UK banks in state of customer complacency amid digital disruption

Source: Redshift Research

Retail banks in the UK will have to shake themselves out of a state of customer experience complacency if they are to stave off the threat of newer, disruptive entrants to the industry in the next few years, according to research conducted by Redshift Research.

The study was conducted on behalf of strategic business applications provider Pegasystems Inc. (NASDAQ: PEGA), and raises significant questions about whether retail banks are doing enough to address the threat of disruptive services.

Based on responses from 1,000 UK banking customers and 50 business decision makers at retail banks in the UK, the survey found that more than a quarter (26 per cent) of all consumers said that they would consider moving away from traditional banks to newer, more innovative banking providers in the future. Perhaps ominously, a third (36 per cent) of UK banks also admitted that they already see new digital services as their biggest competition.

The survey follows a report, published by the Institute of Customer Service, which suggested that the banking sector only comes 6th out of 13 sectors for customer loyalty. The UK Customer Satisfaction Index also revealed that when it comes to the online experience, customers score banks at a lower level than the pan-sector, national average.

Despite this, almost two thirds (64 per cent) of UK banks claimed that they understand their customers and their needs as individuals. Just 21 per cent of customers agreed with this statement, despite the fact that nearly half (46 per cent) of all consumer respondents said that having a customer service team that listens to them and understands their needs was one of their top three customer service considerations. Similarly, more than half (52 per cent) of banking decision makers claimed that their organisation responds quickly ‘every time’ to customers requiring service – a statement that was backed up by only 31 per cent of banking customers.

This sizeable gap between the customer experience on offer and what is expected suggests that a degree of complacency has crept into traditional retail banking providers, as illustrated by the fact that more than one in ten (12 per cent) customers do nothing when they receive poor customer service from their bank, because they are resigned to it as a way of life. With a third (32 per cent) of banking decision makers admitting that customer service is ‘always’ the primary reason that customers choose to move to another provider, it seems that many existing banks are overestimating the customer experience they offer and leaving the door open to newer, more innovative providers.

Commenting on the findings, Jo Causon, CEO of the Institute of Customer Service, said: “Now that customers can switch bank accounts within seven days, they are more aware of the options and more likely to consider changing. There is no longer apathy brought about by uncertainty, meaning that strong customer service is now a key competitive advantage in the marketplace. In what is becoming a relationship-driven economy, if customers are not happy they will vote with their feet and move to the competition.”

Scott Andrick, Industry Principal of Retail Banking at Pegasystems, said: “The gap between the expected customer experience and what is actually delivered can be one of the most difficult things for any organisation to measure, but one of the most important to act upon. Retail banks will find that unless they are able to understand the needs of their customers and address their concerns quickly, effectively, and proactively, they will see more and more jumping ship from traditional providers to newer, more innovative suppliers. Today, the needle of customer expectation has moved further than ever before. To keep up with it, traditional banks will increasingly need to ensure that they are able to communicate effectively with their customers across all channels, anticipate potential problems before they arise, and resolve them quickly when they do.”
 

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