Banks must respond to rise in consumer expectations

In THE post-turmoil world, the retail banking sector finds itself in an environment characterised by shrinking margins, declining trust and reducing customer loyalty. The enterprising banker, however, sees a huge opportunity to adapt and thrive.

What we are seeing is a continuing shift of power from the banks to the customers. Customer service is one of the biggest factors now shaping the banking sector and getting the strategy right is the key to unlocking future success in an increasingly competitive market.

The ability to switch providers has become engrained in consumers’ lifestyles. They are increasingly applying these behaviours to their banking relationships, while the customer service challenge has been heightened by the proliferation of ways to manage finances and interact with banks, including online and mobile.

In the most recent Accenture survey of more than 2,500 current account holders across the UK and Ireland, we found that banks’ relationships with their customers are under increasing pressure. But there is a path to recovery.

The number of high street bank customers likely to buy their next financial product from their existing provider declined from 66 per cent in 2007 to 46 per cent in 2010. Some 16 per cent of respondents (10 per cent in Scotland) said they had switched one or more products from their bank in 2010 and 14 per cent (13 per cent in Scotland) planned to do so in 2011. Three years earlier, the rates were 14 per cent and 13 per cent, respectively.

Customers had the tools to shop around before the crisis – in fact the banks had put these tools into their customers’ hands via direct channels, while online forums and informal blogs simplified the comparison process further. However, the financial crisis has accelerated customers’ willingness to use and act on them.

This volatility is associated with a loss of trust in the banks. The number of British customers saying they were satisfied with their high street bank declined from 84 to 73 per cent and those who would recommend their provider to family and friends fell from 64 to 58 per cent – although, encouragingly, this was higher in Scotland at 60 per cent.

The percentage of customers who complained to high street banks increased from 14 to 17 per cent (in Great Britain as a whole and in Scotland specifically). Looking to the future, however, what is also clear from our survey is that banks have a window of opportunity to engage their newest generation of customers early on in the relationship. Respondents aged 18-24 were 50 per cent more likely than others to switch to another bank. They were also less likely to complain to their banks than others.

With an emerging youth segment that is more likely to simply switch banks when they encounter a problem, rather than take time to complain about service and potentially repair the strained relationship, institutions must analyse this group in order to understand their habits and expectations better and adapt products, services and channels to interact with them on their terms. All the while, they must keep their more mature, loyal and communicative customers on their side.

Three-quarters of today’s banking customers rarely, if ever, bank by telephone. They want to choose the way they access their bank and expect a full service from their access point of choice. They show no desire to give up using branches, while showing increased usage of direct channels. They care about value for money and identify service and experience as the dominant factors in their relationship with the bank.

Customers aged 18-24 placed more significance on value for money compared with their more mature counterparts, who favoured the promise of speedy and efficient service, according to the survey.

They also want the ability to choose independently. They want a reliable bank that knows what advice to give, when to give it and when not to, and they want institutions which they respect and trust.

It all raises interesting questions for the entrepreneurial banks around how to interact with the post credit-crunch customer and what aspects of the service experience they really care about.

The place to start would be to enhance online and mobile services, link branch and website services efficiently and focus on handling complaints properly the first time.

lPeter Kirk is senior executive in Accenture’s Financial Services practice