Experience Radar: Retail Banking Customers Pay For Valued Experiences


PwC’s Shivali Shah explains how our Experience Radar research is different from other customer experience models. Despite many threats to profitability, retail banks have rich opportunities for growth. Customers will pay for banking experiences they value. The challenge lies in delighting customers through experiences they value rather than exhausting resources on offerings they ignore. 

Download Related PwC Publication:
PwC’s Experience radar: 2013, US Retail Banking  

Five Ways Banks Can Build Mutually Rewarding Customer Relationships


thumbs-up.jpgIf you think about the people in your life that you are closest to, chances are they’re the ones that you’ve shared the most experiences with. Those experiences build the involvement needed to grow relationships—between people and also between people and brands. Because there are few things as personal as money, banking is an industry that has a huge opportunity to engage people in experiences that build lasting and mutually rewarding relationships. Yet it’s a segment that has low satisfaction rates (44 percent were extremely or very satisfied with their bank in an October 2011 Harris Poll).

To better understand the opportunity, we commissioned a study on people’s attitudes toward their bank and most importantly, how they felt their bank felt about them.

One big discovery is the difference between the way people feel about their bank and how they perceive their bank feels about them. About 39 percent of people surveyed feel indifferent toward their bank—they neither like, love nor loathe it. But when asked how they feel their bank feels about them, 54 percent feel their bank is indifferent toward them and another 6 percent feel their bank loathes them. I doubt there are many human relationships that could survive under that scenario.

When asked how open to switching banks people were, 30 percent said they are very likely or indifferent/open to switching—that means nearly a third of customers are vulnerable on any given day. A Harris Poll looked even worse for the bigger banks: 46 percent of JP Morgan Chase & Co., 40 percent of Bank of America Corp. and 54 percent of Wells Fargo & Co. customers are extremely or very likely to change their bank. When you consider an American Bankers Association study found that it’s seven times more expensive to replace a customer than to keep them, it seems that the opportunity and the need to build stronger relationships is very real.

Here are five ways banks can build mutually rewarding customer relationships and become a champion for them:

Champion customer needs by focusing conversations on “what they want to do” rather than “what we have to sell you” which just furthers the feeling that the customer doesn’t matter. Banks can rewrite the language used by everyone in the bank to reflect the needs and the power of their customers. One example is Opus Bank. The bank was founded on the belief that strong businesses build strong communities and everything they do supports people with the vision to drive job growth, including their tagline, which is a call to “Build Your Masterpiece.”  

Give people credit for knowing how they like to use their money by creating a culture of choice that allows people to customize their accounts and services.  While many aspects of financial products are regulated, banks could let people choose the other services they value. Where one person might value free wire transfers, another might prefer something entirely different.

Be a valuable resource that champions people’s desire to do something with their money. Think Nike+ for money. Offer financial management tools that help people set goals, track their progress using their account data, and get rewarded for their achievement. This could be a great opportunity to tie in commercial banking partners like retailers and restaurants in each geographic area. We are beginning to see new banks (e.g., Simple) emerge that leverage technology to not just make transactions easier but to actually empower the consumer.

Create communities for customers to share financial advice with each other and with the bank. Banks can show that they embrace customers as people (not just their money) by adopting the behaviors of sociable people, i.e. by being accessible, interested in what people have to say, and providing inspiration to help them achieve what they want to with their money. Regional banks like Umpqua Bank have done a great job of using technology to create a personal touch outside the bank. In contrast to the 98 percent of social media commentary about banks that is negative, theirs is 99 percent positive and almost to the point of fostering a “my bank is better than your bank” pride.

Empower employees to act in the best interest of their customers and reward them based on their personal contributions to the relationships they have. This is particularly important as customers switch to online banking and each interaction takes on more importance.

While creating these kinds of experiences may not directly sell more banking products, they have real business value. They build involvement with your customers and that involvement will lead to deeper relationships that are more mutually rewarding and profitable.

Face-to-Face Still Trumps Technology

cornerstone.jpgUpon reading the news and listening to industry experts, you may think bank branches are going the way of the buggy whip.  News reports claim: “For the first time in 15 years, banks across the United States are closing branches faster than they are opening them,” and “Bank Branches Are Closing; People Using Nearby ATMs Don’t Notice”(time.com).

