Are loyalty and convenience interchangeable for modern banking customers?

By Richard Broadbent, General Manager, Banking, Wincor Nixdorf UK/I 

Not too long ago, people would choose their bank based on where they lived and how close they were to the local branch. Convenience has always been essential for customers and even today, research shows that 58 per cent of customers value the importance of a local branch.

However mobile and online banking are changing the definition of convenience for customers, with the accessibility and simplicity of these services posing new challenges for banks. Many reports have been commissioned to investigate what is important for the modern banking customer and what is clear is that the pressure is on traditional banks to enhance and modernise the end user experience.

A recent report by Bain & Company concluded: “The code that reveals the connection between consumers’ bank interactions and their loyalty to those banks has been cracked. It isn’t only big emotional episodes like fraud that matter to consumers, but also the mundane interactions that people deal with every day. For those interactions, the primacy of a branch that is conveniently near home or work, so important a decade ago, has been replaced by a new imperative: Just make it easy.”

To accurately assess the state of customer loyalty in banking, we have recently conducted a study into the banking habits of a small group of individuals over a period of two weeks. The research involved individuals from all age ranges collecting their banking receipts and recording all their transactions, as a way of gaining insight into how they preferred to bank.

The qualitative study aimed to gain a better understanding into how consumers view loyalty relative to more convenient and more connected ways of managing their personal finances.

Convenience is individual  

Convenience is clearly individual to each customer, so what may be convenient for one person may not necessarily be convenient for another. This was a significant finding in the study and in a number of ways initial predictions were found to be true.

For example, online banking tends to be more popular with younger survey respondents whereas a number of older respondents do not use it at all.  Similarly, in-branch banking for the younger generations was not valued for daily transactions, but is still valued for significant and specific transactions, for example when they need to seek advice about a product or service.

One respondent said: “I only visit a bank branch when I’m making a significant change in my personal banking like opening up a new account or applying for loan. This is because I value the information the staff provide when I need to make these decisions.”

For the over 35s in our study, visiting a branch was valued for a number of reasons, including the importance of personal interaction with staff within the branch. One person said: “I regularly visit the bank to get money out and I like to have a chat with the bank manager.”

The branches they visit are conveniently located for paying money in or taking cash out. Respondents in this age group mentioned the words “ease and speed” and “simple and quick” in reference to their branch experience.

Misinterpreting inconvenience for loyalty

The second interesting finding from the study was that banks may be considering their customers as loyal, when in actual fact it was simply inconvenient for them to change provider.

Most respondents (80 per cent) use the same bank as other family members, and only a few said they would change unless there was a particularly attractive service, deal or financial incentive on offer. Nevertheless, all respondents said they would shop around for certain financial services.

Those people we interviewed over the age of 35 don’t question the bank they use, describing it simply as the ‘bank I’ve always used’, and recognising that it would be ‘inconvenient to change’. One person said: “I have a history with my bank, so it’s sensible to stay”, and another said “I will not change – they know me well and another bank wouldn’t.”

One respondent in the study admitted that she had remained with the same bank for a number of years out of convenience, but would seriously consider the option of changing if she could save money.

She said: “I stay with my bank because it’s easy to do so, however should I be looking to take out a mortgage or loan, I would do my research beforehand to look for the best deal.”

This finding shows that there is a willingness amongst consumers to use different financial institutions for different services. However, habit and inconvenience typically prevent people changing their banks, despite the lure of new market entrants.

Redefining the customer journey

The purpose of this study was to provide a valuable insight into the lives of everyday banking customers. It highlights that the routine interaction is often where the battle for customer loyalty is either won or lost.

As Bain and Co. comments, “While the effect of a single routine interaction is small, customers go through so many that the cumulative effect is large.”

Loyalty is important in banking and there’s a general acceptance throughout our research that people are usually more careful when choosing financial services providers than when selecting services in other sectors. This is summed up in the response of one respondent: “I don’t necessarily think of myself as loyal, but when it comes to banking it’s different from shopping.”

As in the retail world, bricks and mortar are still important and the branch will remain a key channel for banks. But providing customers with the service that makes their experience simple and seamless is critical to improving customer experience, and therefore, loyalty.

Technology is a key enabler of this. Financial services which embrace change and transformation and create engaging technological experiences, both within the branch and through their digital platforms, will be able to get the right balance between making the customer experience convenient, and building a loyal customer base.

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