Data from the 2014 J.D. Power Small Business Banking Satisfaction Study finds that approximately one-third of small business banking customers also have a personal relationship with their primary business banking institution.
These types of ‘cross-functional’ relationships are beneficial for financial institutions. First and foremost, the institution is holding a greater overall ‘share-of-wallet’. Additionally, business banking customers with a personal account report significantly higher satisfaction, loyalty and advocacy metrics (compared to business customers who do NOT also have a personal relationship). However, analysis of study data finds that some banks are struggling to maximize the full ROI of a cross-functional relationship.
For example, as illustrated in the chart below, Bank A is currently not receiving the same positive ‘lift’ when their small business customers also hold personal banking accounts.
Additionally, study data finds that the ability for Bank A to cross-sell their small business customers on personal accounts is lagging peers.
There are many potential reasons why a small business owner is unwilling to hold personal accounts with their business banking institution, including but not limited to:
- Business institution may not be located near the customers home
- The customer has a long-standing relationship with their personal institution and is currently satisfied
- ‘Conflict of interest’ – some customers just want to separate their accounts
Regardless of the reason, the ability for the financial institution to provide excellent service and build trustworthy relationships is vital towards the goal of cross-selling business banking customers on personal accounts.
Within the retail banking industry, account initiation is often viewed as a key ‘moment-of-truth’. In many cases, the opening of an account/product/service is the first interaction between customer and a bank. Other times, account initiation represents an opportunity for banks to engage tenured customers in a discussion about their evolving financial needs.
As part of the 2015 Retail Banking Satisfaction Study, J.D. Power measures customer satisfaction with the opening of banking accounts, products and services. Specifically with regards to accounts that were opened in a branch, study data finds that customers are most dissatisfied with the experience opening checking and HELOC products. Conversely, new account satisfaction is highest among customers opening personal loans and CD’s.
There are different variables driving the high and low satisfaction scores for these products. For example:
-HELOC dissatisfaction is driven by complexity of the process, as customers opening these products are significantly more likely to say the process was ‘more complicated than expected’.
-The level of engagement between bank and customer is lowest for customers opening a checking account, which often leads to lower levels of product awareness/understanding. In turn, the lack of awareness drives lower satisfaction scores.
-Opposite of the experience reported by customers opening a checking account, those opening a personal loan/line of credit indicate that the branch representative was very thorough in assessing needs and was more likely to provide useful information during the interaction.
Understanding which aspects of account initiation are most troublesome for their unique customer base can help a bank implement necessary changes. In some cases, focus should be placed on simplifying processes. Other times, providing additional training/education to staff can help them more accurately assess customer needs and provide additional value during the interaction.
With channel usage continuing to evolve within the retail banking and small business banking industries, it is important for banks to focus on delivering a consistent experience across all customer touch-points. Customers interacting with the bank via the website or call center should receive the same level of high-quality service they receive at a branch, and vice versa. However, analysis of data collected by J.D. Power finds plenty of room for financial institutions to further improve the consistency of cross-channel interaction.
One key example is with regards to Problem Resolution. As displayed in the chart below, small business banking customers report considerable differences in their experience depending on the channel used for resolving a problem. While Problem Resolution satisfaction is highest when interacting with branch personnel (tellers, business bankers and managers), there is a steep decline when dealing with call center and online representatives.
Data in the chart above is from the 2014 J.D. Power Small Business Banking Satisfaction Study, but it is important to note that similar discrepancies in cross-channel interaction are evident in all financial services studies conducted by J.D. Power (retail banking, mortgage and investment). And these discrepancies are not always related to Problem Resolution, as many other aspects of the banking experience are also prone to cross-channel inconsistency, such as:
-Clarity of account information
-Method of accessing secure website (PC vs. tablet. vs. Smartphone)
As identified in the 2014 J.D. Power Small Business Banking Satisfaction Study, one key aspect of the small business banking experience is the relationship with an assigned account manager.
When an account manager is assigned to a small business client, building a strong relationship becomes vital. Ideally, the account manager becomes viewed as a ‘trusted advisor’, which can help the bank maximize the ROI (return-on-investment) of assigning account managers to small business clients. In addition to having a significant impact on customer satisfaction, account managers that are viewed as a ‘trusted advisor’ can also drive increased loyalty and deepen the share-of-wallet customers hold at the bank.
Furthermore, the negative impact of not being viewed a trusted advisor is profound, as satisfaction levels are actually lower than when no account manager is assigned at all (643 vs. 723, respectively, on a 1,000-point scale).
Data from the Small Business Satisfaction Study also identifies clear steps that small business account managers can take to develop a strong relationship with their clients and improve the perception of them as a trusted advisor, including:
-Take time to engage clients and understand their business
-Initiate contact with clients throughout the year to discussed needs and/or recommend solutions
-Promptly reply to any inquiries from clients and show ‘concern’ for their needs
The 2014 J.D. Power Small Business Banking Satisfaction Study was released on October 28th, 2014.
Financial institutions often have staffing and queueing models in-place to minimize customer wait times and improve the efficiency of interactions. However, there are still instances where customers are forced to wait in-line at a branch or are placed on-hold before speaking to a call center representative. When traffic is high and customer wait/hold times are necessary, financial institutions can offset wait-time dissatisfaction by providing quality service once the interaction begins.
For example, the chart below looks at call-center satisfaction among credit card customers that waited at least five minutes before speaking to a call center representative. On average, all credit card customers waiting five minutes before speaking to a rep. have a satisfaction score of 775 (on a 1,000-point scale). However, when a customer waits five minutes and is then greeted in a friendly manner by their call center rep., satisfaction increases to 795. And when a customer waits five minutes, is greeted in a friendly manner and the phone rep had their account information ready prior to joining the call, satisfaction increases further to 827. Finally, satisfaction increases even more when the rep. offers additional assistance and thanks the customer for their business – when all four best practices displayed in the chart below are provided, satisfaction among customers waiting five minutes increases from 775 to 835.
