LONDON (8/9/12)--Forty percent of consumers in the world lost confidence in the banking industry in the past year, according to a new global survey by London-based Ernst and Young. They are less loyal and are switching banks--many to more than one financial institution. It is the year that customers are taking control of their banking relationships.
That could bode well for credit unions, which already are experiencing unparalleled growth in membership. Credit unions must ensure that disgruntled bank customers can make the switch to low fees and better rates and better member service at credit unions.
Among the survey's findings:
- Less than half (44%) of bank customers say their bank adapts products and services to meet their needs; 70% say they are willing to provide banks more personal information but they expect tangible improvements in the suitability of products and services they are offered.
- About 22% want lower costs and better service, with improving fees and charges a top priority, followed by strengthening online and mobile banking. But they want more than a better deal; they want flexibility to shape the relationship, contacting their bank when and how they choose. They prefer online channels for simple transactions but demand high quality personal service for more complex transactions and advice.
- Banks must choose the model (low cost competition, high touch service, accessibility) for where and how they compete.
Ernst and Young urged banks to give customers more flexibility, help customers to shape their experience, and shape business models around customer needs. It made several suggestions for each area. Credit unions can monitor how banks react. If banks take the suggestions to heart, credit unions know their competitors will be focusing their efforts in the marketplace to these areas.
Give customers more flexibility:
Make pricing and service promises transparent. Banks will need to rebalance fee structures for clarity for customers and sustainability for regulators and investors.
Offer segmented levels of service: Customers can opt to buy into certain products and services, earn upgrades through loyalty in terms of longevity, share-of-wallet or value generated by the customer.
Move from multi-channel to omni-channel distribution. Customers care more about convenience than channels and want a fully integrated banking experience that combines advantages of all the channels. Omni-channel distribution can leverage data gathered from all channels.
Help customers to shape their experience:
Encourage customer self-service. Banks need to influence customers' decisions to manage their revenue effectively, which means improving how they provide information and advice. Target self-directed customers and encourage greater self-service through financial planning tools, demonstrations of "how people like you are investing," or ranges of product and pricing bundles.
Shift marketing from "push" to "pull." Word of mouth is gaining importance and direct selling is waning. Recruit satisfied customers as advocates. Recruit online affinity groups as marketers by letting them select and shape the communications they receive.
Develop flexible loyalty programs. Loyalty programs are a growing trend in some markets. Most customers want financial rewards. Although costly, there are benefits in loyalty and advocacy. Tailor programs for affinity groups and let customers choose rewards based on their value to the bank.
Shape business models around customer needs:
Make low-cost digital channels customers' preferred choice. Determine which services customers want to handle through branches and encourage--not force--other transactions to move to digital channels, using price incentives, if necessary.
Prioritize investment on critical customer interactions. Focusing operational improvements on these will optimize the impact on attrition, dormancy and loyalty, and benefit their costs to serve. Target limited capital spending budgets for maximum effect on customer satisfaction.
Use innovative technology to deliver the retail bank of the future. The use of cutting edge technology is vital to all other implications identified, including breaking down silos, creating omni-channel distribution, developing innovative rewards for loyalty and giving customers the ability to personalize products and services. Banks will need to partner with technology innovators.
The study also identified 10 critical customer interactions.
- Changes to fees and charging structures;
- Account switching;
- Account opening or closing;
- Life events (marriage, birth and so on);
- Change-of-account details;
- Complaint handling;
- First time into the debt collection process;
- Lost or stolen card;
- Setting up a payment; and
- Buying a new product.