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ONE SIZE FITS ALL APPROACH TO CUSTOMER ENGAGEMENT NO LONGER ACCEPTABLE FROM THE BANKING INDUSTRY

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ONE SIZE FITS ALL APPROACH TO CUSTOMER ENGAGEMENT NO LONGER ACCEPTABLE FROM THE BANKING INDUSTRY

Nearly half of British consumers (48%) would consider switching their bank as a result of receiving poor customer service

Research commissioned by Engage Hub, the data-driven customer engagement solutions company, reveals that poor customer experience is the main reason UK consumers would be encouraged to switch bank, with nearly half (48%) of consumers citing this as their biggest gripe.

UK consumers would also be highly likely (44%) to walk away from a bank if they didn’t feel they were being adequately protected from fraud. Other factors that could drive customers away, include banks sending irrelevant communications to consumers (23%), having a clunky, hard-to-use app (17%), or not offering the digital communication channels that consumers would prefer to communicate through (14%). Interestingly, the figures for these three factors go up significantly when looking at those aged 18-24:

What factors would most encourage you to reconsider who you bank with? (Aged 18-24 years):

  • My bank delivering poor customer service – 41% (down vs the 48% average)
  • My bank not protecting me from fraud – 44% (level with the average)
  • My bank is constantly sending me irrelevant messages – 31% (up vs the 23% average)
  • My bank has a clunky, hard-to-use app – 24% (up vs the 17% average)
  • My bank doesn’t offer me the digital channels I want to use – 20% (up vs the 14% average)

Mark Grainger, VP Sales Europe at Engage Hub commented, “Customer service is no longer defined by the interpersonal skills of your employees. Younger generations that have grown up with the internet and connectivity everywhere want to use technology to squeeze routine tasks into their busy lives. Their expectation to check balances, make payments and even set up a bank account at any time, in any location and on any device, is forcing traditional banks to reconsider their offerings to attract new customers, and retain existing ones.”

Grainger added, “There is a level of personalisation required when communicating with consumers, who will no longer accept an onslaught of irrelevant messages and advertising. Banks need to tap into the wealth of knowledge locked within the customer data they hold to glean a unique insight into what their customers want. Contextually relevant and personalised content, distributed via the preferred channel of the customer, could dramatically improve customer satisfaction.

Email (44%) was identified by the research as the most popular method of communication identified by consumers, followed by banking apps with push notifications (29%) and text/SMS messages (26%). When looking at different age demographics, there were clear distinctions between younger and older consumers in terms of preferred channels of communication, and looking at the 18-24 vs the 65+ age groups, highlights the differences most significantly:

Which channel of communication would you most like your bank to use to communicate with you?

Comms channel 18-24 years Average 65+ years
Email 38% (down) 44% 54% (up)
App 37% (up) 29% 17% (down)
Text 31% (up) 26% 17% (down)
Voice 18% (down) 19% 19% (–)
Messaging platform 11% (up) 9% 5% (down)
Social media 9% (up) 7% 2% (down)

With such a range of channels available to them, it’s perhaps unsurprising that only 40% of customers are being communicated with via their preferred channel of communication, while 17% are never being communicated with via their preferred channel. One in 10 consumers (10%) believe their bank doesn’t know what communication channels they prefer.

While 24% of respondents believe the communications their bank sends are always relevant to them, 34% feel they could be more relevant. Worse still, 17% believe communications are always irrelevant, and one in four (25%) said their bank never communicated with them.

Grainger concluded, “It is well documented there has been a clear shift towards online banking in recent years, but what’s really upped the ante is the mobile centric behaviours of younger generations. The demand for anytime, anywhere access to banking has been propagated by the capabilities of modern smartphones, and streamlined, integrate systems, with a single customer view point, are the key to optimising customer experience. Those banks that utilise cross-channel communication technologies to deliver this will remain ahead of the curve.”

Banking

A quarter of banking customers noted an improvement in customer service over lockdown, research shows

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A quarter of banking customers noted an improvement in customer service over lockdown, research shows 1

SAS research reveals that banks offered an improved customer experience during lockdown

A quarter (27%) of banking customers noted an improvement in their customer experience over lockdown, according to research conducted by SAS, the leader in analytics.

This represents some good news for banks in an extremely challenging time, with 59% of customers also saying they’d pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.

The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of banking customers using a digital service or app has grown by 11%, adding to an existing 58% who were already digital customers. Over half (53%) of new users plan to continue using these digital services permanently moving forward.

Brian Holden, Director, Financial Services at SAS UK & Ireland, said:

“It’s notable that in times of need customers value being able to communicate with their bank and place an even higher value on good customer service. A rise in the number of digital customers means banks can now reach a wider audience online, leveraging AI and analytics to offer a more personalised experience.

“There is work to be done, though. Even greater personalisation is needed if banks are to win over the 12% of customers who felt banking services deteriorated over lockdown. And this personalisation will need to get right down to a segment of one to properly reflect the unique circumstances some individuals now find themselves in due to the pandemic.”

While the number of digital users grew over lockdown, there is still a quarter (24%) of the banking customer base that have chosen not to make the switch to digital services.

