FORESEE EXPERIENCE INDEX BANKING REPORT

Transcription

1 FORESEE EXPERIENCE INDEX BANKING REPORT AUTHOR Jason Conrad R E S E A R C H A N A LY S T S Angela DiNicola Andrew Hyclak Karly Szczepkowski 2017 ForeSee

2 FORESEE EXPERIENCE INDEX Introduction Banks are struggling to gain new footholds amid mounting industry disruption. Digital migration, increasing competition, and rising customer expectations weigh heavily on the banking industry, bound by regulatory hurdles and prone to cultural Introducing the ForeSee Experience Index (FXI): Banking Report. ForeSee s proven measurement methodology quantifies key CX drivers in order to accurately predict which elements of the experience will drive desired behaviors. In this report, you ll learn: inertia. Competition is fierce and relentless, notably from fintech companies that offer everything from lending to personal finance, payments, and investing, often at a lower cost and with greater convenience. Although consumer behavior has undoubtedly shifted to Map of the Market Credit unions and local banks outperform large, national banks in terms of CX. web and mobile, banks can t risk abandoning branches and RE AD M O RE call centers. More than ever, customer experience (CX) across all the channels in the customer journey is a top business imperative and key competitive differentiator for banks fighting to compete and remain relevant. Great CX turns digital migration from a challenge into an opportunity because CX is directly tied to The Click-and-Mortar Customer Journey Branches still matter. A lot. But digital touchpoints are important for retention and loyalty. READ MORE Breaking Up Is Hard to Do Fintech is the Future Most banks rely too much on captive loyalty to retain customers. RE AD M O RE business impacts like revenue, overhead costs, acquisition rates, New technologies are a growing threat, but smart banks can adapt and learn from fintech successes. READ MORE loyalty, lifetime value, and Net Promoter Score (NPS). 2

3 FORESEE EXPERIENCE INDEX Map of the Market: Credit Unions Dominate CUSTOMERS LIKE A PERSONAL TOUCH ForeSee s methodology quantifies key drivers of Customers rank credit unions above regional and national banks. satisfaction in order to accurately predict which elements AVERAGE FXI SCORE CREDIT UNIONS REGIONAL BANKS NATIONAL BANKS of CX will have the biggest impact on future behaviors. TOP PRIORITIES FOR IMPROVEMENT CREDIT UNIONS REGIONAL BANKS 60 NPS SCORE 45 NATIONAL BANKS 45 A focus on these elements will have the biggest impact on overall CX. Individual banks have may have varying priorities. 35 FXI SCORES ON A 100-POINT SCALE NET PROMOTER SCORE ON A SCALE OF -100 TO +100 Mobile apps and branches get high marks from customers; credit union customers are the happiest across all channels. DESKTOP APP FEES C ONF IDENC E W H Y C X M AT T E R S Bank and credit union customers who have a great CX are: BRANCHES CENTER 76% 63% 86% 58% more likely to buy additional services more likely to continue their relationship with the bank more likely to recommend the bank (NPS) more likely to trust the bank 87 CHAT CREDI T UNI ONS 81 REGI ONAL BANKS 79 NATI ONAL B ANKS 3

4 The Click-and-Mortar Customer Journey BRANCHES AND DIGITAL CHANNELS BOTH HAVE A ROLE Leverage VOC Across the Entire Customer Journey Invest in a consistent metric. Measure the experience across every touchpoint. A common metric, such as satisfaction or NPS, will give executives the holistic view. Manage your assets. Be rigorous and disciplined in updating customer journey maps, which need regular attention. Ensure great returns with an executive sponsor. Building great omnichannel CX requires purposeful leadership that can and will articulate a vision. Diversify! Build a cross-functional team. Get the right stakeholders in the room from the outset and on an ongoing basis, including: marketing, digital, mobile, branches, operations, call center, and very importantly IT. Benchmark your metrics. Over time, across channels and touchpoints, and against competitors and best-in-class benchmarks provide much needed context. channels and touchpoints. However, burdened by strict industry regulations and prone to slow internal processes, many banks struggle to provide consistent and excellent CX across the customer journey and through the customer lifecycle. It s no surprise: The 2017 Digital Banking Report found that two-thirds of retail banks lack a formal CX strategy. And according to the Financial Brand, 72% of financial institutions indicated that they would be increasing their investment in CX initiatives in 2017, but only 28% said their program yielded a positive impact. For some banks, reducing branch footprint is part of the strategy as branch visits decline and branches increasingly become cost centers. Our research shows that customers still want that face-to-face interaction, and they rely on a variety of channels and touchpoints as they research, purchase services, and conduct transactions. The onus is on retail banks to deliver omnichannel efficiency while balancing the needs of key customer segments. Measuring CX is the first step towards managing it. Getting measurement right is critical. Our research shows that banks provide fairly high CX scores in individual 4

