Banking
Our relationship with money has changed, and banks need to get on board
Global Banking & Finance Review®
Company
By Alexander Thomson, VP, Quantum Metric
The retail banking landscape has changed dramatically over the last two decades, and it’s even clearer after the past two years. Gone are the days of cheque books, deposit envelopes, and heading to your local branch on a regular basis. People’s preferences are rapidly evolving, and a digital-first mindset has become increasingly prevalent – accelerated massively by the global pandemic.
With that in mind, the role of retail banks and how they engage with individuals is also changing. If they’re to attract and retain customers, providing a standout online experience and using data-driven analytics to offer personalised products and services are key.
Other priorities include gaining a deep understanding of their customer base and responding with agility across product design, customer service (CS) and communications. As part of that, vulnerable people are supported and digital leakage reduces.
Only then do traditional banks stand a chance of fostering loyalty and retaining (if not expanding) their slice of the market – a priority given the fierce level of competition from fintechs, tech-savvy challenger banks and neo-banks that are making headway in the industry.
Meanwhile, the average consumer holds accounts with at least two banks, and 28% have accounts with three or more. Why? People are looking for options to diversify their money and build their wealth. Individuals are also switching if their primary bank doesn’t provide all of the services they require, be it broader ISA options or the ability to purchase cryptocurrency.
The shift to digital and easy access to online accounts coupled with simultaneous banking across multiple institutions puts banks in a precarious position – unless they take appropriate action.
What does that involve? Building loyalty and preventing consumers’ eyes from wandering in the first place by tracking customer frustration and offering a more tailored and streamlined experience.
Finances and mental health
To cope, these vulnerable individuals have become more watchful, with two in five (39%) checking their balances almost every day. For them, a consistent digital experience gives a sense of control, easing their financial angst.
People with other characteristics of vulnerability – physical disabilities, addictions, low resilience, unemployed, limited numeracy skills – also have additional or different banking needs. For example, vulnerable customers are often more risk-tolerant or have reduced processing power and a lack of perspective.
Because of these factors, they may make impulsive or poor financial decisions like falling victim to a scam, and they’re more likely to purchase an inappropriate product. The situation is only exacerbated if a vulnerable individual receives sub-par support from their bank.
For vulnerable customers, good banking outcomes are achieved when their needs are understood and effective responses are implemented. To that end, it’s all about developing websites, apps and digital services that are simple and intuitive. Empathetic and bespoke user experience is also a must, as is removing red tape from CS processes.
It’s the responsibility of banks to recognise a vulnerable person and respond effectively by improving messaging and usability across all touch points, be it mobile, app or desktop. The process should be iterative, with regular assessments analysing whether outcomes for vulnerable consumers are as good as those for others. As part of that, creating a comprehensive policy to support vulnerable customers is crucial.
Customer frustration on the rise
With people more emotionally driven than ever when it comes to their finances, frustration can lead to them leaving – or just abandoning – their bank. Indeed, over half (57%) have closed an account because they encountered poor CS or found an institution with the same offerings that potentially provided a better experience.
Given that 30% of consumers say their biggest problem is finding it hard to resolve issues online, that reiterates the need for banks to become agile organisations that innovate to meet customers’ changing needs – it’s not just about fixing glitches and bugs.
Similarly, considering more than a third of people ring customer service when they face an online banking issue, it’s important to think outside the digital box by arming call centre agents with the right insights and tools to iron out problems quickly.
People dropping off between an app and actively speaking to the contact centre is undoubtedly an issue, but it’s solvable. By accessing the right data insights, banks can empathise better with their customers and make moves to change the problem, thereby reducing churn.
In an environment where every single customer is both much easier to lose and still relatively expensive to recruit, call centre calls ought to represent red flags. It’s true that sometimes people just want to talk with someone. However, if the reason for the call is a lack of information or an over-complicated process such as avoidable friction in the digital experience, the risk of digital leakage becomes very real, and the chance of a customer going elsewhere grows.
Reinforcing that sentiment is the incorrect widespread belief that banks legally have greater responsibility for vulnerable individuals in the UK than they actually do. With that in mind, intuitively embedding deeper security measures, (two-factor authentication, biometric verification, for example) into the digital experience to protect accounts and help customers better safeguard themselves is paramount.
Consumers’ interactions with retail banks have changed – they no longer stick with one for life and are more emotionally driven. Now, it’s about the experience banks offer: unless it’s seamless, intuitive, secure, user-friendly and personalised, people will simply go elsewhere.
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