Better Customer Engagement Is Essential to Help Banks Differentiate

The biggest customer engagement concerns for banks and credit unions are optimizing staff, providing a consistent experience across all channels and improving digital adoption. New research examines the priorities and strategies banks and credit unions plan to employ for fostering stronger customer engagement — and what consumers are looking for from their primary financial institution.

If there’s anything the first two years of this decade have taught us, it is the sheer unpredictability of today’s world. The fragile state of both the economy and geopolitics requires banks and credit unions to be especially attuned to the changing needs and preferences of their customers. In a highly commoditized industry like banking, financial institutions have to differentiate themselves through superior service and outstanding customer engagement.

Our annual trends report on customer engagement in banking explores the strategic priorities of U.S.-based banks and credit unions, their current initiatives and their outlook on customer engagement for the coming year.

What are the biggest customer engagement concerns for banks and credit unions and the consumers they serve in 2023? Optimizing staff, providing opti-channel customer engagement and improving digital adoption have emerged as critical factors for short- and long-term success.

Accentuate the Human Touch During Rocky Times

It is perhaps no surprise that an economic downturn would affect consumers’ banking behavior and plans. In the event of a recession, 75% of consumers report they plan to scale back their planned financial activities, according to the customer engagement report.

In an economic downturn, relationship banking will be more important than ever. This requires financial institutions to reexamine and prioritize the level of human assistance provided even as digital delivery channels gain in importance.

According to J.D. Power’s 2022 U.S. Retail Banking Study, customers value, and are more loyal to, banks that deliver a meaningful customer experience and make efforts to support them in challenging economic times. In the J.D. Power study, 63% of customers said that if this kind of support is delivered by their financial institution, they “definitely will not switch banks, and 78% say they definitely will reuse their bank.”

A Telling Statistic:

Nearly two-thirds of people said if they have the right support through a difficult economic time, they wouldn't switch banks.

Financial institutions must use engaging methods to provide the support customers need most, especially when the economy is sour, according to J.D. Power. This involves “a personalized mix of financial advice, hands-on help with problem resolution and guidance on how to grow their money.”

When asked how they expect their primary financial institution to support them during a recession, consumers indicate they would be interested in additional personalized services (such as recession strategy planning and one-on-one financial planning).

Where mid-tier banks and credit unions have less room to be competitive, they should look to differentiate their value by providing meaningful customer engagement that supports consumers in challenging economic times, J.D. Power found.

Engagement Sets the Stage for Differentiation

While 78% of consumers are satisfied with their current primary financial institution and the support they receive, engagement is lagging.

Only 54% of consumers agree their bank tries to engage with them to understand their needs, and even fewer (43%) say there is someone at their bank or credit union they always talk to when they need answers to financial questions.

Personal connection and human trust are still largely missing, which implies that consumer satisfaction may be resting on more shallow ground than most banks and credit unions would like. This indicates the opportunity for banks and credit unions to optimize the handoff from digital to human-assisted when consumers need one-to-one personal banking.

Missing Link:

Digital banking and other features are important — but the personal connection between banker and customer is still very valuable to retaining customers.

Banks and credit unions can emphasize the personal by offering a model optimizing how they serve and service customers across all channels (versus making channel-specific investments). Such an opti-channel model enables the customer or member to choose which channels work best for them for their specific need, at any given point in time.

The brass ring here will be in sustaining a consistent pattern of positive customer experiences across all channels no matter where consumers interact with the financial institution. This customer engagement will help banks and credit unions deliver the relationship banking consumers will need in 2023.

Paths to Superior Customer Engagement

From the bank and credit union perspective, staffing and digital adoption challenges cast a shadow upon their outlook for customer engagement in 2023. These are the two predominant barriers impeding financial institutions’ ability to deliver quality customer engagement, particularly in the channels currently best poised to deliver human assistance — physical branches and contact centers.

More than half of the banks and credit unions we surveyed report that in order to deliver strong customer engagement, the No. 1 resource their institutions needed was staff. This represents a 66% year-over-year growth from when we asked this question in 2021 at the height of the Great Resignation.

Where the Problem Lies:

More than one out of two financial institution executives say short staffing is their biggest obstacle when trying to engage customers.

Over half of the banking professionals surveyed also cited digital adoption as their top digital priority for 2023. To overcome the current staffing challenges they face, banks and credit unions need the late majority and laggards (of the technology adoption curve) to adopt even the basic features of online and mobile banking to ease the burden on the frontline staff.

Digital adoption will be critical to reduce the volume of common transactional questions being handled by staff today to free them up to handle the important, more high-value conversations and interactions. This is where the real “relationship banking” takes place.

Four Ideas to Drive Better Engagement in 2023

The staffing challenges that continue to persist for banks and credit unions will not be resolved overnight. They are likely to carry over as a key challenge in 2023. Banks and credit unions must find ways to empower both their customers and employees to be more efficient.

Essentially, they have to be ready to do more with less. This means reducing the high-volume calls, driving more digital adoption and quickly connecting customers who need personalized support or service to the right resource, at the right time, in the channel of their choice.

Here are four ways banks and credit unions can help navigate an uncertain market, meet their growth goals, keep up with ever-changing consumer needs and mitigate the current staffing challenges:

1. Surround customers with access to information. Consider an opti-channel approach that gives customers access to support, product, and service information across your website and mobile applications on their own terms. Be sure you have the resources in place to meet customers where they are and provide the support they are most comfortable with.

2. Route customers to the right channel. Connect customers quickly to the right channel when human assistance is needed. Helping customers transition easily from digital to human-assisted support will be critical to building their engagement and winning loyalty. Be sure you leverage tools such as live chat for common questions, and video banking and appointment scheduling when more personalized support and service is needed.

3. Empower staff to be digital advocates. Most digitally savvy customers are already using your digital tools, so your focus will be on building adoption among digital laggards. Your staff is the key to building awareness of digital tools, as well as improving confidence and adoption. Give employees the resources they need to introduce and support your digital tools. This will lift some of the support burden from your staff, while driving more digital adoption.

4. Provide employees with easy access to information. One of the top employee challenges observed in the field is difficulty locating and utilizing the day-to-day information they need to do their jobs. Ensure your institution sets employees up for success by providing them with access to accurate, up-to-date, and consistent knowledge which they can access seamlessly at any given point in their workflow.

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