Competition for Credit Card ‘Share-of-Spend’

Data from three fielding waves of the 2014 J.D. Power Credit Card Satisfaction StudySM finds that the percentage of credit card customers ‘switching’ their primary card has increased significantly over the past year. More specifically, there is a significant increase in the percentage of customers opening a new credit card account (46% vs. 41% in 2013).

The increase is driven by ‘revolvers’ (customers that typically pay less than their total monthly balance), who cite ‘rewards’ and ‘lower interest rates’ as their primary reasons for switching.

With the competition for capturing ‘share-of-spend’ increasing, it is important for credit card issuers to improve the customer experience in an effort to improve loyalty. One key focus area is ‘rewards’, which have become a key driver of both acquisition and spending habits. In response, issuers must provide attractive offerings, market them effectively and ensure that their customers are aligned into the appropriate programs and card products. Additionally, the creation and marketing of successful rewards programs may also improve acquisition metrics by enticing competitor customers to switch their primary card.

credit card switching chart

The full 2014 J.D. Power Credit Card Satisfaction StudySM, including data from all four fielding waves, releases in August, 2014.

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Who’s Switching Banks & Why?

Next week, we’ll be releasing our 2012 Bank Customer Switching and Acquisition Study (SM). This study will explore the triggers that cause customers to shop for a new bank or a new account, their perceptions of bank brands, and how they make their purchase decision. The study will also include information on those who switched primary financial institutions in the past 12 months.

The customers of the top 25 financial institutions in the industry, as well as customers of small banks and credit unions are targeted in this study.

Focusing on the stages of the purchase process, the 2012 Bank Customer Switching and Acquisition Study will answer the following questions:

  • The Shopping Process – Who is shopping? What prompts a customer to shop? What are they shopping for?
  • Awareness – What drives greater awareness?
  • Consideration – How are customers shopping? What impacts a financial institution’s consideration? Why are financial institutions avoided?
  • Selection – What drives shoppers to select a financial institution?
  • New Account Initiation and On-Boarding – What are the new account initiation best practices? What experience differences improve share of wallet?

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3 Reasons Customers May Break Up With Your Bank & How to Avoid Them

Just like with couples, the relationship between retail banking customers and their financial institution is complex. As with any relationship, a healthy connection between two parties is one that develops over time and is typically based on mutual respect, trust, honesty and support.

Most of us know that it takes effort for healthy relationships to work! Whether we like it or not however, breakups do happen and in the case of bank customers, they get over them quickly and move on to another bank relationship.

The following are a few valuable insights about why retail bank customers may break up with you and how you can implement a few change initiatives to maintain a healthy connection with your customers….to avoid the bank break up.

Reason #1: Callous Communication – Problems become a customer’s biggest problem

Problem prevention needs to be a high priority for all financial institutions, given the incidence of problems (22% of customers¹ indicate experiencing a problem) and the significant impact that problem incidence has on overall customer satisfaction.

Prevention Tips

  • Ensure customers understand fee structures, deal honestly with them and explain the fees right up front – it improves awareness of fees and minimizes complaints.
  • Engage new customers during account initiation to identify their needs and sell them the products that meet those needs …..it lowers the incidence of future problems if they are happy from the start.
  • Empower bank representatives (branch and call center) with the necessary authority, and provide proper training that will allow them to address any customer misunderstandings at the first point of contact. It will eliminate confusion for future problems.
[1] J.D. Power and Associates 2011 Retail Banking Satisfaction Study

Reason #2 – Unmet Needs – You’re not giving them enough of what they want Continue reading ›

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Why Complacency is NOT Customer Service

This past weekend, I visited an actual bank branch for the first time in over 6 months. As part of the MTV generation (the late half of course), I witnessed the introduction of the home computer, the growth of the video game era, the boom of cable television and the construction of the information superhighway we refer to as the internet. Growing up on digital technology, it’s probably not a shocker that I prefer to do much if not all of my banking via online channels whenever possible or available.

So, it was a Saturday morning, and I needed to cash a check written on a large regional bank where I am currently not a customer. Finding a branch location was a synch, as this bank has a huge national footprint with a well-recognized and distinguished brand image. Convenience was definitely key for me, so I went with easy, and chose to visit the small branch close to my home. After all, I had passed it a thousand times on my way to somewhere else, but never had a reason to pop in.