In November 2010, analyst Meredith Whitney predicted 5,000 branches would close in the next 18 months (fortune.cnn.com) and according to author and consultant Brett King, “The current network of branches for most retail behemoths has absolutely no chance of survival in the near future. I’m not talking 10 years out here… I’m talking in the next 2-3 years,” (banking4tomorrow.com).  To paraphrase a quote from Mark Twain, reports of the death of the branch have been greatly exaggerated.

As part of the 2011 Bank and Credit Union Satisfaction Survey, Prime Performance surveyed more than 12,000 retail bank customers.  The findings from this survey show that the branch continues to play a vital role in the customer experience. 

4 Reasons Why the Branch Remains the Cornerstone
of the Retail Banking Relationship

1. 59 percent of customers performed a teller transaction at a branch within the last two weeks
Even though branch transactions are declining, branches continue to be highly visited. In 2011, 59 percent of customers performed a teller transaction at a branch within the last two weeks. While younger customers make more use of self-service channels, they still frequently visit the branch.  Among Gen Y customers, 56 percent performed a teller transaction at a branch within the last two weeks.

2. 74 percent of bank customers said they opened their most recent account in a branch
Most customers still choose to open their bank accounts in a branch.  Almost 3 out of 4 (74 percent) bank customers said they opened their most recent account in a branch.  This compares to 19 percent opened on-line and 6 percent by phone.  As expected, older customers (born before 1965) were more likely to open their account in a branch, and 81 percent did so.  Among Gen X, 69 percent opened their account in a branch, and surprisingly 74 percent of Gen Y did so as well.

3. 52 percent say branch location is the top reason why they selected a bank
Customers claim convenient branch locations is the primary factor in selecting a bank.  Fifty-two percent of new customers who opened their account in a branch rated convenient branch locations as the number one reason for selecting the bank and 74 percent said it was one of the top three reasons. New customers who opened their most recent account online also rated convenient branch locations as the number one reason why they selected the bank, even though they chose not to open the account in a branch.  Twenty-seven percent of customers who opened their account online rated branch locations as the number one reason why they selected the bank and 43 percent ranked it in the top three reasons (35 percent and 49 percent among Gen Y).

4. Live interactions continue to drive customer satisfaction and loyalty
While self service channels can play an important role in the customer experience, interactions with bank representatives are, by far, the primary drivers of customer satisfaction.  Regression analysis on over 12,000 customer surveys showed that customer satisfaction with the branch had the greatest influence on their overall satisfaction with the bank, how likely they are to recommend the bank and how likely they are to return to the bank first for future financial needs.  Still in its infancy, at this point in time, mobile banking is showing virtually no impact on customers’ overall satisfaction.  The branch has over three times the influence on overall satisfaction than both the internet and ATM channels.  Customers value self-service channels, but don’t see them as significant differentiators between banks. Ultimately, their interaction with humans has the greatest affect on how they feel about their bank, for good or ill.

Ron Johnson, who left Target to build the Apple Store from scratch and now is the CEO of J.C. Penney Co.,  said in a recent Harvard Business Review interview, “The only way to really build a relationship is face-to-face.  That’s human nature (hbr.org).”  As long as customers continue to place significant value on the locations of branches and the interactions they have with representatives in branches, banks needs to continue to make the branch the cornerstone of their retail strategy.

Banks must recognize that strong customer relationships are the key differentiator that will drive long-term growth and the branch is the key to developing and nurturing those relationships. Successful banks listen to their customers and use that feedback to energize behavior change and create a shared vision of consistent service excellence, and then deliver on that vision on each and every customer interaction.

Why Mystery Shopping Does Not Measure Customer Satisfaction at Banks and Credit Unions


mystery.jpgCustomer satisfaction has become a hot topic in banking.  Recent studies have concluded:  “Delivering a positive customer experience is one of the few levers banks can use to stand out in today’s market (Capgemini 2011 World Retail Banking Report)” and “organic growth rooted in strong customer relationships, and the economic rewards they deliver, will be the best path forward for retail banks in the years ahead (Bain & Company Customer Loyalty in Retail Banking: North America 2010)  and from J.D. Power and Novantas, 2009: “Across all driving factors, satisfaction provides the most sustainable competitive advantage.”

