The Customer Effect
What banks stand to gain from digital gifting platforms
- Banks offer P2P payment apps but only a few participate in gifting.
- Will P2P gifting apps be joining the banking innovation fray?
September is here, which means that thanks to Christmas creep, Americans will soon begin to experience a push in Christmas marketing and merchandizing - if they haven’t already. Like merchants, banks and credit unions have been quick to hop on the Christmas commercialization wagon, running Christmas promotions for existing customers and new ones. The list of tried and true ideas, which includes holiday loans, ATM cash bonuses, and “skip-a-payment” promotions, demonstrates that banks are eager to harness the PR and profit opportunities that come with Christmas. The fact is, when it comes to digital gifting, though, banks are still largely absent. It’s not because they don’t understand that digital gift cards are important to consumers. As Geoff Thomas, managing director of customer segments and alternative channels for TCF Bank told Tradestreaming, "More than half of our total transaction accounts are opened by millennials … They grew up in the ‘gift card era’ and they are very comfortable using prepaid cards, in some cases, preferring them to traditional banking accounts." And it’s also not because fintech upstarts are lightyears ahead in the P2P payment technology department - they aren’t. Collective bank-owned digital payments network clearXchange began active processing of real-time P2P transactions back in March 2016. Rather, a large part of the reason that banks aren’t all over the digital gifting platforms is that it’s still a nascent field that's been the purview of ecommerce companies. One company that's shifting the digital gifting platform away towards fintech is Swych, which took home one of six Best of Show awards at FinovateFall 2016, held last week. The mobile app enables users to send gift cards to friends and family, which they can immediately switch for another merchant's they prefer. For now, it seems that banks’ Christmas promotions see the bank firmly enthroned as the provider or giver, with customers, the community, or those in need as the recipients. This strategy is of course firmly in keeping with the corporate social responsibility research that’s out there: customer satisfaction levels and loyalty as well as brand recognition are all positively affected by CSR. Nevertheless, banks have the technical know-how to expand their holiday promotions to include digital gifting platforms. According to Statista, the Christmas expenditure on gifts is generally $830 billion in the U.S.. To date, though, few banks have experimented with such a platform. The most prominent is German bank Deutsche Kreditbank AG, which offers digital coupons for more than 50 top brands. So far, customer response has been positive. "We started offering digital vouchers in our direct banking in 2014 and have constantly extended the variety of available vouchers since. Lately, we integrated iTunes vouchers and we are the first bank in Germany to offer Amazon vouchers," said Dana Wachholz and Markus Wittke of the bank's press office. Implementing a digital gifting platform has added benefits, as well. Becoming a space where people can give to one another, and not just pay each other, has great value. Alternative funding platforms like crowdfunding are slowly replacing houses of worship as the locus for community giving among millennials. With digital gifting platforms, banks could follow in crowdfunding's footsteps. By investing in digital gifting platforms, banks can stay true to their money-making charter while staying up-to-date with gifting trends and providing a place for customers to spread Christmas joy and cheer. And with all due respect to an in-branch visit from Santa, digital gifting platforms have better marketing potential.