Bank Customer Service Still Stinks

Banks and credit unions realize that there is a strong correlation between customer satisfaction, portfolio growth and financial results, yet recent studies of customer satisfaction indicate there is still a major gap in performance between the financial services industry and other verticals. 

Where are financial institutions falling short in their quest to become customer-centric and how can banks and credit unions begin to exceed customer service expectations? 

According to findings from a new Carlisle & Gallagher Consulting Group study, 65 percent of consumers say their primary financial institution is not as good as (47%), or much worse than (18%) leading customer service companies. This is despite increased investment in customer experience initiatives by the financial services industry. (A SlideShare presentation entitled, Are Two Calls Too Many in the Eyes of the Customer? is available for download)

The key findings of the report include:

• Customer culture drives great customer service
• Customer experience is defined by first problem resolution
• Most complaints involve core banking products (checking, debit card, credit card, mortgage)
• Banks are not listening to their customers
• There is a correlation between complaint handling, satisfaction, loyalty and new business potential

These findings correlate with the just released ForeSee Experience Index that found that the financial services industry had the lowest aggregate score of any industry, including the lowest scores in retention, upsell and referral potential. In addition, financial services as a category had the largest gap between the highest and lowest scoring brands (American Express is 82 and Santander is 65), suggesting that there is much work to be done in offering the experience that customers expect from companies in this category.

Quick Problem Resolution Provides Challenge and Opportunity

One of the impediments to customer satisfaction is that more than a third of consumers surveyed by Carlisle & Gallagher did not believe their problem* was completely resolved. Of the complaints resolved, a whopping 72 percent of the problems required two or more interactions, with close to 30 percent requiring 3 or more interactions. This is certainly not a path to success.

Source: Carlisle & Gallagher (2013)

From an opportunity perspective, more than half of the customers surveyed said they felt like a valued customer when their issue was resolved with a single interaction and that their confidence in the financial institution increased by 38 percent. Conversely, confidence dropped to 17 percent and trust dropped to 10 percent when a problem required two or more interactions to be resolved.

While some complaints may be complex and require further research, this insight shows the power of resolving a problem quickly and completely. In fact, several studies done in the past have illustrated that a customer who has had a problem resolved satisfactorily can be more loyal than one that has never had a problem.

Source: Carlisle & Gallagher (2013)

All Bank Customer Experience Initiatives Are Not Created Equal

Despite an increased focus on customer experience initiatives by banks of all sizes, new research has found that not all of these efforts may be resulting in revenue growth. 

In fact, while some banks and credit unions are significantly outperforming peers, others aren't focusing on efforts that customers care about most.

In a just released study from PeopleMetrics entitled, "A Shifting Landscape: Customer Experience Trends and Practices in Retail Banking", it was found that banks are engaged in a surprisingly large number of customer experience initiatives. In fact, it was found that 7 out of 10 executives were working on customer-centric practices. 

While a good start, the research found that most banks have shied away from activities that require investment of human or financial resources. Part of the problem is a lack of association by banks between customer experience initiatives and a tangible ROI.

The important question is which activities lead to revenue growth. By evaluating activities being implemented at growth and non-growth banks, the research found that there were four fundamental customer experience practices that could be directly tied to revenue growth at financial institutions. These insights were drawn from a more encompassing PeopleMetrics study 2013 Most Engaging Customer Experiences (MECx) completed earlier this year. 

Improving Bank Onboarding, Cross-Selling and Retention With Personalized Video

At a time when self-service banking models are replacing one-to-one interaction, personalized videos can provide a highly engaging and relevant communication option that can improve engagement, increase sales and reduce churn. 

Combining real-time data with highly customized content, marketers can turn big data insights into differentiated 'wow' experiences.

Online video is coming into its own, no longer being just an add-on component to institution's Web site. Partially due to the explosive growth of tablets, web videos have evolved beyond being used just for education or brand building to become a viable direct marketing messaging and selling tool, deserving of dedicated resources.

Online Content Booming

According to recently released data from comScore, 180 million U.S. Internet users watched almost 36.2 billion online videos in January of 2013. While the majority of these videos were for entertainment purposes, nearly 25 percent were promotional content, helping companies communicate with new and existing customers. In fact, video ads were the fastest growing category of online advertising in 2012, with U.S. spending increasing 46 percent to $2.9 billion.

