What pays banks the biggest dividends?
A new report from Forrester evaluating how consumers perceive their banking providers reveals that many financial institutions are viewed as selfish. People are particularly concerned that the big banks are not acting in their best interests, but instead focusing on the bottom line.
“This is bad news at a time when ‘delighting the customer’ matters more than any other strategic imperative,” warn the report’s authors, Forrester research analysts Alyson Clarke and Caleb Ewald.
Clarke says advocacy goes beyond the customer experience. A bank can give people an Amazon-style, simple and sophisticated online experience. But what happens when a customer calls to complain about wrong mortgage charges or a checking account problem? Do they get the workaround – bounced between evasive and defensive customer service reps who have been ordered to take a hard line in order to protect the results? Or will the bank act to resolve the problem immediately and in the best interests of the customer? This is the lens through which Forrester says banks should look at advocacy.
Study after study, banks have always ranked customer experience as a top priority, but what about customer advocacy? Between the two strategic questions, Forrester argues that advocacy is the best predictor of whether a customer will stay at a financial institution for future purchases or services.
At the top of Forrester’s advocacy rankings were member-owned financial institutions such as Navy Federal Credit Union, USAA, and Vanguard. Understandable, since these organizations are often structured as non-profit, member-owned cooperatives, where return on investment is not necessarily their fundamental raison d’être.
Less than half of customers at nine of the more than 20 banks included in Forrester’s study said their banking provider put their interests ahead of results.
On the technology side, the report recommends that financial institutions ensure that their systems support the work of customer service representatives by facilitating advocacy. Forrester also notes that technology is rapidly removing the barriers that once prevented new competitors from carving out a niche in a wide range of financial services dominated by traditional institutions. Nonetheless, direct / digital-only banks overall ranked near the bottom for advocacy among all banking providers – only Wells Fargo scored worse (more on this in a minute).
“A wave of disruptors using digital tools to deliver a better customer experience at a fraction of the cost is besieging legacy banks, credit card issuers, insurers and wealth management companies,” Forrester says in his report. These disruptors are also taking a decidedly more customer-friendly approach.
And that’s why, says Forrester, banks need to focus on customer retention, not just a smooth customer experience.
“We have tested dozens of characteristics that influence customer loyalty in retail financial services over the years,” says Clarke. “One trumps all the others: customer advocacy. “
What this means:
A bank that does what is best for customers and not just what is best for the bottom line will reap the rewards: less attrition, more success with cross-selling and more products per household. .
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Advances in digital transformation do not translate into stronger advocacy
Banks may think their investments in data have given them a 360-degree view of their customers, but generally these profiles reveal little more than the suite of products that customers have with the bank while ignoring other aspects of it. their financial life outside of the bank. Many institutions only use their data to bring other products to consumers, whether consumers actually need these cross-sell products or actually benefit from them.
Forrester says there are steps financial institutions can take to help reduce the perception that banking providers are selfishly obsessed with their own success. Even small steps can strengthen a sense of advocacy.
“Some companies offer proactive information, such as notifying a customer if they are about to be overdrawn, or a mobile app that can alert in case of duplicate charges, or warn that a customer is about to be overdrawn. [third party] the free trial ends soon, ”says Clarke. “It’s all about using insight into the data to make customers feel like you’re on their side. “
“Financial institutions need to stop thinking like retailers,” warns Clarke. “For retailers, personalization is about suggesting socks that match the shirt you just put in the cart. And customers can return to a retailer every month, or more often. But once a customer has a mortgage or a car loan, they’re all ready for years to come (unless of course the bank can offer new credit at a better price).
While banks may hate to admit it, they have to get used to the fact that people buy most financial products every three to five years, at most. A constant obsession with cross-selling sends the wrong message and can quickly turn counterproductive.
Customer experience is only the first step: big banks think beyond the basics
Financial institutions should also allow customers to do business with them. For example, Clarke says checking account customers shouldn’t need to fill out their name, address, and Social Security number when applying for a home equity loan.
UK, Barclays used client data to determine the amounts she would approve for a mortgage and personal loan for each client in her database. After that, to accept a loan or mortgage application, it is enough to verify that the client’s information is still correct. This may not be the strongest illustration of advocacy, but it shows that the bank has taken steps to avoid wasting customers’ time.
Clarke, originally from Australia, got used to some pretty sophisticated retail banking strategies in her home country. She is concerned about the disparities she sees in the United States.
“In the United States, I have to give them everything from scratch,” she says.
How banks use their data (or not) is a perpetual frustration for Clarke. Banks have the data to know whether a customer prefers to interact with them by phone, text or email just by looking at how they have contacted the bank in the past. But a bank rarely acts on this data, if at all it examines it.
According to Clarke, many bank executives pretend to advocate, claiming that they place “improving the financial well-being of the customer” at the center of their strategy. Meanwhile, however, measures inside the company are still largely based on product sales.
“They go straight to the chinstrap – by selling another product,” says Clarke. “What you get is a disconnect between rhetoric and metric.”
Perhaps the strongest illustration of the impact advocacy – or the perceived lack thereof – can have on a bank is what happened to Wells Fargo. Before their huge cross-selling scandal, where millions of accounts had been fraudulently opened, more than half of Wells Fargo customers considered the bank to be an attorney on their behalf. However, after the scale of the program became public, Wells Fargo saw its advocacy score drop to 36%. In Forrester’s latest study, Wells Fargo made a bit of a dent in its reputation and by 2020 its advocacy metric is back to 44%.
Forrester says a handful of financial institutions are starting to redefine the way they measure performance, assess key employee characteristics, and measure customer satisfaction. Instead of just looking at their balance sheet, they measure the banking experience from the outside in (i.e. customers’ point of view).
Between the lines
Advocacy rankings, Forrester admits, can be compromised by isolated incidents, like online banking failures or poor public relations.
According to Clarke, leaders in customer recommendation rankings tend to keep it simple and act kind, both to their customers and the community in which they operate. In addition, they are transparent and build trust by continuously helping clients improve their financial well-being.
The entire 19-page Forrester report, “Do the right thing: defending the interests of customers builds loyalty among financial companies”, Comparing the advocacy against loyalty and the propensity to cross-sell for banks, insurers and credit card issuers, is available for download.