at the contribution of media to the dropout rates and discusses how brands can optimize their media strategy to reduce the dropout rates.
Any inconvenience or additional effort at the initial three stages can result in customer dissatisfaction and dropouts during the purchase process, referred to as ‘friction’. In short, a friction touchpoint is anything whose presence or absence causes inconvenience to the consumer during the purchase process.
The aim of any bank/NBFC shall be to reduce friction touch-points during the purchase process. This can not only increase sales and revenues but can also reduce customer acquisition costs. There could be many sources of friction, with media being one of the most prominent. The brands use multiple media viz. television, print, outdoor, radio, online or their branch network to communicate with the consumer during their purchase journeys.
Let’s look at the impact of media friction during the purchase of financial products.
Credit Card Purchases
As per the study, of the 40 percent who were planning to apply for a credit card, 29 percent dropped out due to friction at various stages of the purchase process. At 11 percent, media friction contributes to one-third of the total friction. Media friction is the highest at the awareness stage. Different medium offers varying levels of friction at each stage.
Friction points and their impact can be different based on gender, age group, consumer segment. Therefore, there cannot be a one-size-fits-all solution.
How Can Mobile Help?
Currently, nearly three out of five credit card purchases are influenced by mobile. By 2022, eight in ten credit card purchases will be mobile-influenced. Not just that, mobile purchase journeys are around 22 percent shorter than traditional offline credit card purchase journeys. Additionally, mobile can provide for better-personalised experience and targeting.
According to the Facebook report, by enhancing mobile in the media mix, media friction in the purchase journey can be reduced to 8 percent from 11 percent by 2022. Therefore, by directing a larger share of marketing activity towards mobile, the brands can reduce the impact of media friction. It can help credit card brands tap into a potential sales opportunity of $38 billion.
The study segregated the data for life insurance and other insurance products (auto, health, general). However, the findings for the two insurance categories were quite similar. Of the 49 percent really interested in purchasing an insurance product, friction caused around 37 percent to drop out during the purchase journey. In 2017, media contributed to nearly half the friction in the two categories.
From the brand’s perspective, nearly three out of four really interested in purchasing an insurance product dropped out during the purchase process. Media contributed to half those dropouts. This is a massive missed opportunity for the brands. For both life and other insurance products, the maximum dropout was at the awareness stage, with media again a major culprit. As seen in credit card purchases, the impact of various touchpoints can vary across gender, age groups and consumer segments.
How Can Mobile Help?
As per the report, an estimated eight out of ten insurance purchases in 2022 will be mobile-influenced. Mobile-induced insurance purchase journeys are 17 percent shorter too, an indicator of lower friction. Mobile media provides for better targeting and customized purchase experience. By effectively including mobile in the media mix, brands can reduce the media friction by 5 percent each in life insurance sales (18 percent to 13 percent) and other insurance sales (16 percent to 11 percent) by 2022. Such a reduction in media friction alone can lead to potential premium income opportunity of $54 billion in life insurance premium and $16 billion in other insurance premium.
The Facebook study considered the data for two types of loans i.e. personal loans and other loans. Personal loans are unsecured loans taken by individuals for debt consolidation, vacations, living expenses, weddings, and medical bills. Other loans include all the other retail loans such as home, auto, and consumer durable loans.
The findings were similar for the two loan categories. Of the 41 percent who are really interested in taking a loan, 32 percent drop out due to friction. Almost one out of four consumer dropouts happen due to media friction in personal loan and other loan categories. As seen in credit card and insurance purchases, the impact of various touchpoints can vary across gender, age groups and consumer segments.
How Can Mobile Help?
By 2022, an estimated six out of every ten personal loan purchases and seven out of ten other loan purchases will be mobile-influenced. Mobile journeys are around 8 percent shorter than traditional offline loan purchase journeys too. By optimizing mobile in the media and communication mix, brands can reduce media friction by 3 percent from 8 percent to 5 percent by 2022 in both personal loans, and other loans purchase journey. This can create loan sales opportunity of $219 billion ($38 billion for personal loans and $181 billion for other loans) and reduce the cost of customer acquisition by around 21 percent and around 24 percent for personal loans and other loan sales respectively.
How An Effective Mobile Media Strategy Helps
Traditional broadcast media (print, outdoor, radio, television) cannot provide customized and targeted communication. Consumers in the financial services category are not homogenous. Therefore, the communication cannot be homogenous. With mobile as the medium, it is easy to customize communication at awareness, consideration and intent stages based on gender, age group, consumer segment, consumer profile, and preferences. This is expected to reduce media friction.
The number of mobile internet users in India is expected to reach 677 million in 2022, from 420 million in 2017. Mobile is also expected to influence a significant majority of purchase decisions. Therefore, the banks and non-bank finance companies, looking to grow their retail credit, cards and insurance verticals, need to be aggressive with their mobile strategy.
An effective marketing strategy can not only drive sales but also reduce customer acquisition costs, giving a significant boost to the bottom line.
There Is A Zero Friction Future
The consumers of financial services do not belong to a homogenous segment. This has led to the emergence of different pathways, with digital playing a key role in shaping most, if not all, pathways. With the increased adoption of digital and rapid enhancement in consumer-friendly technologies, such as artificial reality and virtual reality, consumer analytics through artificial intelligence, machine learning and personalized offers, the path to purchase is expected to become shorter and smoother. With this increasingly non-linear journey, the purchase cycle seems to be gearing up for a frictionless future.
What do you think?
To read the full report, click here.