As I entered the branch, nobody acknowledged my presence, but finding the teller line was easy……4 steps and I was already inside the roped off area waiting for a teller to motion to me that it was my turn to be assisted. In less than a minute, I got the combo hand signal and slight arm waive to “come on down”, and was greeting with a hearty “hello” by the teller. I told her I wanted to cash a check, and she promptly asked me for identification. As she processed my transaction, counted and double counted the cash she was about to hand me, I took a few moments to glance around the rest of the office to just soak up the atmosphere. I can’t help it. I’ve done thousands of retail bank and branch assessments over the years, so you could say that I’m almost conditioned to automatically make note of wait times, observe service behaviors of branch staff and read non-verbal cues of branch customers. In fact, according to the 2010 J.D. Power Retail Banking Satisfaction Study, the in-person customer experience is the largest contributing factor to Account Activity satisfaction in the entire Study!

Here’s what I observed:

  1. One customer was waiting to be helped on the platform while a CSR was training another CSR on the computer system. Did I mention that it was a Saturday? Did I mention that there was only one CSR on duty?
  2. There were no customers in line at the teller counter, yet there were 3 other tellers on duty chatting amongst themselves. Did I mention that they were chatting behind the teller counter right in front of the customer waiting to be helped on the platform?

The teller finished processing my transaction, handed back my ID with the cash and a receipt and said “thank you”.

Here’s what I wondered:

  1. Why didn’t the teller thank me by name or use my name at all during the transaction? After all, she had my ID, so she knew my name by now.
  2. Why didn’t the teller ask me if there was anything more she could assist me with? I was thinking the obvious, like why was I not already a bank customer or inquire if I would like to be. Why didn’t they want me as a customer? Did they already have too many?
  3. Why wasn’t I greeted by anyone when I entered the branch?
  4. Why was platform training being facilitated on a Saturday with no other platform staff present?
  5. Why was a customer waiting to be helped when almost all employees in the branch were visibly available?

Now, I know what you’re probably thinking……I’ve been conducting comprehensive branch assessments for over 15 years, so how could I possibly be unbiased in my branch observations? I’m trained to notice the subtleties of customer service and can help banks build and implement customer satisfaction programs in my sleep, so maybe my observations were exaggerated or just too critical? Well in this case, I was just an average bank customer processing a simple transaction on a Saturday morning. Continue reading ›

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Much Ado About Nothing?

A lot has been said about the Bank Transfer Day recently and its success (or lack thereof). In a recent interview by the Credit Union Times, I was asked how J.D. Power’s research supports or refutes the recent noise about customers moving their banking relationships from the large banks to credit unions and community banks. I would love to say that data shows customers are embracing Frank Capra’s rendition of the struggling but good-hearted Bedford Falls Building and Loan Association (“It’s a Wonderful Life”, for those who may not see the movie a dozen times over the next six weeks), but it’s simply too early to judge. The question at the heart of the matter is whether or not customers will suddenly decide to switch banks out of fee frustration and media encouragement? Obviously the big banks feel that at least their better customers will not while credit unions hope the opposite is true. While it is still too early for J.D. Power to define a point of view on the voice of the customer on this issue, there are some data points from the 2011 Retail Banking Study which may lead us to make some bets.

If we just look at customers who are largely dissatisfied (satisfaction under 600, based on J.D. Power’s 1,000 point scale) AND have had at least one problem or complaint in the last year, 55% of them STILL say they probably or definitely will NOT switch banks in the next 12 months! Whether it’s because of the hassle associated with switching or just because their bank still meets their needs, if these customers won’t switch, how likely will it be that a general satisfied customer will go out on a Saturday morning and move their accounts just because of a threatened $5 fee or online encouragement? If those dissatisfied customers in the Retail Banking Study are further segmented by income, there is still little support for the either argument as High, Moderate and Low income groups vary by only 4 percentage points on their inclination to NOT switch banks.

However, if problems are taken out of the equation and those dissatisfied customers are instead viewed by whether or not they have been charged a maintenance fee in the last year, inclination to switch does change. 30% of unhappy customers (overall satisfaction < 600) who have not been charged a monthly fee say they probably or definitely WILL switch banks in the next year. However, that number jumps 13 percentage points, to 43%, if a customer HAS been charged at least one monthly fee over the last year. That could argue in favor of the Bank Transfer Day resonating with customers who are already dissatisfied with their existing banks.

So what do you think? Did Bank Transfer Day make enough of an impact among customers and banks to make a difference? Was Bedford Falls’ Building and Loan able to get new customers because they told everyone to switch from the big bank? We will clearly know more in the weeks and months ahead.

 

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