Loyalty in banking is weaker than ever as most consumers are comfortable being multi-banked
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When banks digitalized their customer interactions the benefits were huge: greater convenience for customers and vastly improved efficiency for the banks themselves. But this came at a cost that was underestimated, if it was anticipated at all.
The removal of people as the interface between the bank and its customers, and their replacement with computer and mobile-phone apps, had far-reaching consequences. Banking has become functionally correct but emotionally devoid, with the industry swimming in a sea of sameness. Beyond most banks’ distinctive logo, what customers experience daily has become almost identical from one bank to another.
Recently, Starbucks CEO Brian Niccol said mobile ordering had “chipped away at the soul” of the company as the brand prioritized speed over maintaining the customer experience and connection. Online banking has done the same thing for banks. Gone are the friendly phone calls with familiar, helpful managers and their customer-service specialists, not to mention meetings at the branch. If you’re interacting with a similar algorithm used by every other bank, there’s little to stop you from switching in pursuit of a marginally better interest rate.
Loyalty in decline
Accenture’s most recent Banking Consumer Study, which polled 49,300 customers around the world, confirmed that loyalty is weaker than ever. It shows that nearly three in four bank customers (73%) now are, in a manner of speaking, “cheating” on their primary bank by having a relationship with one or more competing banks. The fact that a similar proportion (61%) have stayed with their bank for at least seven years is not much consolation; it’s lazy loyalty.
What’s missing is advocacy – enthusiastic customers who believe their bank is working hard for their financial security and aren’t shy to tell others about it. The question is, can banks move beyond lazy loyalty and build advocacy? The survey shows they can.
The need for advocacy is heightened by cracks emerging from the foundation with digital-only banks. While only 10% of respondents deposit their paychecks into their digital-first bank accounts, one-third of all customers have a relationship with a digital-only bank. As these banks continue to mature and rapidly innovate on the product and experience front, they could represent a real challenge to traditional banks. So there’s little cause for complacency.
This may sound like doom and gloom for banking, but when we dug deeper we found that the advocates are playing an influential role. Banks with an outsized proportion of these loyal customers are enjoying outsized benefits: 1.7X faster revenue growth (2.6X in North America) and a greater share of wallet (average 2.8 products per customer compared with 2.4 for all other banks).
These are banks which, like their competitors, have invested heavily in digitalization. Yet somehow they have succeeded in preserving if not strengthening the connection with their customers, and are profiting handsomely from it.
What drives customer advocacy?
A deeper analysis of Accenture’s consumer survey responses revealed four main drivers of customer advocacy. Crucially, we found that while most banks believe they are delivering adequately on these drivers, their customers are less convinced. This gap is the difference between passive, lazily loyal customers and passionate advocates.
Advocates want banks to:
Reassure me. This is about trust and transparency. Banks need to persuade customers that the advice they give – in-person or through their AI bots – is as trustworthy as the security of their deposits. By building a consistent track record of relevant information and wise recommendations at every touchpoint they can reinforce trust, strengthen relationships and empower customers to make smart financial decisions.
Remember me. Personalization and tailored advice are crucial. Much like 30 years ago, when a branch manager remembered who you were, customers today want their banks to listen to them and to remember what they are doing and where they are. They want continuity of conversation over channels and time. This ensures they feel “heard” and valued and gives them a greater appreciation of the advice they receive.
Delight me. Customers care about service and channels — satisfaction in these areas ranks second among all the drivers of customer advocacy. Yet, most banking service executives view service as a generator of value rather than a cost item; something that can be cut for short-term gains rather than invested in for long-term growth. It’s no surprise, then, that no more than 32% of consumers feel that service quality (across all industries) has improved over the last five years, despite all the tech innovation. Only when they recognize the potential of service to strengthen relationships will banks harness it as a driver of customer advocacy.
Reward me. This is about compelling financial benefits. Competitive fees and interest rates are a powerful driver of advocacy, yet our survey revealed a paradox: More than half of bank customers have no idea what their current fees and rates are. Eye-catching fees and pricing may be a sugar high that drives customer acquisition, but long-term advocacy is created more by features and benefits. Developing the right combination of products, benefits and features would allow banks to show their appreciation and loyalty to customers without reducing their income streams.
Bringing back the human connection
The real question for banks is how to balance the short-term costs against the benefits of long-term advocacy. Fortunately, generative AI may have emerged at exactly the right time. Given its inherent ability to remember, delight and reassure customers, it is tailor-made to bridge the advocacy gap and make banking human again.
Building customer advocacy is not the only a way to reignite the spark between customers and their banks, but it’s a crucial strategy for profitable growth. In an overcrowded market where differentiation is scarce, achieving the highest level of loyalty calls for banks to fundamentally rethink their approach to fostering an emotional connection, and to turn customers into true advocates.
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