More and more sophisticated viewers don't want to watch a repurposed 30-second TV spot on their computer, tablet or phone. They want online content that is personalized, compelling and interactive. "People are sitting viewing content online wanting to push a button -- give them a reason to push a button," said Jay Miletsky, CEO of online video network MyPod Studios in an interview with CMO.com. If done right, online video can be both a strong branding opportunity and an effective engagement tool.

A survey by Digitas found that 51 percent of online video viewers in the sought after 18 to 44 year old demographic would look up a new brand or product they saw on an online video, and 58 percent of 18 to 34 year olds who follow brands on social media would watch a video that a brand posted online. In addition, the just released Global Video Index : 2012 Year in Review conducted by video analytics provider Ooyala, found that while viewership differs between devices (desktop, tablet, mobile), the overall amount of viewing doubled in 2012.

Will The Power of Mobile Make Bank Branches Disappear?

The high rate of mobile banking penetration at Chase Bank, Bank of America and recently introduced direct banks such as Simple, GoBank, Bluebird and Moven could provide a significant business advantage as digital channels tend to build loyalty and provide the opportunity to reduce costs through transaction migration. 

A recent report from Bain & Company entitled, 'Customer Loyalty in Retail Banking' found that mobile banking is more likely to increase a customer's likelihood of recommending the bank than any other channel interaction and that features such as remote deposit and even the ability to check a balance impact loyalty. The research also found that once customers moved to mobile, roughly half stated they made fewer visits to the branch which can lower costs.

Digital Delight

As mobile banking use increases, banks have the opportunity to 'delight' customers with new applications and functionality. For instance, while remote deposit capture still represents just a small percentage of branch and ATM transactions (as shown by the size of the circles below), it is by far the most likely to 'wow' the customer (64%) and provide the opportunity to recommend the bank. 

Interestingly, even routine mobile transactions such as checking a balance or transferring between accounts has a likelihood to delight (44%) and is a strong influence on loyalty according to the Bain study.

Big Data Provides Big Opportunity for Bank Loyalty

In a new regulatory environment, banks are faced with changing the foundation of rewards programs that were previously funded by interchange income from credit and debit cards. With debit interchange funding gone, FIs still need to continue to find ways to improve bank loyalty and drive the desired card behavior. In addition, banks need to leverage “big data” and mobile payments in the hope that they can replace some of the revenue lost as a result of Reg E and the Durbin Amendment.

Optimally, the future of rewards and loyalty will allow banks and credit unions to take advantage of the “Loyalty Trifecta” (my term for bringing together the benefits of 1) payment and transactional insight, 2) targeted offers and personalized communication as well as 3) mobile offers and payments).

To get an insider view of the challenges and opportunities available to banks today in the area of rewards and loyalty, I reached out to the leaders of four companies that provide unique solutions to the banking industry and who also will be co-panelists with me at the upcoming BAI Payments Connect 2012 Conference & Expo in a session entitled “Rewards in a Mobile Banking Environment.” 

Thanks to Tom Beecher, CEO, Cartera Commerce Inc.; Rob Heiser, President and CEO, Segmint; Schwark Satyavolu, CEO, Truaxis; and Rod Witmond, senior vice president, Product Management & Marketing, Cardlytics Inc who agreed to participate in the panel and contribute to this interview.

Note: An abridged version of this interview is also located as a BAI Banking Strategies article entitled, Big Data Drives 'Loyalty Trifecta' for Banks.

Banks and Credit Unions Focusing on Onboarding to Build Revenues

There has never been so much pressure on financial institutions to maximize the revenue and relationship potential of each customer. With government regulations reducing fee income, historically narrow interest rate spreads, and consumer satisfaction with many financial institutions wavering, there's a need to ensure that once a customer opens a new account, every effort is made to help the customer understand and use their account, expand their relationship, and increase loyalty to your organization.

While time and resources have been dedicated to new customer acquisition processes in the past, a majority of financial institutions are now working to implement or improve the communication process right after account opening and for several months into the relationship. And instead of a single welcome letter (or nothing at all), more and more organizations are using a series of well-timed, personalized communications leveraging multiple channels to improve effectiveness.