With all of the advantages that come with high levels of customer satisfaction, it is no wonder that most banks and credit unions want to measure their customer satisfaction.  According to the Capgemini World Retail Banking Report:  “Banks are taking a closer look at the ways in which they incent and reward branch employees. Increasingly, they are using customer satisfaction as a key measure of employee performance. This process requires more frequent measurement of customer satisfaction and clear communication of the results to branch staffers.”  Many banks today will claim that they measure customer satisfaction through mystery shops.  While mystery shopping can play a role in improving the customer experience, it does not measure customer satisfaction.  To help banks and credit unions understand the limitations of mystery shopping, Prime Performance has published a white paper entitled “Why Mystery Shopping Does Not Measure Customer Satisfaction at Banks and Credit Unions.” 

Available as a free download here, the “Why Mystery Shopping Does Not Measure Customer Satisfaction at Banks and Credit Unions” white paper outlines the seven major reasons why mystery shopping fails to accurately measure customer satisfaction.

  1. Mystery Shoppers Cannot Accurately Gauge Customer Satisfaction
  2. Mystery Shoppers Do Not Represent Typical Customers
  3. Mystery Shoppers are Not Representative of the Entire Customer Base
  4. Mystery Shops Do Not Reflect Variations in Service Based on Time of Day or Day of Week or Month
  5. Mystery Shops Do Not Reflect Levels of Service Provided by Different Employees
  6. Substantial Variation between Shops Diminishes Value of Results
  7. Mystery Shops Do Not Provide Enough Observations to Draw Accurate Conclusions

The white paper discusses other challenges with mystery shopping including mystery shoppers being identified by bank employees and the unintended consequences of a mystery shop program.  The paper also describes when mystery shopping makes sense, such as when customer contact information is not available or when it is used to supplement a robust customer satisfaction survey program.

The paper goes on to explain why telephone customer surveys are a superior approach for banks and credit unions, “based on decades of experience, we believe strongly that phone surveys are vastly superior to mystery shopping as a way for banks to gauge the quality of their customer service. Phone surveys are fast, efficient, effective and relatively inexpensive. They deliver data that is reliable, consistent and actionable. Clients welcome phone surveys that allow them to praise – or criticize – companies they know well. In fact, greater customer loyalty is an unexpected benefit of phone surveys.”

Trust in the banking system: How should banks respond to Occupy Wall Street?


occupy-sign2.jpg“The corporations get what they want and the people don’t get anything,’’ says Elizabeth Johnson, with two pieces of duct tape stuck to her shirt with the words “Occupy Nashville” written on them.

She is taking part in Nashville’s version of Occupy Wall Street, where a loose group of protestors hang out on War Memorial Plaza playing the guitar, holding signs, and conducting organizational meetings to plan their marches and policies: keep the plaza clean, be respectful, don’t destroy property.

Johnson says she was originally in favor of the $700 billion rescue of the financial system until she realized the banks “kept that money for themselves.”

Other protestors include a call center worker who says she is disappointed her $100,000 in student loans for a master’s degree in communications landed her in call center doing customer service; a financial planner who says he is concerned about the future of Social Security, low wages and the loss of American jobs to developing countries; and a machinist who disagrees with the Federal Reserve’s control over monetary policy.

Occupy Wall Street’s protests in cities across the world over the weekend unveiled a groundswell of frustration against corporations, political systems, the global economy and the banking system, all rolled into one. Should the banking industry care? If so, what should be done about it?

After all, there doesn’t seem to be a lot of evidence that angry consumers are voting with their feet. The biggest banks in the country control most of the deposits. Account balances in checking and savings accounts are growing, not declining.

Bank of America just reported Tuesday deposits at the bank grew by $3 billion in the third quarter to $1.04 trillion. JP Morgan Chase & Co. reported deposits grew by $44 billion in the quarter to $1.09 trillion.

Still, many people think a bad image for banking isn’t good for business.

In June, GfK Custom Research North America, a division of market research company GfK Group, reported an online survey of 1,000 Americans where the financial services industry ranked third lowest for trustworthiness, ranking above only state and federal governments.

Only 35 percent found financial companies trustworthy. (Retail companies and packaged food manufacturers got the highest marks—71 percent and 65 percent, respectively—out of the 12 public and private sectors in the survey.)

