Are the customer experience threats faced by banks today real?
In today’s world, adequate attention paid to customer experience in banks will certainly lead to fast revenue growth for them. In order to excel, they also need to recognise and act on the customer experience threats facing banks today. According to a research conducted by Gallup, only 33.8% of the consumers are satisfied with the operations of their bank. Though the advent of smartphones has brought customers closer to the bank, it has also increased the complexity of delivering a memorable customer experience. Not many banks are able to realise the repercussions of not paying attention to this matter, which is leading to disgruntled customers. In order to sail through these changing market dynamics, banks must understand these five customer experience threats they are facing and what they need to do.
1. Excessive usage of technology by customers
Ever since technology has crept into our lives, it has made everything available at the click of a button. Hence, our expectation of receiving a great customer experience from every business has also increased manifold. While technological advancement supports the banking industry, it is also one of the biggest customer experience threat. For instance, the younger generation of banking customers now finds it easy to shift banks in case its existing one is not delivering an enriched digital experience or if the bank is not leveraging mobile technology effectively. Additionally, instead of considering the banks’ recommendation on purchasing financial products, customers today do their research on their own and are well-informed about all the offerings in the market.
Further, with a rise in online and mobile banking, customers are not happy getting just a generic response from their banks. They expect a personalized solution that suits their requirements appropriately. Hence it is of paramount importance that customers be engaged by use of better social and digital platforms.
2. The startup threat
The flexibility of fintech start-ups is creating a tremendous pressure on the traditional banks. The absence of legacy technology systems and of long and winding processes at these startups allows them to adopt quickly to customer demands and hence deliver a better customer experience. The startup’s ability to create and provide mobile-friendly banking experience for customers is a major reason why customers are shifting towards these new-age financial services providers.
In the last few years, mobile-based banks like Atom, Tandem, Starling, and Monzo have come forward with their offerings of current accounts that help users manage their lifestyle and money easily. Not only were these fintech start-ups able to grasp the weak gaps left in customer experience by traditional banks, they were also able to find ways to cover them up. Due to the lack of overhead costs such as maintenance of branches and call-centers, these start-ups are able to pass the benefits of their savings to customers in the form of great savings rates and fee-free cards.
For example, it was difficult for small businesses to apply for and get a loan cleared, especially if they did not have any asset to offer as collateral. A fintech player named Funding Circle, based in the UK understood this gap and was able to lure small businesses to apply for loans online. Inefficiencies in traditional banks such as complex loan application procedures and long turnaround time on those applications make new-age fintech start-ups a better alternative for customers.
3. Lack of promptness in service delivery
Imagine you order a pizza for yourself and hope to receive it within the next 30 minutes. However, the restaurant delivers a hot and fresh pizza in just 15 minutes! Pleased with this surprise and product quality, you would consider the same restaurant for your next order as well. The same applies to banks. Delivering on-time and high-quality service is an imperative need. However, banking procedures often involve several departments working together and a delay on the part of one of them can lead to a disappointment for the customer. Therefore just like the pizza place, banks need to have their internal departments aligned to deliver prompt service. As per a survey conducted by Zendesk.com, 69% of the customers associate good customer experience in banks to how quickly a solution is provided.
Life was simpler for banks when telephone and e-mail were the only modes of communication. However, with time, the increased use of social media and messaging apps have left banks in an uncomfortable position because they were not prepared to communicate on these channels. Today, just having a social media page is not enough, and not having one is not an option. Any query or complaint raised on a public forum or social media channel needs to be addressed promptly. A delay of more than a few hours infuriates the customer, leading to a damaged reputation. Therefore, along with delivering prompt service, banks need to set up a robust communication strategy that ensures quick response time to customers on every channel.
4. Cheap availability of technological tools
Technological innovation ranging from social media to IoT has allowed every industry to enhance its customer experience. This trend has caught on even in the financial services sector and most banks are using the same kind of technological advancements to serve their customers. While it has definitely made it easy for a customer to get his work done at a bank, it has exponentially increased the competition in the banking sector. By utilising better technology and automation, every bank is trying to reduce the cost to acquire and serve a customer. Cost reduction definitely allows some banks to offer the same level of service at a cheaper price. This competitiveness in the banking sector is a boon for customers because now they have better and cheaper options that weren’t available before.
5. Issues with Customer retention
Even in the past, customer retention was a problem area for banks. However, in the last decade, the entry of so many players in the market has made it tough to satisfy today’s informed and demanding customers. Furthermore, the banks have to also compete with non-banks and new-age fintech startups that are offering competing services. Moreover, customer acquisition is a lot easier today because customers are finding their way to the purchase window online.
Hence, banks need to focus on customer retention to expand and survive in this cutthroat competition. It is a known fact that a banking customer becomes profitable to a bank only after the second year of his patronage with the bank. Any customer that churns before two years is a loss-making customer for the bank. If you do not give your customers a strong reason to stay with you, then the competition will give them a strong one to leave you. Memorable service quality, enhanced customer experience, and personalised customer engagement are going to prove useful in making these customers stay with you.
There are a lot of factors that affect a bank’s relationship with its customers. The key to winning this battle lies in paying attention to customer experience and constantly working towards improving the same. Banks must use advanced data analytics to provide a personalised experience that customers would cherish. Further, reactive contact needs to be converted to proactive ones.
Finally, banks must keep their customers engaged throughout the customer journey. Most often customers feel deceived after the sales process ends. During the sales process, the bank personnel would have regular contact with the customer. However, once the sale is made the customer finds himself on a deserted island. It is critical for banks to take care of the customer’s experience through the customer’s lifecycle.