According to the recently completed 2012 Financial Services Marketing Survey done in partnership with The Financial Brand, both banks and credit unions indicated that onboarding would be one of the most important strategies for the next 12-24 months, with virtually no institutions stating that the importance of onboarding would be less.

2012 Financial Services Marketing Survey

Banks Need to Make Love Not War

Over the last three days, leaders from the top banks across the country convened at the Barclays 2011 Global Financial Services Conference in New York to present investors with a review of results so far in 2011 and provide an outlook for 2012. Unlike the past two years, where this conference was dominated by bank presentations focused on TARP, credit risk, capital reserves and liquidity, this year's presentations highlighted the opportunity for organic growth and improving client's share of wallet.

For instance, Jim Rohr, Chairman and CEO of PNC Financial Services Group said that PNC will be focused on adding new customer relationships and cross-selling going forward. "If we cross-sell new clients, we'll see an almost $220 million increase," Rohr said during his presentation.

Similarly, Tim Sloan from Wells Fargo discussed significant opportunities that exist as a result of the integration of Wachovia. According to the presentation done by Sloan, there is a variance of an average of one product per household between legacy Wells Fargo (6.25) and the results from the Eastern footprint (5.29). He further illustrated that there is a variance of two products when legacy Wachovia is compared to the top Wells Fargo region (7.36).

Differentiation Is Key Component To The Value of Rewards

Yesterday, it was announced that merchant-funded rewards leader, Cardlytics had signed a global strategic alliance with loyalty leader Groupe Aeroplan allowing for the expansion of transaction-driven marketing (TM) to Canada and abroad.

Unlike traditional rewards programs used by financial institutions that are points based and driven by the volume of transactions processed, the Cardlytics platform provides the ability to present highly targeted retailer offers to customers through a bank's online statement, mobile device or email based on the customer's recent transaction activity. Since the Cardlytics decisioning tool resides within the bank's firewalls, customer insight never leaves the bank and retailers never have access to proprietary customer information. In addition, as opposed to the points reward program being a cost to the bank, the Cardlytics pay-for-performance model not only eliminates risk for the merchant, but also can provide much needed revenues for the partner bank.

Brand Advocates Should Be Cultivated

Every bank talks about customer loyalty and advocacy, but many find it difficult to define what a brand advocate is, or what the value may be to their bank.

According to a study just released on the actions, motivations and influence of brand advocates conducted by Dr. Kathleen Ferris-Costa at the University of Rhode Island for social networking leader BzzAgent, brand advocates are 83% more likely to share information about a product than typical web users and 50% more likely to influence a purchase. Since they enjoy solving problems and helping other to make purchases and decisions, they are also 75% more likely to share a great experience and three times more likely to share their opinion with someone they don't know (they are also more likely to share a bad experience). In other words, this segment of your customer base acts and thinks very differently from your typical customer and should be searched out and cultivated.

Responding to the Self-Directed Bank Customer

According to a soon to be published Accenture survey of senior banking executives from major banks across the world, there has been a significant power shift between banks and their customers that has resulted a lowering of customer profitability levels. The research entitled, Customer 2012: Time for a New Contract Between Banks and Their Customers?, found that nearly half of the executives have seen their average customer profitability decline by 5-15 percent since the beginning of the financial crisis.

According to Noel Gordon, global managing director of Accenture's banking practice and co-author of the research, “Consumers have emerged more confident in making financial decisions for themselves, more skeptical of their bank brands, more price-conscious and more willing to move away from institutions that provide poor service.

Effective Onboarding Begins with Good Insight

In 2003, the BAI released a research study entitled, 'The Ninety Day Window of Opportunity', where interviews, deposit statistics and segmentation models revealed that nearly 75% of all cross-sell opportunities and the vast majority of attrition occurred in the first 90 days of a new customer relationship. These findings continue to be verified in the marketplace, with expanded concern recently around the lack of funding, engagement and use of new products by these new customers.

More than ever, financial institutions need to begin the onboarding process by capturing an accurate and robust view of the customer which can be used across the organization to enhance the customer experience and expand the relationship with the bank. In short, to optimize the customer experience during the first critical months and year of the relationship from both the customer's and bank's perspective, you need a 360 degree view of the customer. With online account openings, this process becomes even more critical.