5 The Click-and-Mortar Customer Journey BRANCHES STILL MATTER. A LOT. If your bank s online functionality was ideal, would you still want a branch? 49% SAY YES weekly monthly last three months Frequency of branch visits HOW CUSTOMERS RANK BANKING CHANNELS Mobile apps score the highest in terms of CX, but branch CX outperforms desktop and mobile web. 19% 40% 62% DIGITAL CONTRIBUTION 2/3 of website visitors leave digital experiences for another channel. Do you know why? Customer experiences in web and mobile play a critical role in their customer journey. If you don't accurately measure and understand digital's contribution to your business today, you might be underestimating, or worse, underfunding your digital efforts. 5 Steps to Measure Digital Contribution 1. Capture addresses using CX survey backed by a proven model. 2. Send digital visitors a short survey asking what they did next. APP 87 BRANCH 86 DESKTOP CENTER 83 CHAT Analyze what CX factors drive digital visitors who don t convert, or who convert with a competitor. 4. Report on digital s contribution to the customer journey. 5. Prioritize strategic and tactical improvements with certainty. 5

6 The Customer Controls the Journey: Understand Their Path The journey of a retail banking customer is complex and usually involves multiple touchpoints. Overall, nearly ⅔ (61%) of customers start their journey in a digital channel (desktop and mobile web) when opening a new account. However, more than half (58%) who start their journey digitally end up in a branch. It s also useful to examine the customer journey by generation. In our research, as you might expect, Baby Boomers are more likely to start and end their journey in a branch when opening a new account, while Millennials and Generation Z tend to prefer digital experiences. STARTS IN NATIONAL BANKS ENDS IN STARTS IN REGIONAL BANKS ENDS IN STARTS IN CREDIT UNIONS ENDS IN BRANCH 31% 88% BRANCH 40% 94% BRANCH 35% 91% 41% 55% 35% BRANCH 36% 73% 22% of people who start their journey in web end in branch BRANCH 37% 63% 31% BRANCH 23% 44% 16% 31% 18% 59% 25% 22% 58% 14% 26% 43% CENTER 25% 4% 19% 13% CENTER CENTER 5% 67% 10% 14% CENTER CENTER 6% 59% 10% 23% CENTER 6

7 Breaking Up Is Hard to Do BANKS RISK 21% CUSTOMER DEFECTION IF SWITCHING WERE EASIER Banking is where the telecommunications industry was 20 years ago. Before number portability was mandated back in 2003, many cell phone users felt trapped by their wireless carrier, because switching meant giving up the phone number known to all their friends, family, and business associates. Bank customers today can relate; switching banks often doesn t seem worth the hassle or the potentially severe consequences of missed payments on important things like college tuition, electricity bills, or even Netflix. Efforts to do the same for banking, with the Freedom and Mobility in Consumer Banking Act in 2013, failed but imagine the competitive landgrab for banking customers IF or WHEN switching banks is as easy as switching cell carriers. In fact, our study shows that 21% would switch banks today if it were as easy as switching cell providers. Banks can do better at earning customer loyalty and not just banking on the captive loyalty they enjoy today. ForeSee research reveals that while CX is not a top reason customers select a bank, a great online CX is a crucial retention tool, and ranks as one of the top reasons people stay with a bank. If banks improve their CX, they ll spend less time competing over and over again for the same customers when they need new products. Because right now that s exactly what is happening. How else could you square that 24% of people wouldn t consider their current bank or credit union when looking for new products or services! Banks and credit unions are in the unique position of being able to connect meaningfully with their customers because they are a big part of many of life's most memorable moments from buying a first car, to building a dream house, to opening a child's first savings account. It makes sense to embrace these opportunities to connect, and it becomes even more important if switching banks ever becomes as easy as switching cell phone providers. 7

