The experience retail banking providers are delivering seems to have hit a wall, prompting Forrester Research to brand the state of the industry’s CX efforts as “stagnant.”
Financial institutions have been complacent, thinking that perfunctory “innovation” efforts and an “adequate” experience is enough to remain competitive, when in reality these are merely the antes banking providers must deliver just to be in the game at all.
In the latest edition of Forrester’s annual customer experience rankings, some institutions did well and made significant strides forward. But generally speaking, the average scores for all 18 traditional banks and 10 direct banking providers came in exactly as they had in the previous rankings.
For the second survey in a row, not one institution achieved the firm’s “excellent” rating, with most institutions landing in the fat part of the curve, ranked as only “good.”
“Most banking providers have settled for just ‘average’ CX scores.”
Overall, Forrester says this indicates a serious lack of differentiation among many institutions, with most banking firms settling for rankings that are just “average.” And this isn’t just Forrester’s opinion; it’s substantiated by results from a broad poll of banking consumers.
According to Alyson Clarke, Principal Analyst at Forrester, there’s an easy explanation for the languishing CX scores uncovered by their research: Consumer expectations keep rising at a faster and faster rate, and banking providers simply aren’t keeping up.
Clarke says this is why disruptors from outside the traditional industry have been able to continue gnawing away at traditional providers’ market share. Consumers have become conditioned to expect experiences that are continually improving. If their current providers don’t show them that, they will look further afield, she explains.
The twist is that with some disruptors, they need banking partners to provide the back end infrastructure central to their existence. The fintech model is often accomplished simply by slapping a fresh “wrapper” on top of a legacy financial institution’s platform — a CX “veneer” that is more innovative and intuitive.
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Only a Handful of Standouts Deliver What People Want
“Great customer experience in banking is still rare. That means that there is huge financial upside for banks to differentiate by transforming their CX.”
If traditional players in the banking space don’t break out of the pack and keep improving, Clarke warns they will continue seeing their margins squeezed while outsiders chip away at their business.
Clarke says that institutions that elevate their CX stand to realize big gains.
“Great customer experience in banking is still rare,” Forrester says in its report. “But that means that there is huge financial upside for banks to differentiate by transforming their CX.”
Clarke dismisses the banking industry’s incessant whining about the impact of regulatory constraints on customer experience quality. This is nothing more than a cop out.
“It’s simple,” she explains. “Banking providers don’t really understand their customers and their needs.”
Clarke has praise for those atop the Forrester rankings, and for organizations that found ways to significantly improve their standing.
Navy Federal Credit Union came in first among traditional institutions, the third year in a row they’ve done so. The world’s largest credit union had the highest percentage of people who enjoy effective, easy, and emotionally-positive experiences of all the traditional banking providers measured.
The service experience is the single biggest factor influencing CX scores, according to Forrester, and Navy Federal offers a textbook example.
“Navy Federal recently shifted its call center to a behavior-based scorecard model,” Forrester says in its report. “This has improved call quality and the experience for both employees and members.”
USAA ranked first among direct banks — also for the third year in a row — topping the study’s three primary categories: effective, easy, and emotionally positive.
Do the common military roots of the two banking providers account for their high performance? Clarke doesn’t believe so. Anyone who thinks this is just making excuses for their own shortcomings, Clarke maintains. The excellence comes from the attitude within both institutions, she says.
As an example of such a difference, she points out that many banks and credit unions offer mortgage loans. Typically they are a standalone product within a specialized department or division.
At USAA, she explains, the viewpoint is not on the product, but on the purpose, to produce a more holistic, more service-oriented experience. USAA offers consumers a cross-functional team that helps people find their home, borrow for it, and get into it. She applauds this flavor of “soup-to-nuts” thinking that integrates a network of participating real estate brokers, homeowner’s insurance, and even cash rewards based on the home’s price.
Huntington National Bank made a strong comeback, rising six spots over their previous ranking to land in second place among traditional banking providers. Forrester suggests that the fallout from a major merger had caused some drag, but the bank’s fundamentals had helped it regain CX satisfaction momentum.
A significant initiative for Huntington, which has branches in eight Midwestern states, is its “Fair Play” program. Huntington Chairman, President and CEO Stephen Steinour implemented it back in 2009 as part of the bank’s recovery efforts in the wake of the Great Recession. Among the policies introduced was a 24-hour grace period in which customers could cure overdrafts without penalty. The bank’s steps also included introduction of “all-day deposits.” Consumers have up until midnight for a deposit to be credited for that day. The industry’s standard cutoff is typically much earlier.
