In my recent discussions with UK banking execs, I’ve detected a fresh urgency when they talk of the need for change.
Banks have been speaking about greater customer centricity in their annual reports for years, but it’s really only in the past six months I’ve started to hear banking leaders highlight it as something that needs to happen “if we’re going to survive”.
I’ve been wondering why this is. After all, if we’re honest, UK banks have rarely done more than pay lip service to Customer Experience. Certainly, all their talk has amounted to negligible difference in our experience as customers.
So, what’s changed?
I think it’s the realisation that the rubber band that stretches between customer expectations (ever increasing) and service quality (flatlining) has finally reached breaking point – a hot topic which I discussed with The Experience Professionals in Medallia’s recent webinar Reimagining CX for Banking in the Digital Age.
This article will go further in outlining the specific risks for those banks that are still perhaps resistant to change, and what they should do about it.
Join me if you will on a journey back in time, in more ways than one.
‘Look at those cavemen go’
In January this year, I was in my local branch for an appointment.
I’d been on time, but the IT system had other ideas. I remember checking the clock; my Personal Banker had last appeared some 10 minutes before. At that point, he’d assured me we’d be up and running in five.
With no offer of tea or coffee to distract me, my attention fell to a poster on the wall, which ranked the UK banks by various perception metrics. Clearly it wouldn’t be on display if it didn’t have to be – my bank, one of the UK’s Big Four, didn’t have much to shout about. Under ‘Branch Experience’, for instance, it loitered somewhere in the bottom half of the list, below a number of challenger brands and building societies.
Bored of flicking through yesterday’s newspapers, I reflected on how I’d come to be there. I’d recently tried to open an account online. This included the usual process of KYC (Know Your Customer), where the bank attempts to verify a person’s identity. Now, despite my holding seven products with this bank, it turned out it didn’t know me very well at all. With the system unable to verify my identity digitally, and the contact centre unable to help, I was invited – a customer of 18 years’ standing, who hadn’t changed his address in nine – to pop in and prove that I was me.
First world problems of course. To be clear, I’m not suggesting my experience is uniquely terrible.
In fact, I’m sure most of us could rattle off stories about our banks – and many of those would be far, far worse. In 2018, a study by Medallia and Ipsos found that just seven percent of UK banking customers felt their experience had exceeded expectations over the past year. Contrast this with 19 percent in the USA.
And really, that’s the point. Reflecting on my experience, doesn’t it feel like something from a bygone era? After my appointment (which finally started a full half-hour after it had been due to finish), I remember thinking as I raced back to the office: “Why are banks such laggards in the UK?”
Focused on the wrong outcomes?
At first glance, it seems inexplicable.
After all, the links between CX and business results are well-documented. Take the ‘Likelihood to recommend’ survey question. The potential for financial impact is self-evident: if you treat customers well, they’ll be more likely to stick with you and tell their friends.
But it’s more than just common sense; there is hard data to back it up too. Farmers Insurance, for instance, attribute its CX investments with driving a three-point improvement in retention over three years, equivalent to $500 million annually in incremental revenue.
The Medallia-Ipsos research found that 40 percent of a bank’s customers would tell their friends and family after a positive experience. That’s 40 percent of a bank’s customer base happy to work as an extension of its marketing division – for free – helping to bring down cost of acquisition.
Meanwhile, as many as 18 percent said a positive experience would cause them to start using their bank more – a sizeable audience ripe for cross-sell. Why would the banks, of all organisations, be so lackadaisical about trying to capitalise on this financial linkage?
Perhaps the answer lies in part with another metric – one the banks have tended not to view as a cause for concern – attrition.
In contrast to other industries, in UK consumer banking, conventional wisdom has it that when a customer opens their first account, by and large they’ll remain a customer for life. For decades, acquisition strategies employed by the banks – visiting local schools, etc. – have borne fruit.
I still have the branded money box I received in what must have been my first interaction with any bank (and yes, that brand went on to become my primary provider). Great at attracting new customers, banks have been terrible at servicing existing ones – and it hasn’t mattered because those customers don’t churn. Even seven-day switching has failed to disrupt that paradigm.