8 LOYAL, BUT NOT IN LOVE 1/4 of bank customers are loyal only because it's hard to switch Their satisfaction score is far lower (74) than average (82) THE YOUNG AND THE RESTLESS 1/5 of Gen Z have already switched banks at least once in their short lifetime 38% of bank customers would definitely consider their primary bank when in the market for new services More than 1/4 of Gen Z banking customers would switch banks if it were easy Both Gen Y & Z place a higher premium on ease and convenience than Gen X and Baby Boomers If it were as easy to switch banks as it is to switch cell phones, would you do it? 21% SAY YES ACQUISITION, LOYALTY, AND DEFECTION Do you know what factors drive customer acquisition, retention, and defection? HOW TO GET AND KEEP CUSTOMERS Acquisition 1. Convenience 2. Trust 3. Perception of stability/financial security 4. Availability of branches Retention 1. Great online bank experience 2. Perception of stability/financial security 3. Fees and interest rates 4. Availability of branches Defection 1. Availability of branches 2. Poor customer service 3. (Lack of) Trust 4. Fees and interest rates 8

9 LOYALTY MATTERS Regional banks have the most to win and the most to lose: their customers are more likely to defect when they make mistakes, but also more likely to be loyal when they provide a great CX. Credit unions rely on consumer confidence for loyalty more than other types of banks. Large national banks have lower confidence scores, but it also matters less for them (it s a lower priority for improvement). FOUR TYPES OF CUSTOMER LOYALTY 1 Purchased Loyalty 3 pays customers Convenience Loyalty can play a role in to be loyal, and is a popular and driving earned loyalty. Whether it s by effective tactic for banks. Examples simplifying the processes for depositing include customer rewards programs, checks, to offering more ATMs or memberships, coupons, and rebates. branch locations than the competition, Purchased loyalty can be easily stolen convenience can play a significant if a competitor offers a better loyalty role in driving acquisition and loyalty. program. However, when your competitor offers 2 a more convenient banking alternative, Restricted Loyalty is at play when falling back on earned, or true loyalty, there s no other game in town, often will remain your ultimate strategic true for utilities, cable companies, competitive advantage. etc., and less relevant for retail banks 4 especially in light of the emergence Earned Loyalty or True Loyalty is of fintech companies. It only works the best kind. The only way to truly until industry regulations change and earn loyalty is to provide a great competition increases but is one of the CX. Customer satisfaction drives most effective kinds of loyalty. allegiance to a brand or product that doesn t depend on loyalty programs, convenience, competition, or even price. 9

10 FORESEE EXPERIENCE INDEX Fintech Is the Future W H AT S H A P P E N I N G? WHY? W H AT D O E S I T M E A N T O Y O U? With fewer barriers to entry and loosening The rise of the smartphone has irrevocably Fintech is about removing friction from the regulatory burdens, new fintech companies changed consumer behavior across all industries, customer journey. Banks themselves have the have emerged to meet the needs of digitally and people now expect to handle their finances opportunity to offer many of these services, demanding customers. They re appealing and manage their money as easily as they shop and a captive audience of existing customers to directly to this consumer for everything on Amazon or post a status update on Facebook. upsell and cross-sell. The ace in the hole is that from banking, to lending, personal finance, Customers want to check accounts, change the banks have security and stability on their side. Are you up for the challenge? payments, investing, home mortgage, and so investments, apply for a mortgage, or open a on. Fintech has not just created disruption and new credit card from their phones. And while competition, but also upped the ante for retail many traditional banks are starting to offer banks to maximize cross-channel profitability. these services, most have not been able to do The threat of disintermediation can t be so as easily, quickly, and efficiently as a host of overstated. According to PwC, 80% of financial fintech startups. organizations believe their business is at risk to innovators. 10

