For all the talk about customer relationships and customer experience in banking, a big consumer survey confirms many banks and credit unions lose loyalty when they view customers as “accounts”, rather the people with emotional needs to fulfill.
Indeed, the 2022 US Banking Industry Loyalty Report by Apex Scoring System revealed a 37% spread in customer loyalty scores between America’s ten largest banks.
At issue, said James Robert Lay, CEO of the Digital Growth Institute, in a podcast, is a failure to recognize the value of those emotional experiences.
“People do business with people. People bank with people. And I think there’s this humanity we’re seeing coming out of the Covid experience as we continue to move forward into this decade,” Lay said.
Banking is Personal and Emotional
The Apex report probed the changing face of customer experience and loyalty by surveying more than 3,000 retail banking customers at 20 traditional and digital financial institutions, including Capital One, Wells Fargo, Chime, N26, Bank of America and SoFi.
The data revealed several critical “wants” that, when met, create customer loyalty. First, consumers want new technologies and services to add value. They want their banking provider to be “uncomplicated” and keep things simple across all areas of financial services. They want to be treated like people and be able to depend on their financial institution to serve their interests when they need it the most.
Finally, customers want their provider to be predictable and instill a sense of joy in banking interactions.
“Tapping into someone’s emotions — giving them a truly great experience as a member — is what builds loyalty and helps retain members for a lifetime,” Barb Bowker, Chief Member Experience Officer at Pennsylvania State Employees Credit Union, told The Financial Brand.
While PSECU, which has more than $7.5 billion in assets and 480,000 members is a digital-first brand, it puts human emotion at the forefront of everything it does.
“Tapping into someone’s emotions — giving them a truly great experience as a member — is what builds loyalty and helps retain members for a lifetime.”
— Barb Bowker, Pennsylvania State Employees Credit Union
According to the report, PSECU’s approach is not typical. Financial services is traditionally considered a quantitative category in which organizations with the best products, services, and rates ultimately win.
However, that approach doesn’t necessarily create customer loyalty, the co-founder of Apex, Nick Bond, explained during the Digital Growth Institute podcast. When it comes to banking, he said, consumers have a big emotional factor because finances touch nearly all aspects of their lives.
Speaking to the ‘Why’ Consumers Bank
To develop a meaningful, long-term relationship, banks and credit unions must dig deeper into “why” consumers use their products. Apex measures 16 “Levers of Loyalty” and consumer attitudes that come together to determine the strength of a brand relationship.
The report noted several trends among banks that had high levels of brand loyalty.
First, these banks build that “why” into every customer conversation.
Second, they understand that loyalty is earned. As they profile prospects according to the person’s feelings and beliefs, these banks build plans to generate a sense of honesty and predictability for their customers.
Finally, these financial institutions continually measure what is important to their customers and then act on what they learn.
Digital and challenger banks ranked higher than traditional banks in customer loyalty by a margin of 21% and 10%, respectively.
However, all financial institutions can improve loyalty in their own ways. PSECU, for example, regularly researches members and potential members to understand the “rational and emotional triggers” that drive their financial lives, said Bowker. PSECU’s own research found its members’ loyalty is strongly driven by trust. Customers who trust their banks feel valued and in control of their finances, she said.
PSECU also regularly obtains feedback from members, such as their lifetime experiences banking with the credit union. It then strives to ensure the right mix of products to help members through every phase of their life, from auto loans and mortgages to children’s savings accounts, student banking, and more.
“Bridging the gap between a transactional relationship and a lifetime member means we must connect with them emotionally. It solidifies their interaction as more than just a loan payment or depositing a check. It means they see [us] as a meaningful part of their financial life – a partner helping them achieve more,” said Bowker.
Bridging the Emotional Gap
Understanding the customer and continually acting on that knowledge, Apex advises, bridges the emotional gap that the report identified.
First, it recommends that bankers build predictability, so that customers can feel at ease and know exactly what to expect when dealing with the financial service institution. Three-quarters of consumers surveyed identified “predictability” as one of the most important drivers of their loyalty.
The report noted three opportunities to increase predictability:
- Organizations can empower customer service reps to take control and solve customer problems.
- Banking leaders can improve customer perceptions of their honesty by being respectful, willing to have tough conversations and keeping customers in the loop.
- To be believed as forward-thinking, financial institutions need to ensure that technology and other enhancements aren’t just about improving the firm’s efficiency but about improving customer service.
One way to start applying these concepts is to put people — both customers and employees — at the center of what you do, said Marc Whitehead, Principal at APEX Scoring System, in the podcast. As many financial brands are product-driven, this takes a shift in mindset.
Financial institutions must 'chase the audience' (customers and employees) rather than the competition.
James Robert Lay noted that executive leadership in financial services often thinks differently than the consumers they serve. “With financial services, the conflict is in the banker’s brain because they’re very smart, analytical, left-brain-driven leaders. But people buy based on emotions. They buy based on feelings,” said Lay.