Data from the Current Account Switch Service suggests only a relatively small proportion of customers have tended to vote with their feet. Other factors have further contributed to ensuring a captive audience. In rural areas, for instance, selecting your primary provider is frequently less a matter of comparing brands and more a matter of banking with the only show in the town. Branch closures have exacerbated this, with consumer choice in certain regions now severely limited.
With the banks laser-focused on efficiency ever since the global financial crisis, the levels of retention they’ve enjoyed have enabled them to concentrate on cost cutting, while deprioritising investments that would improve CX – even if those investments would lead to greater share of wallet from happier customers.
But there are signs that customer inertia may be a thing of the past. The Medallia-Ipsos research found that, today, 13 percent of UK customers will switch banks if their expectations are not met. While that’s a smaller proportion than the cross-industry average of 64 percent, still it remains far from negligible. And it should be a wakeup call for the big UK banks.
The end of customer stickiness
Branch closures have accelerated a trend that was already underway. A recent study found that a bank’s physical location is far less important than it was a decade ago, with only 10 percent of today’s customers citing it among their top three reasons for choosing a bank. Contrast that to the 42 percent of Generation Z customers and 37 percent of millennials who list “ability to manage services via a mobile app” among their top three reasons.
Take Monzo for example. Some recent hiccups notwithstanding, the asset-light UK challenger bank onboarded its two-millionth customer this year. Millennials and others, who will be the drivers of future growth, have realised that factors like proximity to branches are less important to them.
As consumers increasingly look to their banks to meet them wherever they are, the old rules of attraction and retention are breaking down.
Banking leaders have long talked of the threat of disintermediation – of some nightmare future (for the banks) where the fintechs have successfully interposed themselves between customer and bank. In that dystopia, the fintechs own the distribution layer, ultimately winning the end relationship with the consumer, leaving the traditional banks to do the fulfilment behind the scenes.
But, as with climate change, arguably the future is already here. Monzo is currently growing at a rate of 35,000 customers per week. Have banks truly grasped the urgency of their predicament?
In January this year, around the same time I was struggling to open that account, I asked some industry contacts for their opinions on Monzo. I found their opinions surprising:
“Smells like emperor’s new clothes.”
“They are a comms company not a bank.”
So, in the UK at least, a degree of complacency remains. CX is generally treated as a matter of compliance (see the poster in my local branch, on display at the stipulation of the Competition and Markets Authority), rather than being seen as an opportunity to drive meaningful change. While most of the big banks have a CX programme in place, too often it’s merely a case of sending out surveys. And surveys aren’t the answer.
Why surveys alone can’t work
Take the example of my account opening fiasco. Sure, a survey would have allowed me to tell the bank about it – but only after the fact.
Best case, someone calls me to apologise. Think how more impactful it would have been – and how more satisfying for me as the customer – if the bank had resolved things in the moment. Multiple signals were generated over the course of my experience, from the unsuccessful digital application, to my unresolved query with the contact centre, to the operational signals at the branch (i.e. the IT failure occurring at the same time as a known customer appointment).
Any or all of these together should have alerted someone that a customer was having a bad time.
So far, UK banks’ over-reliance on the survey companies has bought them nothing but stagnation. When it comes to service quality, the UK Big Four are all competing in the same narrow range, while challengers put clear blue water between themselves and the traditional providers.
Learning from other regions
UK banks would do well to take note of what’s happening across the Atlantic and elsewhere in Europe. I like what I’ve been seeing from Bank of America (BofA) for instance – a bank that has recognised how today’s customer expectations are shaped by the likes of Apple and Airbnb.
BofA is rising to the challenge. Its recent innovations include a digital debit card, plus a ‘save’ feature for online product applications, which enables BofA to reduce cart abandonment by reaching out to customers who don’t complete in a single sitting.
Culturally, BofA has grasped the value of embedding a customer focus at every level. CX doesn’t live and die within the BofA Marketing team; more than 30,000 BofA colleagues are actively involved in reviewing and responding to customer signals daily. The insights that bubble up to senior management enable them actively to improve offerings for clients. CX as a compliance function this is not.
I also like what I’ve seen from ABN AMRO. Based on customer signals, ABN completely overhauled its mortgage process, which now includes a personalised video to guide customers through their journey (e.g. the time of their appointment, where they need to go, what paperwork they should bring).