Source: 2014 J.D. Power Credit Card Satisfaction Study
Similarly, among retail banking customers, simply greeting customers as they enter the branch can significantly improve satisfaction with wait-times in the teller line. In the chart below, satisfaction among customers who waited 3-4 minutes but received a greeting when entering is 8.60 on a 10-point scale, which is higher than customers that did not have to wait but did not receive a greeting when entering the branch (8.39).
Source: 2014 J.D. Power Retail Banking Satisfaction Study
Each year, J.D. Power surveys over 80,000 retail banking customers as part of the annual Retail Banking Satisfaction Study. The study is conducted via four quarterly fielding waves.
While the primary focus of the study is the customer experience and it’s impact on satisfaction and loyalty metrics, J.D. Power also collects and analyzes data related to consumer sentiment (i.e. ‘your outlook for our economy and ‘your personal financial outlook’).
Data from the first two fielding waves of the 2015 Retail Banking Satisfaction Study (collected in April 2014 and July 2014) finds that the outlook for the American economy continues to trend upward. In fact, there has been a consistent improvement in economic outlook since 2011, as the country moves further past the economic distress that originated in 2007/2008.
However, it is interesting to note how perceptions of the country’s economic outlook varies across the different geographic regions:
California customers are currently most optimistic, while customers in the South Central region are least optimistic.
Over the past 18 months, the outlook for the economy has improved the most among customers in the Northwest region, and improved the least among customers in the Southwest region.
Since 2011, the California and Northwest regions have seen the greatest improvements while the South Central region has seen the smallest improvement.
For reference, the regional definitions associated with the Retail Banking Satisfaction Study are displayed in the graphic below.
Data from the J.D. Power 2014 Retail Banking Satisfaction Study finds that the industry continues to improve upon their ability to prevent problems. In fact, overall problem incidence has declined every year since 2010.
However, data also finds that problem incidence tends to be highest among retail banking customers that are both ‘young’ and ‘wealthy’. For example, over one-fourth (26%) of Affluent Gen Y customers have experienced a problem with their personal banking institution in the past 12 months.
Perhaps more importantly, these young and wealthy customers are less tolerant of perceived ‘problems’ with their current institution – when a problem occurs, they are considerably more likely to say that they ‘definitely/probably will switch’ banks in the next 12 months.
Young customers, such as those in the Gen Y age segment represent tremendous ‘growth potential’ for financial institutions, particularly if they are already considered to be ‘Affluent’. It is critical for financial institutions to gain a deeper understanding of the problems that these valuable customers are most likely to experience and develop correction action plans to prevent additional problems in the future.
Many banking institutions are evaluating their current fee structures and considering modifications in an attempt to drive bottom-line improvements, while also acknowledging the potential ‘fallout’ that can arise from a change to fee structures.
Using data from the U.S. Retail Banking Satisfaction Study, J.D. Power has analyzed the topic of fees from multiple angles. Among other things, prior analysis related to the topic of fees has found that:
- The ‘negative impact’ of monthly maintenance fees has been decreasing within the retail banking industry, indicating that customers are becoming slightly more ‘accepting’ of monthly fees.
- Many customers pay a higher-than-average fee, yet remain highly satisfied. This is driven by the delivery of a clear ‘value proposition’ from their bank (the customer feels that the benefits they receive from the bank outweighs the cost).
- When implemented, fee changes represent a significant risk for banking institutions. Problem incidence will increase, driving an increase in labor costs associated with problem resolution. Intended attrition also increases, especially within the first month after a change.
When considering whether or not to increase/decrease monthly fees associated with checking accounts, it is important for banks to fully weigh the pro’s and con’s of the change. On one hand, an increase in the percentage of customers charged a fee (or an increase in actual fee amounts) can positively impact revenue.
However, as displayed in the chart below, data finds that banks who position themselves as a ‘low cost’ institution enjoy bottom-line benefits such as lower ‘cost-to-serve’, greater loyalty and greater share-of-deposits. Additionally, customers of ‘low-cost’ banks are significantly less likely to open additional accounts/products outside of the bank.
The decision to implement/increase/decrease fees should be unique for each and every banking institution depending on their overall strategic plans. It is critical, however, that they fully understand all potential ‘tradeoffs’ for any decision that is implemented. Analysis of consumer behavior and customer satisfaction data can be an extremely valuable tool to use when determining the appropriate cause of action.
With the continued acceptance of digital banking channels, it is important for financial institutions to ‘keep up with the times’. Even banks that promote personal service as a key part of their value proposition need to devote investment resources to their digital channels. Failure to do so may put the bank at risk of losing customers that represent future growth potential (ie. Millennials), who have already shown a preference for digital interaction.
Data from the 2014 Retail Banking Study provides an interesting case study on the impact of investing in digital channels. As shown in the graphic below, ‘Bank A’ has been investing heavily in digital channels while ‘Bank B’ has not. Bank A has seen a greater lift in customer satisfaction, driven by their technology improvements. It is also important to note that, despite a heavy investment in digital interaction, Bank A has also been able to significantly improve the branch experience.
The chart below provides further evidence of the impact of investing in digital channels, as interaction scores for Bank A are significantly higher than those at Bank B. Additionally, the negative ‘gap’ in digital satisfaction between Bank B and the industry average has widened considerably.
Finally, the real impact of investing in digital channels is shown below, as Bank A has seen their key loyalty and advocacy metrics improve, while Bank B has seen declines.