What is the future of value-added services (VAS) and how to tailor them to customers?

We recently had the opportunity to talk about the future of VAS in banking with the participants of UX Poland during the World Cafe panel. Value Added Services (VAS) are non-banking services that add value. Banks are implementing such services into their offer in order to stand out from their competitors and raise the attractiveness of traditional banking services, which form the basis of their offer. As there is a wide range of available services, there are both plenty of interesting solutions as well as misguided ideas on the market.

The rise of VAS

The handling of traditional banking services and products has moved from physical branches to online and mobile banking. Online banking has become so widespread that at times these activities no longer provide sufficient value for users. Therefore, banks have started to look for new areas to enhance their customers’ satisfaction. In addition to developing financial products, banks have started to offer services that have little to do with banking, but can interact with it in interesting ways. For example, buying cinema or theatre tickets, paying parking fees, and so on.

Experts from Deloitte have distinguished six categories of VAS that work well with banking:

• Commercial offers (shopping platforms and discounts)

• Loyalty (rewarding loyal customers)

• Stand-alone insurance (life and property protection)

• Advisory (tax, cyber security)

• Digital administration (eGov)

• Support services (car rental)

As you can see, the range of possibilities is quite broad.

Banks have a certain advantage in offering VAS, which puts them in a better position than mobile operators for example. It has been noted that customers of several of Poland’s largest banks use their bank’s mobile app and its authentication system for government related paperwork. The overwhelming factor in this case is that customers trust their bank when it comes to personal data protection, which can be a major competitive advantage.

How it’s done around the world

It’s fairly easy to find examples of VAS among the world’s leading banks that benefit both the customer and the business. One of the leaders in providing value-added services is the British bank Monzo, where customers can take advantage of services such as:

• switching their electricity, cable TV, or mobile service provider to the cheapest option on the market,

• support in choosing their home insurance,

• support in choosing a mortgage lease.

In Scandinavian countries or Singapore, we can find banks where VAS are already an integral part of the offer. Banks such as Danske Bank, DNB and Nordea offer:

• advice and assistance in processing administrative matters,

• advice and guidance on career,

• development,
  help in selling real-estate.

A well-known example where VAS are offered on a large scale is the Hungarian bank OTP which has its own app Simple. It features more than 40 VAS, such as:

• buying tickets for the cinema, theatre and events,

• event locator,

• food ordering,

• and more specialised ones, such as buying transport vignettes.

The Simple app is used by more than 700,000 people. This is almost twice as many users as the traditional OTPi banking app. In addition, the Simple app is available to both OTP’s customers and external users, therefore the range of services can grow even further.

Poland versus the world

Compared to foreign banks, Polish banks still have a lot of catching up to do. However, valuable examples can already be found that are worth looking at and observing in the future.

The ING bank’s offer includes the MyServices app, Navidom – an offer that includes additional payment options and assistance in buying a property. The bank supports customers in the selection of a suitable flat by providing a list of steps and documents needed for its selection. It then presents step-by-step information about the mortgage needed for the purchase of the property. This information is then complemented by all the additional costs that arise in the subsequent stages of purchasing a flat.

SGB Co-operative Banks offer a unique way to manage subscriptions. The SGB Group in Poland was the first to provide a subscription management service in a banking app. The subscription module developed by VISA and used in SGB Mobile has gained recognition among foreign banks, including the ANZ banking group from New Zealand. Thanks to this service and with the help of the banking app, customers are able to control things such as where their card details have been stored and receive information about recurring payments paid with the card. Apart from its simplicity, the main advantage of this solution is the ability to contain all recurring automatic transactions made from the account in one place. Subscription is intuitive. Simply move the slider next to the relevant service to block the possibility of automatic payment. The customer must remember, however, that using this function does not mean cancelling the service, although in the event of non-payment the service in question will in time cut the customer off on its own.

