It is well known that in any consumer driven business, the customer experience is a core contributor to business success. Over the past five years the banking industry appears to be catching onto this. This is likely due to the industry's reputation being tarnished during the recession. In a 2014 survey of banking customers by Ernst & Young, customers selected “the way I am treated” as the second most important reason for trusting their banking provider, trailing only the predictable “financial stability” of their bank. Multiple research reports have found that a positive customer experience is critical to customer loyalty.
While saying that “keeping the customer happy helps with customer loyalty” is akin to saying “water is wet”, it is amazing how banks, and to a lesser extent credit unions, have struggled to focus on creating a positive customer experience. Customer loyalty and the customer experience are always listed in the top 5 critical issues facing the banking industry. In a survey, these issues were listed as #3 and #4 respectively. It found that while 75% of surveyed financial institution executives stated that the customer experience had improved, 66% of surveyed customers saw “no change”. This disconnect between perceived improvements and actual realized change in the customer experience, is a big part of the industry's reputational issues.
The banking industry has worked hard to improve its reputation, which fell to an all-time low trust rating of only 18% according to a Gallup study in 2010. The customer experience is a big part of improving customer’s trust, which is also as one of the primary drivers of customer loyalty. The Ernst & Young survey above focuses on improving the customer experience as a key to increase growth. The most common reason customers cited for opening or closing accounts in the past year was the experience with their financial provider, more so than rates/fees or branch location!
Improving the customer experience is not rocket science. Multiple customer surveys have shown what customers find to be lacking from their bank. Most complaints revolve around making banking simple and easy to understand. This means ensuring transparency of fees, clear communication between the institution and the customer, and having a product suite that is easy to understand. Also related to simplifying banking is the ability to have an “omni-channel” experience. Brian Stephens from KPMG stated:
The banking industry is at a critical juncture where it needs to transform on a number of fronts – most importantly upgrading old and implementing new technology to enhance and simplify the customer experience.
This means allowing customers to bank through web, social media, mobile, and branch platforms seamlessly. Having all these resources available to the customer does not necessarily improve the customer experience if they are not executed well.
Additional areas where banks can improve the customer experience are problem resolution and offering sound, meaningful advice. Problem resolution is often a make it or break it moment for a customer relationship. If the customer comes away satisfied with the resolution, their loyalty to the institution is often dramatically increased. If the customer is not satisfied with the resolution of the problem, they are usually no longer a customer. Because of the zero sum nature, it is imperative for institutions to be proactive and efficient in working on customer issues. Customer advocacy and support teams that are properly staffed and well trained is critical to finding resolutions.
Financial institutions have been offering advisory services for decades. What is changing is the nature of the advice and the target demographic. In the past, the advisory services offered by banks were exclusively reserved for high net worth clients or commercial relationships. Moving forward, financial institutions are finding that investing in their customers’ financial well-being improves the customer experience and overall customer loyalty. One key point that has been shown in customer surveys is that when they are looking for advice, a face to face experience is preferred. This is a driving force behind the continued growth of branch networks at financial institutions worldwide.
As the US economy continues to improve, the banking industry is poised for strong growth. By focusing on the customer experience, financial institutions will build consumer confidence and trust. This will create momentum and give institutions that can execute a positive customer experience an advantage going into the next business cycle.
