Understanding ‘Virtual-Only’ Retail Banking Customers

With increased functionality such as mobile phone check deposits, online chat, envelope-free ATM deposits, and image-enabled ATM receipts, retail banking customers are able to fully manage their account without ever stepping into a branch or contacting the call center. While this can create significant cost savings by reducing branch traffic and decreasing the number of calls to the call center, there is also a considerable downside, based on findings from the 2014 J.D. Power Retail Banking Satisfaction Study.

Despite having similar demographics and product portfolios, self-service customers—those who have interacted only via remote channels during the past 12 months for routine transactions—are not only less satisfied with their banking experience, but are also less committed than are those who have visited a branch or called the call center during the past 12 months for routine transactions. Further, self-service customers tend to be less engaged and, in fact, are often indifferent toward their bank, as a larger percentage of self-service customers say they “probably will” or “probably will not” recommend, reuse, and switch, compared with assisted customers.

Banks that are able to elevate customer commitment levels[1] among self-service customers can benefit from improved overall financial performance. Specifically, banks that convert 2% of customers with low commitment and 5% of those with medium commitment into customers with high commitment stand to gain $1.68 million in interest revenue from greater deposits, investments, and loans per 100,000 customers[2].

Analysis of study data also finds that some banks are currently more successful at satisfying their virtual-only customers. For example, as displayed in the chart below, Bank K has the lowest overall satisfaction score amongst its virtual-only customers (720 on a 1,000-point scale). Meanwhile, Bank H has the largest percentage of virtual-only customers within their population (40%), making it especially critical for them to improve the overall experience of virtual customers.

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Self-service customers have different priorities and needs than assisted customers, which makes it essential for financial institutions to adjust their strategy in servicing these customers. Recommendations for additional areas of focus include:

  • If you got it, flaunt it; if you don’t got it, get it. Channel features are important to this segment, and while banks often do offer the features customers want, many are unaware of them, so it is important to ensure features/services are fully marketed. Furthermore, banks should continually look to add features to meet the changing needs of customers and, in turn, to remain competitive.
  • Be proactive, not reactive. Self-service customers place great importance on product offerings and tend to be critical of their bank’s value proposition; therefore, financial institutions need to proactively communicate with these customers and ensure they are aware of all product features/services and fully understand how and when fees will be incurred. Moreover, banks should consider implementing programs in which bank representatives and advisors proactively reach out to self-service customers to provide advice related to their financial needs.
  • If it’s broken, fix it. It is critical for banks to minimize the occurrence of problems. To achieve this, banks should focus on reducing the problems that not only have the greatest impact on satisfaction and retention, but also those that occur most frequently. Banks need to collect and analyze customer and employee data to determine root causes of problems and revise processes that are ineffective or problematic. Furthermore, banks have an opportunity to improve their rates of problem resolution via remote channels. The level of service that is provided via all channels needs to be optimum; however, banks need to pay close attention to service levels by remote channels (email/online chat) ensuring consistent and effective resolution of issues. Additionally, banks need to understand which problems can’t be fully resolved using a remote channel and revisit policies and procedures to improve the effectiveness of these channels.

[1] High commitment is defined as providing combined ratings of 17-20 points based on responses to the four commitment statements; medium commitment is defined as providing combined ratings of 12-16 points based on responses to the four commitment statements; low commitment is defined as providing combined ratings of 11 points or less based on responses to the four commitment statements.

[2] Assumes a 3% interest margin

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Banking Customers with Business and Personal Relationships

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.

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Additionally, study data finds that the ability for Bank A to cross-sell their small business customers on personal accounts is lagging peers.

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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.

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Meeting the Needs of Female Full-Service Investors

The ‘value’ of female investors is growing. As the percentage of females graduating college and opening small businesses increases, so does the proportion of America’s investable assets held by the female population. For investment advisors and firms, their ability to satisfy the unique needs of female investors will help them capture a greater share of the investable assets held by the female population.

Data from the 2014 J.D. Power U.S. Full-Service Investor Satisfaction Study helps to identify some underlying characteristics of female investors. For example, women investors tend to place more value on a ‘trusting’ relationship with an investment advisor, and are more likely to collaborate closely with their investment advisor.

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Data also indicates that women investors are more ‘critical’ of advisors that fail to engage them in discussions regarding their investment goals, strategies and performance. For example, when an advisor fails to fully educate a client on their investment portfolio, the negative impact^ on satisfaction is significantly greater among females than males (-104 vs. -76, respectively, on a 1,000-point scale).

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Key takeaways for investment firms and advisors and to consider:

-Firms need to review the way they recruit, train, team and incent advisors to better align with behaviors that will drive stronger long term client relationships with an increasingly diverse set of financial decision makers

- Advisors need to be proactive in developing a meaningful dialogue with women clients to establish personal goals and provide a clear ongoing understanding of how performance connects with those goals

 

^ ‘Impact’ is defined as the difference in satisfaction when the service best practice is met vs. not met

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Using Mobile Apps during Mortgage Origination

Data from the 2014 U.S. Primary Mortgage Origination Study (released in November 2014) finds that mobile apps have an opportunity to emerge as an important interaction channel for customers.

Current usage is low, with only 8% of customers indicating that they used an app during the origination process. However, as shown in the chart below, over half (53%) of customers who have not used an app during the mortgage origination process would consider using one for their next home purchase or refinance. Specifically, customers would be most interested in using an app to check status (47%), review next steps (35%) and review/confirm loan details (34%).

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New Credit Card Customers vs. Tenured Credit Card Customers

In addition to identifying the overall weighted^ drivers of customer satisfaction within a given industry, the flexibility of the J.D. Power Index Model can also pinpoint differences based on consumer behaviors and demographics. For example, Rewards may be a vital part of the experience for one segment of credit card customers, while Card Terms may be more important to a different segment of customers.

With regards to the credit card experience, the drivers of customer satisfaction differ between new and tenured cardholders. Card Terms (e.g. fees, rates, credit limits) is a bigger driver of satisfaction amongst new cardholders (less than one year with issuer), while Billing/Payment and Interaction (e.g. website, call center representative) are bigger drivers of satisfaction amongst tenured cardholders (one year or more with issuer).

Analysis of data from the 2014 Credit Card Satisfaction Study also finds that most issuers struggle to maintain satisfaction with cardholders as the tenure of their relationship increases. As displayed in the chart below, a majority of issuers receive ‘above-average’ satisfaction amongst new primary cardholders (less than one year). However, only three issuers have above-average satisfaction amongst tenured cardholders (one year or more). This seems to indicate that the ‘shine’ of a new credit card wears off quickly, and it is important for issuers to focus efforts on maintaining satisfaction throughout the life of the relationship.

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^For each industry measured, J.D. Power utilizes a multi-regression analysis to identify and prioritize the primary drivers of customer satisfaction.

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Improving Consistency of Cross-Channel Interactions

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.

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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:

-Account initiation

-Clarity of account information

-Method of accessing secure website (PC vs. tablet. vs. Smartphone)

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Becoming a Trusted Advisor to Small Business Banking Clients

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).

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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

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The 2014 J.D. Power Small Business Banking Satisfaction Study was released on October 28th, 2014.

 

 

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The Impact of Customer Service on Wait Time Satisfaction

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

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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

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