Revolut is a good example of a financial product that, in our opinion, offers additional service that correlate very well with their core value proposition and offer. Revolut users mainly use the app when travelling to make payments in a foreign currency. In addition, Revolut offers travel insurance, which can be paid in packages, but also separately for each day. In addition, premium users have free access to services such as airport lounges, VIP service, discounts on flights and many shopping promotions. In this case, a good understanding of the segment and its context has created an interesting offer.

Millenium and its Goodie app is offering to refund some of the money spent on online shopping. The service covers almost 800 well-known online shops where customers receive the so-called cashback. The mBank offer, mOkazje, which offers customers a portion of their money back for their purchases works in a similar way.

Thanks to the Santander mobile app, you can order flowers delivered to your home. However, this service is controversial and several misconceptions can be pointed out. For example, the offer is not closely linked to payments and does not solve the basic daily pains of the customer. But such a value proposition may work in the context and given time the user is in. Maybe on a day-to-day basis users would not use such a service, but we can imagine the popularity of this offer on Valentine’s Day or Mother’s Day.

It is interesting to note that Mastercard is working on the development of the VAS Introducer tool, which is a collection of VAS. This tool makes it easier to securely implement value-added services to the banking world, while taking the burden off banks to work with different providers on an ongoing basis.

Poles want VAS

As it turns out, more and more Poles are open to VAS. According to data presented by Deloitte on such services in banks, more than 50% of Poles are already reluctant to open accounts to use typical online services. Smartphone users use an average of 10 apps, which can easily be turned into one (as the SGB example shows). They are often looking for solutions that help them bring everything together in one place. A banking app could naturally become such a place.

Poles see opportunity in bank offers for:

• medical services,

• e-commerce,

• online safety,

• or access to online courses

Unfortunately, VAS offered by Polish banks are still singular and not always profitable options. However, experts say that investing in VAS can translate into many benefits for banks. The combination of their good image, the trust customers have in them and their experience in the financial industry gives them a major competitive advantage.

The power of qualitative research in selecting VAS

The success of selecting the right service is a good understanding of the targeted segment. Therefore, it is good to talk to representatives of the segments to which we want to offer an additional service. A good example of this is Revolut, which is developing from a travel payment application into a bank that offers many additional segments related to money management. The best preparation for the selection of an audience segment is desk research, i.e. a search for trends and reports in the area of interest. Then it is necessary to map (e.g. using the “jobs to be done” methodology) what the segment’s needs may be, which of those are still unmet and what solutions can be offered. Based on this research selected offers can be proposed and discussed, through an in-depth interview, e.g. in the form of a ‘buy a feature’ test.

What’s next?

What might be the future of VAS and what will ultimately make the user want to pay for subscriptions, access to medicine and electricity through a banking or telco entity? There are a few key principles to consider.

• Banks need to give services that revolve around the wallet (e.g. subscriptions), just as telcos operate in the area of communication technology.

• The overriding value that additional services should bring is to provide convenience of use and customisation. Then time saving, and finally it has to tie in financially (put simply, the offered service has to be cheaper).

• Services or products should be tailored not only to the segment in question, but also to the context of the customer persona. To this end, contextual personalisation is important, which will happen in the background, based on advanced data analytics and the situation in which the customer finds themselves.

• Partnerships with providers of a range of services included in the VAS offered should be developed.

What’s coming next?

Banks already have an advantage in offering VAS. Users trust banking institutions and will be more willing to share their data with a bank than with other institutions (e.g. a mobile operator). On the other hand, observations of foreign examples indicate that properly prepared and tested VAS tools allow banks to make money from risk assessment and money trading by linking non-banking products to banking.

Banks have the additional advantage of huge analytical capabilities, based on quantitative data and customer operations. It therefore seems to be much easier for them to pick up on recurring trends and changes. They have naturally moved part of their business to the online world, which means they have access to a whole range of additional services and offers capable of attracting customers. To put it simply: wherever a customer spends money, the bank has the chance to help or direct them in their decision or facilitate the arrival at a destination with additional tools. Which is the main idea behind the added value that are VAS.