Meanwhile, failure to offer a consistently satisfactory customer experience could prove costly for banks, with a third (33%) of customers claiming that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service, so this just underlines how much retail banks can win or lose in these difficult times.

For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer? 

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Banking

Swedish Bank Stress Tests in Line with Recent Rating Actions

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Swedish Bank Stress Tests in Line with Recent Rating Actions 2

The Swedish Financial Supervisory Authority’s (FSA) latest stress test results show major Swedish banks’ robust ability to absorb credit losses. The results support Fitch Ratings’ view that short-term risks have abated in recent months, and are in line with Fitch’s assessment of major Swedish banks’ capitalisation at ‘aa-‘, which was a factor when Fitch removed the ratings of Handelsbanken, Nordea (not covered by the FSA’s stress test) and SEB from Rating Watch Negative in September.

The FSA estimated about SEK130 billion of credit losses over 2020-2022 for the three largest banks (Swedbank, Handelsbanken and SEB) under its stress test. This represents about 220bp of their loans, or about 70bp annually. However, the banks’ pre-impairment profitability in the stress test could absorb credit losses of up to about 110bp of loans annually. Fitch’s baseline expectation is for credit losses below 20bp of loans in 2020 and 8bp-12bp in 2021.

Capital remained strong under the stress test. The average common equity Tier 1 (CET1) ratio fell by only 2.8pp (1.9pp if banks did not pay dividends) from 17.6% at end-June 2020. The capital decline was not driven by credit losses, which could be absorbed by pre-impairment profitability, but by risk-weighted asset inflation.

The three banks’ 3Q20 results showed that capital has been resilient despite the coronavirus crisis. The banks had a CET1 capital surplus over regulatory minimums, including buffers, of almost SEK100 billion (excluding about SEK33 billion earmarked for dividends). SEB had a CET1 ratio of 19.4% at end-September, Handelsbanken’s was 17.8% and Swedbank’s 16.8%.

The SEK130 billion credit losses under the latest stress test are lower than under the FSA’s spring 2020 stress test (SEK145 billion), which also covered a shorter period of two years. However, they are still larger than the actual losses incurred by the three banks during the 2008-2010 crisis. This is despite tightened underwriting standards by the three banks in recent years, including, in the case of SEB and Swedbank, in the Baltics, the source of most of their loan impairment charges in the previous crisis.

In its baseline economic forecasts, the FSA assumes a harsher shock to Sweden’s GDP in 2020 and 2021 (-6.9% and 1%, respectively) than Fitch’s baseline (-4% and 3.4%), although it assumes a similar recovery by end-2022. It also assumes real estate price corrections, which appears particularly conservative in light of a 11% housing property price increase over January to November 2020.

The ratings of Handelsbanken (AA), Nordea (AA-) and SEB (AA-) are on Negative Outlook due to medium-term risks to our baseline scenario. The rating of Swedbank (A+) is on Stable Outlook, reflecting significant headroom at the current rating level following a one-notch downgrade in April due to shortcomings in anti-money laundering risk controls.

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Banking

Future success for banks will be driven by balancing physical and digital services

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Future success for banks will be driven by balancing physical and digital services 3

Digital acceleration due to COVID-19 has not eliminated the need for bank branches

Faster service (23%), smaller queues (26%) and longer opening hours (31%) are among customers’ biggest asks of their bank branch, new research from Diebold Nixdorf today reveals. But with 41% consumers saying they would be comfortable to engage with all banking services via an app, it is vital that banks respond to the full spectrum of customer needs – balancing and evolving their offerings on multiple fronts.

A third (35%) of customers say they will always want access to physical, in-branch banking services in some capacity and one in ten (10%) consumers will never bank predominantly online in the future. This demonstrates that there remains an important role for the services a branch provides. This role, however, continues to shift away from purely transactional banking:

  • A quarter (26%) value face-to-face advice when it comes to their banking needs

  • One in five (18%) seek advice on different products

  • 17% want to speak to the staff or other customers.

Matt Phillips, Diebold Nixdorf vice president, head of financial services UK & Ireland, said: “The majority of banks have spent the last decade focusing on their digital strategies and investing in improving – or establishing – their online customer experience. However, the data shows that there is still an essential role for physical branches. Banks now increasingly face the challenge of continuing to provide customers with access to a range of physical and as well as digital services, giving them the flexibility to choose the best service for them at any given moment in time.”

When looking beyond the impact of COVID-19, planned branch visits by customers are expected to rebound to 28%, following a dip to 11% during lockdown. And when asked about the new services they’d like to see inside their bank, sixteen percent of respondents said more self-service machines would improve their in-branch experience.

Matt Phillips continues: “In a world that is fast evolving and where the future is digital, there’s no doubt that high street banks must, and are, responding to the needs of highly digital customers. But not every customer requirement is digital. There is still a strong need for physical bank branches and the interaction and services they offer, and striking this balance between physical and digital is where the industry must come together to provide solutions. For example, building a strong, leave-behind strategy is something we’re seeing across the board when banks have to close branches, ensuring customers have access to self-service machines to complete all their transactional needs.”

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