COVID Could Cost Banks Big If 1 in 4 Customers Switch

Continuing inferior service from call centers annoys many consumers, but it has had an especially negative impact on how key groups perceive the service they have been receiving from their financial institutions. These groups include Gen Z and Millennials, Black, Asian and Hispanic minorities, and small business owners.

With increased call volume, reduced headcount and the need to help with a multitude of new consumer questions as a result of the ongoing COVID-19 pandemic, many financial institutions have been struggling to deliver optimal service to consumers and businesses and to prospective customers. Research from Deloitte Digital finds that an unsatisfying customer service experience during the pandemic — specifically slow, unavailable or unhelpful call center service due to high volume — has become the leading driver when consumers consider switching financial institutions.

According to our “HX in Uncertainty” research, which surveyed over 2,000 retail banking customers, 28% of respondents said they would be inclined to switch financial institutions due to a poor customer-service experience. The next two drivers of switching banks during COVID-19 were a poorly designed mobile platform (26% of respondents) and the price/fees of a bank’s products and services (17% of respondents).

Customer service interactions are vital for financial institutions to understand and address the immediate needs of customers, especially during challenges like COVID-19. Institutions that deliver a positive customer experience are more likely to both establish themselves as trusted leaders within the financial services industry and achieve a competitive edge.

Institutions Must Meet Customers Where They Are

Deloitte’s research shows that customers are more inclined to look to their banking providers as trusted partners during the pandemic. While purchasing behaviors may have changed, including the obvious decline in in-person interactions, customers who previously had transactional relationships with their banking providers are now expecting timely guidance on their financial performance. Such ramifications of the COVID crisis have contributed to the relationship change.

As a result, banks and credit unions must increasingly be equipped to respond digitally to customers. Of those surveyed, 41% said they are now more comfortable handling financial interactions online than they were prior to the pandemic. Cash and check payments, in particular, have become 20% and 13% less popular payment preferences, respectively. The adoption of digital payments is likely to continue to accelerate, driven largely by those between the ages of 18 and 40, who already have a high usage rate.

Financial institutions looking to pilot digital platforms may want to consider optimizing customer-facing mobile payment apps and digital wealth management tools — among those shown to have the highest increase in consideration by customers. Now is also an optimal time for implementation, as times of uncertainty tend to create a willingness among consumers to adopt new solutions. While there are guardrails around innovation limits — for instance, health and safety are important considerations — COVID-19 has been a catalyst for digitization.

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Failure to Serve Immediate Financial Needs Will Erode Customer Bases

The consumers we surveyed have shown a decrease in customer loyalty or an unwillingness to recommend their banking provider to others are disproportionately correlated with those who face severe financial impacts due to COVID-19, or felt that they did not receive adequate resources or guidance during the crisis.

This finding is especially prominent among Gen Z and Millennials, underrepresented minorities (Asian, Black & Hispanic), and small business owners. Black and Hispanic customers say they are most likely to change their banking habits due to COVID-19, with 52% of Black customers and 66% of Hispanic customers expressing concern about falling behind on payments.

These patterns could have a sustained impact on banks and related implications should be considered carefully. Providers may want to start by understanding the immediate financial needs of customers who are facing exacerbated financial burdens. It’s important for banks and credit unions to consider how they are not only providing the customer service their customers are looking for and need, but also easy-to-access financial resources and education.

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Institutions Must Pay Attention to Employees’ Needs as Well

During the pandemic, customers are also paying attention to how their institutions are caring for their employees. Leaders need to proactively recognize employee concerns, be sensitive to their personal/family needs, and prioritize physical and psychological health efforts.

An empathetic and agile approach to talent helps maintain employee productivity while also ensuring employees feel appreciated — in turn helping to retain customers. 40% of survey respondents reported that an institution’s ability to take care of its customers during the crisis is a driver of satisfaction. Additionally, just under 20% of customers want to know their bank is taking care of their employees during the crisis by providing them with the resources they need to safely conduct their work. Millennials and business owners care most about institutions taking care of their employees, with 43% and 28% of respondents, respectively, indicating this as a driver of satisfaction.

In response, banks and credit unions should consider communications to their customers that state their COVID-19 policies from the perspective of keeping both employees and customers safe. Health protocols, such as requiring masks in branch locations, should be upheld and maintained for the safety of customers and employees. Institutions should also provide flexible digital options for customers, so they are not required to go into a bank for previously in-person tasks. Not only does this help to meet new preferences of customers, but it also reduces potential wait times and limits the number of customers coming into the bank.

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Driving Trust During and After COVID-19

In times of uncertainty, people turn to those they can trust. This is true now and is likely to remain so long after the pandemic subsides.

Banking innovation in the face of COVID-19 merits enthusiasm. If institutions continue on this path, the potential value they deliver customers and employees could be what sets them apart when it comes to driving loyalty and satisfaction. This moment matters — and the next steps taken will set the standard for how the industry helps customers and businesses thrive going forward.

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