Such steps may have cost the bank millions in revenue, but they also resulted in consumer good will, and have helped contribute to business growth.
Reality Check: Improving your CX often comes with additional expenses and/or reduced revenues. But the payoff includes reduced attrition rates and big word-of-mouth marketing gains.
“Culture is the key, and the heart of Huntington’s culture is our unyielding commitment to ‘Do the Right Thing’ for our customers,” wrote Steinour in an annual report.
Clarke says that such commitment makes an impression on consumers. It can be a major boost when a financial institution “does the right thing for its customers, versus the bottom line.”
As another example, she notes that North Carolina’s State Employees Credit Union offers “Another Chance Alerts.” Consumers who register for these alerts will have until 5:30 p.m. Eastern time to make a deposit or transfer in order to prevent an item from being returned for nonsufficient funds — a rare example of a financial institution exhibiting empathy and consideration.
The report also commends Ally Bank, ranked in the direct banking group, where it placed second. Forrester celebrates that Ally posts the wait times for call center support reps on its web pages.
“The bank also makes online chat available at all times within online banking,” the report says, “something that is rare among North American banks.”
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Mobile App Communication Beyond Words
Direct banks, being fundamentally digital, tend to think that keeping their website and apps on the leading edge will lead to high consumer approval rates, says Clarke. That technology’s great stuff, “but it’s table stakes” she says. Consumers expect that from a direct bank — it’s the business they are in.
The kind of thing that makes an impression on direct banking consumers, she continues, touches on the emotional. For example, she looks to Royal Bank of Canada. The bank offers “NOMI,” personal financial management software available only through the bank’s mobile app. Using a form of artificial intelligence, NOMI monitors spending. It will even alert consumers if a recurring payee raises its rates. The app’s “Find & Save” feature automatically scouts for funds that don’t appear to be needed to handle the consumer’s typical spending patterns. That money goes into savings, painlessly, and can be retrieved if necessary.
“That’s good stuff that drives emotion,” says Clarke. A product like NOMI also addresses a shortcoming among financial institutions that the Forrester report flags: While they excel at communicating data, they typically don’t do much to help consumers digest that data, and turn it into action that will improve their financial affairs.
How to Stay Ahead of Rising Expectations
“Banking providers are racing to create entirely digital experiences to entice customers away from contact centers and branches. That’s a mistake.”
— Alyson Clarke, Forrester
To avoid customer experience stagnation, Forrester recommends financial institutions focus on three categories that play a big part in its rankings — the three “E’s”:
“Conventional wisdom states that customers prefer digital experiences,” says Clarke. “As a result, banking providers are racing to create entirely digital experiences to entice customers away from contact centers and branches. That’s a mistake. Our data shows that the real situation is more complex.”
Effectiveness plays differently in the multichannel and direct bank spheres. In the Forrester report multichannel users ranked banking in a branch and using the institution’s website equally for meeting their needs — they like being able to take more complex matters to humans. Among direct bank users, websites rank higher than mobile apps. Indeed, after websites come interacting by phone, and then the apps.
Ease for multichannel bank users is best reflected in their dealings with bank staff. Websites and apps come closely behind. For direct bank consumers, websites are considered easier than apps. Forrester thinks direct banks must work to improve apps, as digital represents their main avenue of service. However, doing so will not differentiate the bank from the pack. It just keeps the institution in the race.
Read More: Banks and Credit Unions Still Love Branches (And Here’s Why)
Emotional Appeal Has Multiple Facets
The emotional aspect of customer experience isn’t as simple as keeping consumers happy. In fact, doing so isn’t the most effective strategy for either multichannel banks or direct banks. But, overall, emotion — which Forrester defines as how consumers feel about their customer experience with a provider — is central to setting an institution apart from the pack. This applies to both categories of institution in the study.
Forrester finds that the most effective emotional appeal for multichannel users is making consumers feel appreciated, respected, and valued. For consumers using direct banks, the top three emotional appeals are feeling appreciated, confident, and valued.
While the debate over branch versus digital continues to rumble on, strategists and financial marketers should bear in mind this finding about direct banks from Forrester:
“A phone conversation with a person evoked the most positive emotions. Once again, human contact drives the most emotion. As with the customers of multichannel banks, a call with a person evoked the greatest amount of positive sentiment from direct banks’ customers — even though these customers have chosen a bank that operates without branches.”