E&Y advises Banks:Use innovative technology to deliver the Retail Bank of the future

The massive Ernst & Young Global Consumer Banking survey of nearly 30,000 bank customers around the world reveals a host of insights and patterns behind their behavior.

 Globally 12% of respondents are thinking about switching banks

Customers’ increasing willingness to change banks is reflected by the increased number of banking relationships. Although customer dynamics vary between different markets, there is a clear global trend toward customers using more than one bank — known as multi-banking. Globally, those with just one banking relationship have fallen from 41% to 31% since 2011, and those with three or more banks have increased from 21% to 32% in the same period. The growth in multi-banking is being driven by a desire to obtain the best rates (34%) and to receive the best product or service (34%).

 

Customers’ increasing willingness to change banks is reflected by the increased number of banking relationships. Although customer dynamics vary between different markets, there is a clear global trend toward customers using more than one bank — known as multi-banking. Globally, those with just one banking relationship have fallen from 41% to 31% since 2011, and those with three or more banks have increased from 21% to 32% in the same period. The growth in multi-banking is being driven by a desire to obtain the best rates (34%) and to receive the best product or service (34%).

Customers want to play an active role in customizing their products and services

Globally, only 44% of customers say their bank adapts the products and services to meet their needs. The survey results show that 70% of customers are willing to provide their banks with more personal information. In return, customers expect to receive tangible improvements in the suitability of products and services they are offered. Customers prefer online channels for simple transactions, but they also demand high-quality, personal service for more complex transactions and advice.

For large retail banks, choosing where and how to compete is a complex challenge. They need to deliver the level of personalisation and flexibility customers want, and develop differentiated products and services — all while lowering costs and generating sustainable profits.

What Should Banks Do to give customers more flexibility and at the same time minimize costs?

Though there is no simple solution, E&Y researchers and analysts could come up with some practical suggestions such as

 Offer segmented levels of customer service

Customers should have the option to buy into certain products and services, as well as the ability to earn upgrades through loyalty, whether in terms of longevity, share-of-wallet or the value they generate.

Move from multi-channel to omni-channel distribution

Customers care more about convenience than about channels. Banks need to look beyond multi-channel toward a fully integrated banking experience that combines the advantages of physical branches and in-person interactions with the information-rich digital channels. Omni-channel distribution leverages customer data gathered from branches, website visits, social media and elsewhere. Marketing offers are customer specific, rather than channel specific, and allows customers to purchase a product in one channel that they had researched or seen promoted via another channel.

Encourage customer self-service

By regaining influence over customers’ decisions, banks can manage their own revenue more effectively. To do so they need to improve how they provide information and advice. Banks need to 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”

The growing importance of word of mouth and the waning power of direct selling have implications for banks’ marketing strategies, which need to shift from push to pull. Banks should aim to recruit their satisfied customers as advocates. They also could recruit online affinity groups as marketers by letting them select and shape the communications they receive.

Develop flexible loyalty programs

Banks need to capitalize on customers’ growing enrollment in loyalty programs, especially in emerging markets like India (48% in 2012 versus 26% in 2011). Most customers want financial rewards. Although costly, such rewards offer huge potential benefits in loyalty and advocacy. Banks should tailor programs for affinity groups and let customers choose rewards based on their value to the bank.

Prioritize investment on critical customer interactions

Customers identify a number of bank interactions as particularly important. Banks that focus operational improvements on these areas will optimize the resulting impact on attrition, dormancy and loyalty. They will also achieve a benefit in terms of their costs to serve. Banks recognize the importance of operational investment, but they will need to carefully target their 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 of the other implications we identify. This includes breaking down silos, creating omni-channel distribution, developing innovative rewards for loyalty and giving customers the ability to personalize their products and services. Technology can also help to maintain intimacy as customers move towards digital banking and greater self-service. To achieve this, banks will need to partner with technology innovators.

Along with people and process improvements a large Private Bank in India tried to adopt technology in order to empower its employees and influence customers to establish a more engaging banking relationship. And it worked wonders for them increasing their customer satisfaction, reducing turn around times and improving employee productivity.What do you think about the observations and the next steps to make your bank a customer-centric Bank – tell us, we’d love to know!

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Download the Report

To know more, do check the Ernst & Young’s latest survey of retail banking customers around the world. The study examines the views of more than 28,500 banking customers in 35 countries, gathered in March 2012. You can download the complete 62-page survey results report instantly by clicking here (no registration required).

The survey emphasizes the following questions:

  • How likely are customers to switch banks, and if so, why?
  • What are the customer expectations from their banks?
  • How customer behaviour differs when purchasing different products?
  • What is driving customer satisfaction, and what improvements do they want to see?
  • What steps can banks take to make improve customer loyalty and make them their brand advocates?

- By Madhavi Natukula

CustomerXPs offers real-time, intelligent products that empower banks with instant insights enabling influenced outcomes of deeper customer engagement and fraud-free transactions.

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