Use of Online Banking and Bill Payment Continues to Grow

According to the 2010 Consumer Billing and Payment Trends survey published this week by Fiserv, the number of households that use online banking increased more than six-fold between 2000 and 2010, and the number that use online bill payment increased nearly eight-fold. In fact, 72.5 million U.S. households (80 percent of all households with Internet access) use online banking, while 36.4 million households (40 percent of all households with Internet access) use online bill payment.

Illustrating that online bill payers are not just the youngest and wealthiest demographic, in 2010, consumers age 21-34 made up 28 percent of online bill payers, consumers age 35-54 made up 48 percent, and consumers over age 55 made up a surprising 24 percent of all online bill payers, while more than a third of online bill payers had a yearly household income of less than $50,000.

Banking on Social Sites Unlikely

According to a new research report by Forrester, Banking On Social Sites Is A Work In Progress, while social networking sites have a 30-day active population of more than 400 million users of which more than half visit on any given day, that love doesn't extend to banking through social networks. In fact, more than 70% of online households surveyed showed little or no interest in accessing their accounts through social sites like Facebook. Not surprisingly, the reasons for the lack of interest revolves around privacy and security concerns more than anything else.

So, while the majority of large financial institutions continue to look for more ways to leverage social networking's ability to engage customers, resolve problems and ultimately build loyalty, the reach of these sites beyond stronger interactive communication remains to be seen. At the very least, consumers will need the stronger security guarantees, authentication and more that is already afforded customer who use online and mobile banking.

Banks Can Accelerate Revenue Growth by Managing Digital Experience

According to the March issue of the McKinsey Quarterly, digital channels can assist companies in unifying the customer experience and help move customers from interest to loyalty. In the article, "Four Ways to Get More Value From Digital Marketing", David C. Edelman discusses how companies can increase revenues through a better coordination of the digital end-to-end experience (see exhibit).

By focusing on the capture of a larger amount of Internet traffic through improved mass media key word positioning and SEO, increasing customer engagement through easy to navigate sites and targeted messaging, converting more of the digital leads to sales with strong offers and building digital loyalty through online and offline channels, revenues can be optimized.

Cardlytics Introduces Bank Statement Innovation

At a time when banks are looking for ways to generate new revenue and increase customer loyalty, Cardlytics has developed a way for banks to leverage transaction data to deliver targeted offers to clients on their online bank statements.

Since the privately held company launched the innovative product last November, more than 100 marketing campaigns have been run, reaching half a million bank customers. According to a recent AdvertisingAge article, the company expects to have 50 to 70 financial institutions on board by the end of the summer, reaching some 10 million customers by the end of the year.

SIFMA Asset Management Account Roundtable Recap

I would like to thank the people from the Securities Industry and Financial Markets Association (SIFMA) as well as co-chairs Jennifer Byrd from Morgan Stanley Smith Barney and Steve Newcamp from Federated Investors. As always, the event was well attended and the sharing of ideas and insights from the speakers and participants was great. I would be remiss if I didn't also thank my own company, Harland Clarke for the amazing dinner at the Battery Park Gardens Restaurant where, even with the rain, the view of the Statue of Liberty was super.

Some interesting takeaways from the meeting:

Five Steps to Improved Customer Engagement Through Email

According to Peter McCormick, co-founder of one-to-one communications firm ExactTarget, there are five steps for engaging customers via email.

1. Express Gratitude: According to McCormick, fewer than 50% of marketers send a welcoming email thanking a customer for accepting communication from a brand. This should be the first step after a customer provides their email address. This communication also sets the tone for future dialogue so this is a great time to include a coupon for expansion of the banking relationship and/or a research report or white paper for a B2B client.
2. Take a Genuine Interest: Let the customer tell you about their communication needs and interests to enable more relevant content delivery. A preference center can achieve this where a customer expresses what they want to know going forward.

What Banking Needs to Become

In this quarter's Strategy + Business Magazine, Vanessa Wallace and Andrew Herrick discuss the significant changes in the banking industry over the past few years and how bank's business models, capabilities and practices must change as well. In their very good article, they emphasize that the purpose of banking and the needs of the customer have remained relatively consistent with regards to safe havens for savings and consistent access to credit for investment.

The environment has changed, however, with the competitive landscape changing, the regulations increasing and the public trust eroding. In addition, the times of high growth have ended.