Venture funding for financial technologies is outpacing any other sector. Startups alone received $34 Billion in 2018, giving rise to a new age of “digital-first” challenger banks. In board meetings at big banks across the world the phrase “Digital Transformation” is sure to be on the agenda. Both traditional and challenger banks are making huge investments in their mobile banking apps, creating customer chat bots, and adding tech to the in-branch experience (for those that have branches). But the heavy focus on online technologies is causing businesses to overlook an opportunity to apply new tech to seemingly “old school” communication channels.
While the focus on the online experience makes sense, consider that 60% of customers still prefer to receive statements and bills via mail. Especially for communications that require follow-up action, email is failing to convert successfully because email inboxes are simply becoming saturated. The average customer receives 88 emails per day, compared to only 2.5 pieces of physical mail each day. Considering these stats it’s no surprise that direct mail receives 13x higher conversion rates compared to email alone.
So why isn’t mail receiving the same attention as digital communication? Mail has historically been an expensive and challenging process to manage and execute. Unlike email there is a significant lead time for the physical production and postage. When you include creative design, pricing negotiations, list building and formatting, and proofing, fintech companies report that executing a single campaign can take up to three weeks.
Because so many of the steps in a traditional direct mail campaign are manual, they can be extremely costly, just due to the labor alone. A third of direct mail campaigns are outsourced to agencies, due to the complexity associated with a send. Outsourcing makes sense to alleviate internal manual work, however it drives up the overall cost and adds yet another layer to the process.
Maintaining accurate address data is a significant challenge for all businesses. In a recent study conducted by Mintel Comperemedia, 60% of respondents selected address data as one of the biggest challenges to effective direct mail campaigns. 20% of addresses entered online contain mistakes, leading to massive costs associated with returned or undeliverable mail. According to USPS undeliverable mail cost businesses $20B in 2018.
Not only is accurate address data required for seamless mail delivery, but it also is essential for KYC processes. US financial institutions are required to verify the identity of all their customers in a process called Know Your Customer. These requirements have given rise to a new industry of tech companies called RegTech – regulation technologies. While these third party services provide end-to-end solutions for financial institutions they are quite costly.
KYC costs only increase when you consider businesses are passing on address data that contains mistakes. For challenger banks that lack the resources of their larger competitors, costs of compliance can be a significant burden. Banks like Honeydue and Current are turning to independant address verification tools to validate the information when a customer enters it. This ensures that the information getting passed on to their KYC solution will not create unnecessary costs.
The rise of technology and APIs provides businesses the opportunity to transform a historically manual and painful process to an automated and programmatic workflow. These innovations optimize offline communications which play a critical role in the customer lifecycle. Pairing solutions for address verification and automated direct mail allows financial institutions to reliably reach the right clients, at the right time, and with the right message.
Lob brings digital innovation to your address data and physical mail. Lob is a software platform that integrates within your customers systems to power precisely timed, highly personalized printed communications, while verifying, formatting, and correcting your customer’s addresses to ensure seamless delivery. Lob’s platform fully automates the process of sending mail – eliminating cumbersome manual work, reducing costs, and freeing up teams to work on more complex and value-adding activities.