11 FORESEE EXPERIENCE INDEX FINTECH IN HIGH DEMAND FINTECH HOT LIST People want more fintech in their lives: Quick and mobile payments, budgeting, and financial advice/investment services are gaining in popularity. 53% ON AVERAGE Gen Z of people would use fintech services 52% Millennials through their bank 46% if they were offered. 30% Gen X 27% 32% 28% F I N T E C H I S G E N E R AT I O N A L We asked who would use some kind of fintech services if offered by their primary bank. Here s who said yes: 20% Traditionalists (born before 1946) 29% 50% Baby Boomers 19% 70% Millennials Gen X 21% Baby Boomers ( ) 76% 19% 19% 10% 6% Gen Z (1996 and later) PAY M ENTS ( ) ( ) 11 BUDG E T IN G A DV ICE

12 Conclusion The challenges facing retail banks are non-trivial. Yet, the opportunities are significant and those banks and credit unions that focus on delivering on CX will have a strategic competitive advantage in the marketplace. Highly satisfied customers are more brand conscious and less sensitive to prices, fees, and rates. In tough economic times they will be the last ones to leave, and when the economy rebounds they will be the first to return. Much like banking customers are on a journey, retail banks are on their own parallel journey to retain and grow the customer base, increase lifetime value, and win in a new era of the empowered omnichannel customer. The stairway shows the journey every bank and credit union must complete to compete and win in this era of immense competition and impressive customer empowerment. STEP 3 IDENTIFY THE NEXT BEST ACTION STEP 2 ENRICH SEGMENTATION STEP 1 MEASURE CX EVERYWHERE STEP 5 GROW EARNED LOYALTY We don t know how to measure and discern between loyal customers versus retained customers. STEP 4 OPTIMIZE THE JOURNEY We don t know how to optimize upsell opportunities across channels and products to customer segments. We don t know when to target the next best upsell, to whom, and through which channels. We don t have enough data on customer attitudes for key segments and where they are on their lifecycles. We don t have a consistent and proven way to measure CX across the omnichannel journey. 12

13 About the Author Jason Conrad, Vice President, oversees ForeSee s retail banking business and is a long-time advocate for delivering great experiences. He is the author of numerous articles about CX in the financial services industry and speaks frequently about CX analytics and best practices. Jason is a member of the Digital Analytics Association (DAA) and the Customer Experience Professionals Association (CXPA) and is a recipient of the coveted ForeSee Builder Award. He is an alumni of California State University, Northridge. About the Research Analysts Financial Services Team Lead Angela DiNicola works extensively with a team of analysts who deliver actionable insights to finance companies hoping to improve their CX across all channels. She earned her B.A. in Marketing and her M.S. in Marketing Research from Michigan State University. Andrew Hyclak is a Client Analyst who helps companies in the financial services sector understand their CX through solid survey design and meaningful analysis. He graduated from the University of Toledo with a Master of Business and Administration in Marketing. Karly Szczepkowski is an analyst who has worked with some of ForeSee s largest clients to help them understand how they can engage with their visitors to improve loyalty, recommendations, and regular usage. She also manages all of ForeSee s more than 600 benchmark categories. Karly was previously an analyst at Wayne State University in Detroit, MI. She graduated from Wayne State University with a Master in Information Science and from the University of Michigan with a Bachelor in Engineering. 13

14 About the FXI: Banking Report The ForeSee Experience Index (FXI): Banking Report is the first study of its kind to assess customer experience (CX) with national banks, regional banks, and credit unions. More than 4,000 banking customers were surveyed in July Using its proven model, ForeSee is able to quantify customer satisfaction with a variety of banks and touchpoints, prioritizing for clients the changes that will have the greatest business impact. ForeSee works with eight of the top 10 banks and half of the top 50 retail banks in the world. About ForeSee ForeSee pioneered customer experience intelligence in 2001 and has become a recognized leader in Voice of Customer (VOC) solutions. The award-winning ForeSee CX Suite helps more than 2,000 companies worldwide transform their VOC programs into a strategic business discipline that delivers economic impact. Only ForeSee offers a rigorous scientific approach to customer experience measurement, access to an unmatched 200 million benchmarked experiences, and actionable insights from a team of 200 expert analysts that give certainty to CX improvements. ForeSee is headquartered in Ann Arbor, MI, and has offices in New York; Washington, DC; St. Louis; Cleveland; San Francisco; Vancouver; and London. For more information, visit