Big banks have spent a lot of time and effort improving their image and performance in recent years, yet customers are switching financial service providers at an unprecedented rate. Continued pressure in a competitive market flush with options for consumers and a shift in customer needs is driving this attrition. Banks are introducing various initiatives to adjust to the change, with a strong focus on digital banking and improved customer service, but results have been mixed. In an attempt to better understand this trend and develop strategies to decrease the rate of attrition for big banks, we completed a study on stealth attrition in the banking industry, interviewing over 1,000 banking customers. The study helped us identify who is leaving, where they are going, and why. Here are three customers who are thinking about leaving your bank, and what you can do to keep them:
1. The customer you’ve taken for granted
This customer falls into our “branch-centric” category and is typically a pretty loyal client. They report a higher level of satisfaction with the branch experience than other customers, and may not even have a banking app at all. They visit the branch frequently compared to the overall sample, with 26% of them going to the branch weekly. However, if not given recognition for their long-term loyalty, this customer may begin to consider switching to another traditional bank.
Why? In spite of being with their bank for years, this customer has not been rewarded for their patronage. They would be happy to consolidate their services under one financial institution if there was a customer loyalty program in place. Having their bank help them save money and take care of their overall financial well-being is important to this client, who earns less than the overall sample. Banks can keep this customer by taking their overall relationship into consideration when offering new services and rewarding them for their loyalty – with more than just lip service. VIP zones are another way banks can show loyal, high-value customers that they recognize their importance. Since this customer frequents the branch more often than others, the physical branch and staff must be leveraged in delivering these rewards.
2. The cynical customer
This transaction-focused customer thinks of banking as a chore and does not enjoy the branch experience. They do not view their relationship with their financial institution as being trusting or long-term and report high levels of frustration at numerous points in the customer journey. Seeking out the best rates, their services are spread out between a number of financial institutions. This points to a lack of differentiation between banks – this customer sees them as all the same and has no qualms about choosing the best rate for the product or service they are seeking, regardless of whether or not it is with their primary bank. This customer may be a small business owner looking for financial advice for their business and personal finances, but currently looks online or seeks guidance from friends and family. This customer is the most likely to move their financial services, and are likely to be considering either a different traditional bank or an online-only bank.
Why? This customer has a negative, transaction-based relationship with banking. They see the branch as uncomfortable, impersonal, and unenjoyable. In order to keep this client, big banks need to reimagine the branch as a hub for financial advice and added-value services: respondents in this high-risk group cite access to financial experts, seminars, coaches, and services for personal and small businesses as key reasons they would pay more or visit the branch more often. This means engagement in the branch must extend far beyond customer service and problem solving. This customer does not need a teller to deposit their money – this is a simple task they can complete with their phone or with an ATM. They are looking for expert financial advice they can trust as well as added-value services for small businesses. Banks will need to rethink their staff’s skill set and their staffing model to meet these needs. We recommend that banks consider creating small business hubs in key locations – these will be particularly relevant to the cynical customer.
3. The customer who wants what they want when they want it
Although this customer makes up the smallest demographic in our study, they also skew young which could be an indication the segment will grow. This customer is heavily reliant on their mobile phone for banking and is primarily concerned with flexibility and convenience, expecting products and services to be a perfect fit. This customer also earns more than those in other groups, so although they made up a smaller portion of the sample and are the second most likely to switch, their loss represents a high risk. Although they are digital-centric, they are not likely to go to a non-traditional bank, but do consider online-only banks as a viable option and have no significant loyalty to their primary financial institution.
Why? This customer is looking for exactly what they want when they want it. They will seek out rates, services, and packages online, but they’re not just looking for lower rates. They want custom-fit products and services that include customer recognition, advice, money-managing options, and friendlier, more knowledgeable staff. Given their preference for online banking, banks should leverage data to curate a personalized experience that predicts what this customer will want and offer relevant advice proactively. Research shows younger customers will accept data collection if there is some benefit to them and Millennials and Generation Z see customization as an important factor in making decisions. Banking apps should feel more like social media feeds and added-value options such as savings programs should be intuitive, customizable, and fun. The key is that service and offerings must fit the individual specifically rather than appearing to be a generic offering that will be made to everyone.
Getting to know who your banking customers are and approaching the issue of attrition from their perspective is the first step to addressing the slow drip of customers away from your bank and toward the competition.