“The fact is that the vast majority of financial services companies still generate substantial profits by fooling customers, or by capitalizing on their mistakes, or by taking advantage of them when they simply aren’t paying attention,’’ says a new report from the management consulting firm Peppers & Rogers Group. The group recommends increased transparency and practices that keep the customers’ best interests in mind, as a way to survive a future where customers can increasingly publicize their frustrations and bad experiences on everything from Facebook to Twitter.

In fact, making consumers happier could do something to push back the tidal wave of increased regulation of the banking industry, some think. Where did the Credit Card Act of 2009 come from, if not consumer frustration?

Plus, the volatile stock market, crashing home values, low wages and high unemployment set the stage for people to be angry at banks, says Gregg Poryzees, vice president, Consulting – GfK Financial Services.

“When the economy takes a hit, people are now unhappier with the financial firms they deal with,” Poryzees says. “This really is an opportunity to rise to the occasion. This is a great time to say ‘What can we do in terms of communication with our customers and designing innovative products, with brand positioning, managing the brand in a volatile market and a volatile consumer market?’”

Another GfK survey in July found that 88 percent of respondents strongly agree or moderately agree that consumers need an agency such as the Consumer Financial Protection Bureau to oversee the practices of banks and other financial institutions.

Waiting for new regulation from the Consumer Financial Protection Bureau is not a plan, Poryzees says. Getting ahead of regulation with consumer-friendly changes is a solution.

 “The implications are that the banking industry can turn this frustration into an opportunity, not so much different fees, but innovations that are more customer focused,’’ he says.

One can only wonder if the recent decisions of some large banks, including Bank of America and JP Morgan Chase to offset new restrictions on debit card interchange fees by charging customers a monthly fee, has further tarnished the industry’s image.

William Mills III, the CEO of Atlanta-based financial public relations firm the William Mills Agency, says bankers should think about how they will respond to the concerns of Occupy Wall Street and others. Community bankers in particular may have an opportunity to differentiate themselves from the bigger banks because they didn’t participate in the marketing and sale of risky bonds, equities and subprime mortgages.

“I hope bankers are thinking about how they would respond if a member of the media calls or a customer asks about it,’’ he says.

Scott Talbott, the senior vice president of government affairs at The Financial Services Roundtable, which represents 100 of the largest financial institutions in the country, says the industry understands the anger reflected in the Occupy Wall Street protests. The financial industry is carrying more capital, is safer, and has eliminated a lot of risky practices, such as subprime lending.

“We are working hard to restore the economy and trust in the banking system,’’ he says.

But the problem lies deeper than trust.

“What am I supposed to tell my children about what their goals should be?’’ says Felisha Cannon, the 33-year-old call center worker, saying she’s not sure there’s a better future for them.  “I can’t tell them to buy a house, because it might not be worth anything. What should they be working for? Should they go to (college) and have $200,000 in debt?”

Consumer Adoption and Usage of Banking Technology


FD-WhitePaper2.jpgToday’s consumers, especially those known as Millennials and Gen Y, are used to having technology integrated into most aspects of their work and personal lives. Banking is no exception. To respond to changing customer expectations, banks, credit unions and other financial institutions have incorporated online and mobile technology into consumers’ banking experiences. However, financial institutions still need to answer several questions pertaining to banking technology:

  • How well are financial institutions meeting the needs of consumers when it comes to offering high-tech products and services?
  • Whom do consumers view as the trusted provider of the mobile wallet?
  • How does adoption of banking technology vary for different consumer groups?

This white paper answers these and other questions that are critical to the ongoing success of financial institutions in a rapidly evolving marketplace. The paper is based upon the findings of a recent online research study of 2,000 U.S. consumers conducted jointly by First Data and Market Strategies International. The “New Consumer and Financial Behavior” study assessed consumers’ attitudes, behaviors, desires and technology adoption. This white paper is the third in a series of four based on results of the study and focuses on consumers’ attitudes and behaviors related to technology in banking.

Topics include:

  • Consumers’ attitudes about, and adoption of, banking-related technology.
  • Usage of mobile banking.
  • Perceptions of the mobile wallet by different consumer groups.
  • Usage of online banking and bill payment.
  • Steps that financial institutions can take to appeal to various types of consumers.

