Mastering multi-brands is key for today’s banks

Multiple brands allow financial institutions to carefully target consumers—but the regulatory ramifications can be challenging.

This content originally featured in a Forbes article in October 2024.

In recent years, financial institutions have increasingly adopted multi-brand strategies to diversify their offerings, capture new market segments and enhance customer loyalty. Based on my experience in the banking and financial services industry, there are multiple facets firms must consider when adopting a multi-brand approach, including market drivers, strategic objectives and consumer psychographics. Regulatory considerations are also key as financial organizations mull over whether to use multi-brands or not. Other key aspects to consider are technological influences, customer experience, competitive landscape, financial performance and future trends.

Market analysis

The shift toward multi-branding in the financial sector is driven by several market trends and consumer behaviors. The rise of digital banking, changing consumer expectations and the need for personalized financial services are significant factors. According to reporting by American Banker, some traditional financial institutions have developed online-only counterparts to target niche audiences and experiment with new technologies. For instance, American Commerce Bank launched digital-only Monesty Bank, which is meant for people of all ages but with a special lens on older adults and their caregivers.

Strategic objectives

Financial institutions pursue multi-brand strategies for various strategic objectives. A large number of leading financial institutions have launched or are planning to launch niche brands. The strategic objective for each can be varied. These might include capturing new market segments; developing a "one-stop shop" mobile app for customers' convenience and to drive engagement; investing in the next generation of consumers; diversifying risk; and enhancing customer loyalty.

By offering distinct brands, institutions can tailor their services to meet the unique needs of different customer groups.

Brand differentiation

Differentiating multi-brands is crucial for financial institutions to avoid cannibalizing their existing customer base. Each brand must offer a unique value proposition. By clearly addressing different target audiences for each brand, your brands can exist in the same market without competing against each other.

For instance, Goldman Sachs’ Marcus brand focuses on high-yield savings accounts and personal loans, targeting tech-savvy consumers seeking competitive rates. This differentiation helps Goldman Sachs cater to diverse customer needs without diluting its primary brand.

Consumer psychographics

Understanding consumer psychographics (lifestyle, values and attitudes) and segmenting your audience into buckets based on common psychographic characteristics is essential for successful multi-branding. From there, you can begin to understand your audience's deeper motivations and anticipate their needs, then align your branding strategies with those.

For example, digital-only brands often appeal to younger, tech-savvy consumers who prioritize convenience and digital engagement. These consumers value seamless, efficient and innovative banking solutions, which digital-only brands are well-positioned to offer. Niche digital offerings can be used to attract specific market segments—for example, physicians with high student debt.

Regulatory considerations

Launching multi-brands involves navigating complex regulatory landscapes. Financial institutions must ensure compliance with regulations governing consumer protection, data privacy and financial stability.

The Consumer Financial Protection Bureau, for instance, enforces regulations such as the Equal Credit Opportunity Act and the Truth in Lending Act, which are designed to protect consumers from unfair practices. Regulatory requirements can vary significantly by region, impacting branding and marketing strategies. For instance, the European Union’s General Data Protection Regulation imposes stringent data protection requirements that differ from those in the US. Institutions must stay abreast of regulatory changes to mitigate risks and ensure smooth operations.

Technology and innovation

Technological advancements play a pivotal role in the success of multi-brands. Digital banking platforms, mobile apps and fintech partnerships enable institutions to offer innovative services. These innovations help institutions stay competitive and meet evolving consumer expectations. The integration of these technological advancements helps financial institutions remain relevant in a rapidly changing market. By adopting new technologies, banks can improve operational efficiency, reduce costs and offer personalized services that cater to the unique needs of their customers.

Customer experience

Ensuring a consistent and seamless customer experience across multi-brands is critical. Financial institutions must manage customer expectations and maintain brand loyalty. According to Kantar, financial institutions that excel in customer experience see a 1.9X higher recommendation rate and a 2.1X greater likelihood of customers expanding their product portfolio.

A positive customer experience can drive brand loyalty and enhance the overall reputation of the institution. A McKinsey report highlights that the lifetime profitability of a satisfied customer willing to recommend the bank is five to eight times greater than that of a customer with a negative perception.

Financial performance

The financial performance of multi-brands is a key consideration for institutions. Metrics such as customer acquisition costs, revenue growth and profitability are essential for evaluating success.

A well-executed multi-brand strategy can enhance financial performance by diversifying revenue streams and reducing risk. Institutions must continuously monitor and optimize their multi-brand portfolios to achieve sustainable growth.

A bright future for multi-brands

Looking ahead, several trends are expected to shape the future of multi-branding in the financial sector. Emerging technologies such as artificial intelligence, blockchain and open banking will drive innovation and enable more personalized services.

The adoption of a multi-brand strategy in banking offers a dynamic approach to meeting diverse customer preferences. I have seen firsthand that by leveraging multiple brands, banks can tailor their services to different market segments, enhancing customer satisfaction and loyalty. This strategy not only allows for greater market penetration but also fosters innovation and flexibility within the organization.

My reading of this trend is that as the financial landscape continues to evolve, a multi-brand approach positions banks to better navigate competitive pressures and regulatory changes, ultimately driving sustainable growth and resilience in the industry.