ABN’s mortgage perception scores have moved from -30 to +30 as a result. Indeed, ABN has seen a +16 point improvement in overall customer perception and a +20 point improvement in Customer Care, all without ever displaying an aggregated score on anyone’s dashboard internally. ABN recognises that impactful CX is not about score-watching; instead the focus should be on keeping employees engaged. Consequently, ABN trials initiatives like handing out customer stories in fortune cookies – fun things like that – and much of ABN’s success is due to leveraging employee ideas.
To make all of the above happen, ABN and BofA equip their colleagues with empathetic tools that enable them to understand the true picture of CX. As ever, technology can provide a solution – but first a bank needs the vision to move beyond using surveys as a blunt instrument. And, frankly, also the courage to stand up and say “this is worth investing in”.
It’s clear that good stuff is happening elsewhere. It just hasn’t taken hold here yet.
Sure, that’s often the way with tech-enabled innovation: it starts in Silicon Valley, migrates to the East Coast, then makes landfall in Europe a couple of years later. Even by that standard, however, the UK banks are starting to look decidedly behind the times.
With the fintechs no longer merely yapping at their heels but actively winning market, it’s finally do-or-die time for banks. The days of “too-big-to-fail” are demonstrably over, as the execs I mentioned at the top of this article are starting to verbalise. It’s time for the UK big banks to stop issuing mealy mouthed platitudes about “Customer Experience”.
Time at last to demonstrate to consumers why on earth they should continue banking with them.
Medallia recently published The 4 Pillars of CX Excellence for Banking. In addition to the steps outlined in that whitepaper, below are my urgent recommendations for those banks that are still dragging their feet:
1. Revisit the business case for CX
Sure, balancing efficiency targets with CX projects will always take careful calibration. But deprioritising customer-focused investments in favour of cost reduction inevitably leads to a race to the bottom.
Evangelists for CX within banks need to be able to equip their P&L-owning execs with the arguments – how good CX leads to reduced cost to serve, lower acquisition costs, improved retention and greater share of wallet. CX has earned its seat at the top table; if banks are going to stop treating it as a compliance function, it has to be top-of-mind for execs with decision-making and budgetary authority, not just analysts.
2. Look beyond the survey
Start meeting customers where they are, by bringing together signals from across channels – SMS, social, “emerging platforms” (Whatsapp, Facebook Messenger, etc.) to understand the true picture of Customer Experience. Customers are less willing than ever to respond to surveys; banks need to be smart about gathering and interpreting signals wherever they may be harvested.
3. Think in-the-moment
Don’t let customer signals disappear into some analytical black box.
That won’t wash any more.
Even just apologising to customers 24-48 hours after an incident feels woefully insufficient in today’s Uber-ised marketplace. Think about customer signals not simply as data, but as a way to deepen relationships and uncover underlying issues and unmet needs. View each signal as a potential opener to a dialogue, and start engaging in those conversations now.
4. Activate the entire organisation
It’s easy enough to engage frontline colleagues with customer feedback – and most banks do at least an element of this – but what about product and proposition teams? They may not interact directly with customers, but still they play a pivotal role in shaping their experiences.
To keep pace with ever-changing customer demands, it’s crucial that middle – and back – office teams are supported to develop greater empathy for customers’ experiences, to design more empathetic experiences.
5. Above all, recognise and listen to your people
Engaged employees are more likely to manifest customer-focused behaviours that lead to bottom-line impact. This is hardly new insight – it’s the central philosophy of the service-profit chain that a trio of Harvard academics evidenced as early as 1994.
But have the big UK banks truly embraced this? When CX becomes a score-watching exercise, when employee ideas are either not solicited at all or disappear into the ether, what does that say about the value the bank places on its employees’ ability to change customer’s lives? Recognition, positive coaching and effectively harnessing employee ideas at scale are key.
It’s not too late for the banks to decide to compete to win and survive. It will, of course, require a new approach. But will any of them have the courage to change?
Additional material you may find helpful
- The 4 Pillars of CX Excellence for Banking (Medallia whitepaper)
- Reimagining CX for Banking in the Digital Age (on-demand webinar)