Meeting the Needs of the New Financial Consumer: A Snapshot of Six Customer Segments


FD-WhitePaper1.jpgConsumers have a lot of options when choosing a bank or credit union. To be successful in today’s highly competitive environment, financial institutions must creatively and innovatively meet their customers’ needs and expectations. However, consumers are not a homogenous group—and attitudes, behaviors and expectations related to desired products, communication tools and service vary dramatically.

Even more challenging for financial institutions, consumers are rapidly evolving in their use of technology. As consumers increasingly use technology in their day-to-day lives, many expect the convenience of high-tech tools from their banks and other financial institutions. At the same time, a persistently weak economy, the widespread erosion of savings and investments, and the lending crisis have fundamentally altered many consumers’ mindsets. Especially among baby boomers—the backbone of financial industry growth over the last 25 years—confidence in financial institutions and a willingness to engage in carefree spending appear to be things of the past.

So, how can financial institutions best meet the needs of a diverse and evolving consumer base? To find out, First Data and Market Strategies International jointly conducted an online survey of 2,000 U.S. consumers. The “New Consumer and Financial Behavior” study looked at consumers’ attitudes, behaviors, desires and technology adoption. The results revealed six distinct consumer segments, providing financial institutions with valuable insights into opportunities and challenges associated with different types of customers.

By understanding the needs and expectations of different consumers, financial institutions can:

  • Determine which types of consumers are most valuable.
  • Target products, technology and tools at specific customer groups.
  • Improve customer retention through targeted customer loyalty programs.
  • Better service customers by meeting their needs and expectations for products, services, communication and technology.

This white paper is the first in a series of four based on results of the “New Consumer and Financial Behavior” study.

About the Study
The “New Consumer and Financial Behavior” study was conducted jointly by First Data and Market Strategies International, a market research consultancy. During March 2011, 2,000 banked consumers (who have at least one account at a financial institution) completed an online survey of their attitudes, behaviors and expectations pertaining to their primary financial institution, as well as their adoption of related technology. All respondents were individual or household financial decision-makers recruited from the uSamp opt-in online panel of U.S. adults. For purposes of analysis, respondents were grouped into six consumer segments using a sophisticated and robust segmentation approach that combines demographics, attitudes, behaviors and values to create comprehensive, instructive consumer profiles. A full description of the research methodology is included on p. 13.

For all of us, job one


Maybe it’s all the traveling I am doing these days, but customer loyalty is top of mind. From American Airlines’ advantage program to Hyatt’s guest rewards, sometimes the littlest of things add up to something big (e.g. 1,099,622 miles flown on AA as of this morning). So yes, customer loyalty and me have a special bond, one worth exploring in the context of today’s financial community.

customer-service.jpgCase-in-point, I had the chance to watch PNC’s president (and head of Retail Banking) Joe Guyaux share his hows and whys of focusing on customer loyalty for one of the nation’s largest diversified financial services organizations. A keynoter at American Banker’s recent Best Practices in Retail Financial Services Symposium, he talked about PNC focusing on customer loyalty as a means to build a differentiated brand and grow customers while increasing (but not always maximizing) revenues. As a loyal PNC customer, I made a point of introducing myself to Joe after his talk concluded. You see, from slides on PNC’s definition of customer loyalty (“an enduring emotional connection and bond beyond our customers, employees and the PNC brand”) to the bank’s approach to creating brand ambassadors through social media, I was impressed to hear “the message from the top.” Indeed, what he shared with bank execs in Miami translated to the branches I regularly visit in Washington, D.C.  

Truth be told, one slide really stood out: PNC’s framework for winning loyal customers. Sure, we all know that loyal customers are integral to any business model. Still, interesting to note the elements that PNC defines to build and maintain that loyalty. Naturally, it starts with (and requires) engaged and empowered employees — and extends to:

  • A drive to deliver exceptional customer service;
  • The challenge to protect and grow its payments business;
  • A focus on earning a “share of a customer’s wallet;”
  • The discipline to maintain positive operating leverage;
  • Managing risks; and
  • Encouraging real and ongoing community involvement among staff.

While a number of banks espouse similar approaches to customer loyalty, PNC’s rise to its current position in the marketplace reminds us all that customer service really is job one. Seeing a message like Joe’s distributed and embraced across a national franchise? Impressive, to say the least.