The biggest challenge in any industry, from foodservice to banking, is the fact that customer loyalty is always diminishing. With new start-ups, disruptive platforms challenging the status quo, and aggressive competitors who want to win at any cost, the quest for customer loyalty has never been more difficult. It’s not that the factors or metrics that drive customer loyalty are being questioned. Indeed, net promoter scores and the quality of service continue to be the true test of customer’s loyalty, irrespective of whether they’re delivered online, on the phone, or in person. To better the nuances driving the bond between a customer and their primary financial institution, we need to look at the flip side of the equation. That is, what’s driving a lack of customer loyalty?
Our stealth attrition study clearly identified a lack of loyalty as a growing issue, with more and more customers considering competing banks, online only financial services, and non-traditional banking options. Looking at the nuances surrounding defection, we can identify key triggers that drive preference and loyalty for one bank versus another, assuming the products being marketed are relatively similar.
The key triggers driving a lack of primary bank loyalty are:
Fewer emotional connections
In our study, more than 79 percent of respondents typically visit a branch less than once a month, with more than 25 percent visiting their branch only once a year. Less human interaction and a greater dependence on technology creates fewer opportunities to develop strong emotional connections with customers. Ironically, 25 percent of respondents in our study were “branch centric” customers – and had the second highest level of loyalty to their primary financial institution.
With so many options for banking across so many platforms, customers are becoming less engaged with their primary financial institutions. Our study found that the less engaged a customer is with their primary bank, the higher the risk of defection. Worryingly, 35 percent of customers indicating they are disengaged from their bank.
Highly transactional relationship
Over 57 percent of customers view their relationship with their bank as “transaction centric.” This means they see it as a place to access money and manage their accounts, but not as a resource for financial advice. Customers with a highly transactional-focused relationship with their bank are the most prone to defect to competing banks. Customers who are transactional digital-centric have are the most likely to consider non-traditional banking platforms.
Lack of credibility where it counts
Our study clearly identified a startling fact: only four percent of consumers view their bank as a trusted source of financial advice. This is a huge issue, especially when you consider a future devoid of hard currency, eliminating the need to visit a branch or rely on banks to access money. Loyalty will be won by providing services that can’t be commoditized such as conflict resolution, superior financial advice, and building a personal and customized relationship with customers.
So why are customers leaving your bank?
Beyond the traditional value of conflict execution and customer service, our study identified that customers leave their primary bank because of a lack of strong financial advice. That leaves customers feeling insecure about their future – a feeling exacerbated by low quality of the customer experiences and a lack of flexibility and control. For Millennials, we identified an additional need for bank platforms to provide more customization and personalization.
Primary bank loyalty is under siege. While you may be focused on making banking more convenient and efficient, that convenience an ugly underside. The fact is that banks are making it easier than ever for customers to leave them. It’s a damned-if-you-do and damned-if-you-don’t scenario. The tie breaker in this equation – and the true driver of customer loyalty – is. human interaction. Banks need to stop sacrificing quality branch experience in an attempt to cull their channel strategy.