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Retail banking customers' satisfaction does not mean loyalty

The relationship between retail banking customers and their financial institutions can often be described as strained and tumultuous. The role played by banks in the global financial crisis and its sequels of massive trading losses, Libor fixing scandals and active tax evasion scheming are certainly not doing anything to improve the confidence customers get in the entities they are entrusting with their deposits.
But that relationship is also laden with paradox. Despite the apparent breakdown of trust in financial services brands, report after report from around the world show good satisfactions of customers in their banks.

Decent satisfaction... but appalling loyalty

According to the World Retail Banking Report by Capgemini, customer satisfaction has reached a respectable global average of 65% in 2012, with regions like North America leading at 80% and banks in Asia Pacific trailing at 53%. However, attempts at gauging loyalty of the same customers shows worrying results with only 50% of customers confident that they will remain with their primary bank over the next six months.

Needless to say that customer loyalty in banking, as in any other industry, is of paramount importance, particularly in a time when banks desperately look to generate revenue. The lifetime value of loyal customers is significantly higher as they buy more banking products in support of the key events in their life. They also generally cost less to serve and naturally act as customer advocates.

Lack of trust… but likely acceptance as infomediary

The dreadful level of trust and confidence of consumers in the banking industry hides another paradox. When asked which party they would trust as a guardian of their personal digital information - or infomediary, guess who comes significantly ahead of social medial sites, telcos and even governments? Banks, of course. This is one of the interesting results of a recent report by Cisco IBSG, where banks were chosen by 42% of the respondents as the most qualified organisation they would be willing to use for a digital footprint management solution.

The optimistic way to look at these paradoxes is to believe that things can be fixed.

Increasing loyalty through financial advisory

In recent years, increased competition and fear of commoditisation (more than the image crisis of the banking industry) have been powerful drivers for banks to focus on customer satisfaction. Improvements such as extended branch opening hours or making sure that customers can accomplish a complete range of everyday banking activities online are laudable efforts. But they might not give banks that extra edge required to trigger a real increase in customer loyalty.

One obvious approach is for the banks to go the extra mile when customers face accidents of life, big (like losing a job) or small (like reverting a fraudulent transaction). Delighting customers upon those high-stakes moments, when the true meaning of "being here for you" is tested, is clearly key.

Building a long-term strategy of ongoing multi-channel assistance to customers might be a more powerful method though. Offering regular personal financial advice from experts who care, with no artificial gee-whiz factor, might be the best way to keep customer from switching. The online banking service is a natural and cost-effective channel to deploy this value-add financial advisory.

And, beyond increased loyalty, what better way for banks to drum up some much needed customer trust and to improve public opinion than to fulfil their social role and responsibility as financial advisors?

 

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Comments: (3)

A Finextra member
A Finextra member 06 June, 2013, 10:58Be the first to give this comment the thumbs up 0 likes

Agree with you thoughts, Olivier. Multi-channel and especially online banking are important "customer experience" drivers. But I think, many banks are struggling with their huge existing investments and age-old  core infrastructure. And the additional layers of channels, adds to the woes at times. But this scenario need change over period of time..

Shripad Vaidya (Founder - "Online Banking" community, finextra)

 

   

A Finextra member
A Finextra member 07 June, 2013, 11:48Be the first to give this comment the thumbs up 0 likes

Well done on tackling the vexed issue of bank relationship conflicts and paradoxes.

In yor article you suggest increasing loyalty through financial advisory and specifically: "The online banking service is a natural and cost-effective channel to deploy this value-add financial advisory."

I have to say that I disagree with you on this.

From our experience giving online financial services advice has isues around regulatory restrictions, (about what you can say), and the fact that it is self service. Both issues will combine to negate the relationship building component that is critical in developing loyalty.

New technologies and devices such as Tablet Banking do provide opportunities but these still have some way to go.

Olivier Berthier
Olivier Berthier - Moneythor - Singapore 07 June, 2013, 12:58Be the first to give this comment the thumbs up 0 likes

Mark, thanks for your comment.

I get your point on regulatory issues and I do agree, particularly when it comes to providing investment advice.

However there are many insights which can be provided online by financial institutions to assist their clients over and above the basic reporting of transaction details and without crossing the regulatory line. Those are the ones I was referring to.

It might be better to call it money management and financial literacy 101 then, rather than "financial advice". Take spend analysis, proactive alerts and anomaly detection or peer comparison and benchmarking, for example. I insist that the online channel is an excellent medium for this kind of more intelligent transaction reporting, whether you're on the Web-based channel, tablets or smartphones apps.

 

 

Olivier Berthier

Olivier Berthier

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Moneythor

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