Positive CX earns bank customer loyalty

At a recent Fortune Brainstorm Finance conference in Montauk, NY, Adam Dell, founder of personal finance App Clarity, opined that there are two types of incumbent banks: “banks that know they are screwed” and “banks that don’t know that they are screwed.” While some of this may be to call out the superior CX that Marcus is introducing in the market to be the Amazon of banking, there may be some truth to that statement. Chase, Citi, BOA, TD, RBC are all investing heavily in better CX to increase revenues through customer loyalty.

Technology has had an inalterable impact on the financial services industry. Through digital transformation, traditional methods of banking have morphed to provide personalized engagement and a seamless banking experience for customers.

Before online retailers sparked the rise of consumerization through 24/7 availability, limitless choices, and personalization, loyalty in the banking sector was built on customer trust. Today, banks continue to earn loyalty, but tech-savvy customers and millennials also seek customer experience (CX) built around a digital customer journey.

Now that switching banks is no longer an onerous task, customers can choose from a range of financial services providers. Although customer stickiness depends on several factors, providing easy and convenient banking services, and high trust influence customer retention, as well as customer acquisition.

Why do customers ‘stick’ with their bank?

Notes: (1) The percentages for both graphs represent customers who gave a rating of 6 or 7 on a scale of 1─7 for each of the factors.

(2) Only the top five factors are shown in the figure.

Sources:          Capgemini Financial Services Analysis, 2019; Capgemini Voice of the Customer Survey, 2018.

As the likes of Amazon and Apple and digital banks gain customer trust while traditional banks sluggishly meet customer expectations, digital players will keep growing their customer base. Customers that trust tech firms are more open to starting a banking relationship with BigTechs.[1]

BigTech firms are leveraging their huge customer base and analytics expertise to expand both their horizontal and vertical presence. Ant Financial capitalized on its e-commerce business to expand into payments, consumer lending, wealth management, insurance, and more. With the ability to analyze vast customer data, BigTechs can create easy, effortless, and excellent digital consumer engagement.

Identifying customers’ future needs and providing appropriate personalization are critical to bank success and staying ahead of the CX curve. Banks must reimagine financial services and continuously offer new customer experiences tailored to changing requirements and lifestyles.

HSBC offers facial-recognition banking for its corporate customers and may eventually consider its extension to retail customers. Clients in 24 countries use Face ID to log in to the HSBCnet app, which already offers a nearly-instant Touch ID login.[2]

State Bank of India, the country’s largest, launched YONO (You Only Need One), a fully digital banking platform to address customers’ financial and lifestyle requirements. YONO includes a digital bank where customers can do all banking, payments, and other non-financial banking transactions; a financial superstore that offers insurance, mutual funds, and investment options, as well as an online marketplace that features options from auto rental to retail purchases to travel planning.[3]

The wide acceptance of voice-based digital assistants is a noteworthy lifestyle change for clients, and many banks are advantageously leveraging the trend. Chatbot Erica helps Bank of America customers handle basic banking needs and acts as a virtual financial advisor by helping customers in managing funds, paying bills, analyzing spending habits, earning rewards, scheduling payments, and transferring money between accounts.[4]

FinTech firms and other customer-focused players outshine traditional banks at providing superior customer experience. Banks can also deliver excellent customer experience throughout the customer journey by working together with the FinTechs. Also, effective use of data analytics can help banks gain a full view of customer’s preference and needs, helping them to come up with customized and personalized products.

While cost-effective chatbots or self-service options may be ideal for general problems or questions, human help remains the most effective support for complex issues. Bankia, one of the largest banks in Spain, is bolstering its customer relationships through the multi-channel, Connect with your Expert solution. The free service complements its brick-and-mortar offices. Connect with your Expert reaches customers via face-to-face meetings at Bankia’s standard and quick branches as well as through a 24/7, dedicated web app. The innovative solution offers Bankia customers access to a personal advisor (always the same person) for financial advice and transaction support. Aimed at digitally-savvy customers, Connect with your Expert features include customer-to-adviser video calling and screen sharing for document review.[5]

As customer experience becomes a top priority for banks, numerous transformational projects are being undertaken. Nearly 96% of bank executives interviewed as part of the World Retail Banking Report 2018 said they considered customer experience to be the number-one reason to transform.

Banks’ Drivers for Transformation (%), 2018

Note:               The percentages represent banking executives who gave a ranking of 6 or 7 on a scale of 1–7 for each of the drivers.

Sources:          Capgemini Financial Services Analysis, 2019; 2018 Retail Banking Executive Interview Survey, Capgemini Global Financial Services.

While most banks have a digital strategy in place, transformational results have been muted. Of the banking executives polled, nearly 92% said improved customer experience was an underlying principle of their digital strategy, yet only 38% said their CX efforts have been effective. The gap between bank efforts and measurable impact on customer experience is a challenge that only continued adoption and understanding of technology will resolve.[6]

Going forward, positive experiences will drive customer loyalty. Therefore, banks should reassess customer-engagement strategies for retention, particularly around digital channels for new-generation segments. While regulation gets a bad rap at times, we should recognize that regulations such as GDPR, CCPA and others are empowering customers to take their data to a better CX environment and also reduce their service costs significantly. This switching is expected to continue as fintech and bigtech continue this push to do better than the traditional banks.

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[1] The Financial Brand, “Loyalty Advantage Now Favoring Digital Banks and Big Tech Firms,” Jim Marous, January 30, 2019, https://thefinancialbrand.com/80293/trust-loyalty-digital-banking-big-tech-amazon-paypal/.

[2] Banking Tech, “HSBC unveils facial-recognition banking for corporate customers,” Antony Peyton, May 9, 2018, https://www.bankingtech.com/2018/05/hsbc-unveils-facial-recognition-banking-for-corporate-customers/.

[3] State Bank of India, https://www.sbiyono.sbi, accessed June 2019.

[4] Maruti Tech Labs website, “DOES BANKING NEED DIGITAL VOICE ASSISTANT?” https://www.marutitech.com/banking-need-digital-voice-assistant/, accessed June 2019.

[5] Bankia Annual Report 2017, “Multichannel Approach: Bankia’s Remote Personalized Customer Service Model,” Section 04.2, Retail Banking, Page 136, https://informes.bankia.com/recursos/cmsmemoria/recursos/doc/memoriaanual2017/2018/04/12/4-business-model.pdf.

[6] Capgemini, World Retail Banking Report 2018, September 20, 2018, https://worldretailbankingreport.com/