Putting a Value on Customer Experience in Retail Banking

18 Aug 2017 - OB Insights

As artificial intelligence, social media and mobile first design start to dictate customer experience, banks will need to incorporate new services at the risk of upsetting a volatile customer journey. This article highlights some stats on the importance of getting this right.

Many return-on-investment stats are mooted in support of user centred design and its impact on revenue. One of the most striking examples is in the retail banking industry.

A good customer experience is associated with growth rates 163% higher than the average - a fact supported by the expansion of banks like First Direct and TSB - two of the most user friendly brands to emerge from the account switching revolution.

The Importance of “Moments of Truth”

Banks rely heavily on the customer experience benchmark known as the Net Promoter Score. Those with scores above 60 will tend to see 26% more growth in operating income than those with scores below 60. A good score will help to build-up a reputation in the media, and encourage trust in the service.

This clear reaction to service standards reflects an industry which is built on customer experience, which in turn means that banking customers are some of the most volatile when they feel this trust has been broken or they aren’t being served.

Customers react strongly to simple one-off encounters which can quickly transform their relationship with the bank - summed up by the World Retail Banking Report as ‘Moments of Truth’; these moments can be fairly innocuous interactions in the customer journey such as changing your billing address or simple notifications, where customers come away feeling positive, or they meet friction.

It therefore makes sense that a recent survey reported 54% of banking professionals predicted the biggest trend of 2017 would be to iron out any friction in the Customer Journey. (Despite the fact only 37% of banks have a formal Customer Experience plan to support this philosophy, although 80% plan to invest more in the next three years.)

The message we take from this is that Banks believe consolidating the overall customer experience is more important than technological experimentations.

Removing friction in the customer journey might be sufficient right now - the impact of a bad experience is often stronger than a good one - but a conservative approach to new technology won’t wash with a growing audience of millennials.

The Value of Engagement and the Impact of Millennials

In the past, the conversation in the banking industry boiled down to a fairly simple question: How to retain loyal customers and acquire new ones. The benefits of actually engaging the customer base would often get buried in the fight for territory.

Banks are now being challenged to engage audiences through combinations of Artificial Intelligence, home assistants like Alexa, social media, and mobile. These technologies can target customers individually, cross-selling products and services which they know that particular customer would be interested in.

According to a recent KPMG survey, personalisation alone accounts for 23% of the overall customer experience score. The reward is clear - customers who are fully engaged bring 37% more annual revenue to their bank than customers who are actively disengaged; for example, banks could dominate simple cross-selling markets like travel insurance.

Problematically a recent Gallup poll stated:

Only 25% of Millennials are fully engaged customers, and their engagement is highly dependent on technology. In order to attain their attention brands must achieve excellence in every channel.

This has influenced many digital challenger banks towards a technology-led approach, perhaps at the expense of building this technology into a unified customer experience, but then all banks have vastly different growth strategies and audiences.

Digital challengers have less to lose and everything to gain, but for all banks, technology adoption should never be the end-goal in its own right. It’s application as part of the wider customer experience and how it responds to the individual is everything.

Engagement in banking can be a complicated subject. Customers don’t and won’t want to engage with their bank in the same way they do with recreational brands or apps.

But they do appreciate services which are always available, non-invasive, timely, and personalised.

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