CUSTOMER POWER: BANKING

Exploring the relationships that customers want to have with their retail bank

Customer Power: Banking is a Harris Interactive programme of research exploring the relationships that UK customers have with their bank. This article, the first in a series of four, explores whether consumers have the relationship they want, how it makes them feel, who the best banks are and why, and how banking compares with other sectors.

Does the wider banking sector impact on people’s feelings about their own bank?

For the past few years the banking sector has received quite a bashing. It seems there has been one disaster after another as banks have focused less on the personal touch and more on shareholder value and profit. Headlines around pension mis-selling, bailouts, PPI, irresponsible lending and service failures have become all too familiar.

Even Ross McEwan, head of RBS, has said his bank “is the least trusted company within the least trusted sector”. But is he right? Whilst there has been some positive change in the last year for financial services as a whole, up 10 percentage points for being trusted, banks still sit at the bottom of the league. Just 32% of consumers say they trust them: the same as in the energy sector.

However, consumers tend to have a more rosy view of their own bank. When asked, almost three quarters (72%) say they feel positive about their bank, including feeling secure, in control and supported. Just a quarter (24%) say something negative: mainly feeling disappointment and frustration – which perhaps occurs when things start to go wrong.

What do customers want in the relationship with their bank?

Around half (48%) of customers have the banking relationship they want, and yet a similar proportion (41%) hark back for the days of old fashioned banking and feel they miss the personal touch.

Preferences vary considerably by bank, with customers from First Direct, Nationwide and the Co-operative most likely to have the relationship they want, perhaps implying they get the right service levels and personalisation. On the other hand, RBS and other mainstream bank customers are those most likely to desire a more personalised service – something that will perhaps become even more challenging as we continue to move into the digital self-service world.

Comparing banking customer relationships to other sectors

The Harris Relationship Score measures customer relationship strength on rational, emotional and future intentional elements.

Looking at the scores, we see that banking is actually doing pretty well compared to other sectors.

First Direct, which is at the top of many banking leader boards, is far higher than the best performer in any other sector. However, we need to remember that not all banks perform as well as First Direct, and that there is a growing threat from brands like M&S, Virgin and Tesco, who are increasing their financial services profiles.

Managing customer relationships

Considering the positive results already mentioned for First Direct and Nationwide, it perhaps comes as no surprise that they are ranked as number one and two within the banking sector for the strength of relationship with their customers.

Out of the 25 experience based statements we asked customers First Direct comes first in 19 of them. That is some performance. Similarly, Nationwide comes first or second on 15 of the 25 elements, cementing its position as number two.

What is interesting is who is number three. Over the last two years we have seen significant improvement for Santander, which has now dislodged the Co-operative from the third spot. This appears to be due to the impact of its 1-2-3 proposition launch, and a focus on service quality, particularly for online and mobile banking.

The elements that banks need to get right to most positively enhance customer relationships are as follows:

•  Quality of service provided
•  Understanding needs
•  Product range & ease of understanding them
•  Clarity of communications
•  Listening to customers
•  Staff professionalism.

First Direct rates highly because they understand what matters most to customers and focus on delivering these elements well to meet those needs and expectations.

The threat of switching

From the Relationship Scores we calculate how connected customers are to their bank. Only 19% are fully connected, that is they connect rationally, emotionally and intentionally. Yet these customers are more likely to hold a wider variety of products, are more open to new innovations, complain less and are positive ambassadors for brands. Not surprisingly First Direct, Nationwide and Co-operative customers are most likely to fit this category.

However, many other banks have a challenge of dealing with a high proportion of customers who appear indifferent, or even apathetic, to their bank (36%), or who are disconnected (9%). This matters as the latter group are at a much higher risk of switching to another provider as they feel uninterested, powerless, angry, and even neglected by their bank.

Summary

Perceptions and experiences of individual banking relationships are stronger than those of the banking sector as a whole. There is still a good deal of general mistrust to overcome.

However, things are becoming more positive and banks are perceived better than some other service companies.

Not all banks are the same. The best performing banks are streets ahead and have the opportunity to differentiate themselves through their service, innovation, and communication.

There are commercial benefits for those banks who put the effort in to fully connect with their customers.

About Harris Interactive UK

Harris Interactive UK is a full service, consultative custom market research agency working internationally out of offices in the UK and Europe. With in-house expertise covering all areas of research design, implementation, analysis and reporting, it has particular strengths in loyalty and brand.

For more information, please visit the Harris Interactive UK website.

Customer Power: Banking is a Harris Interactive programme of research exploring the relationships that UK customers have with their bank. The team comprises Debbie Senior – Senior Consultant, Phil Brooks – Financial Services Research Director, and Georgiana Brown – Financial Services Research Manager.

[1] Edelman Trust Barometer UK