Recently, Forrester released a report entitled “What Drives Retention and Sales In US Banking?” that tackles this question from the consumer point of view. Using regression analysis, we uncover how these drivers vary for acquisition, retention, and cross-selling in US retail banking.
What did we find? For one thing, consumers value trustworthiness from a bank above all else for both sales and retention. This comes as no surprise to us; with so many financial institutions to choose from, consumers want to do business with a bank that they trust. This finding also supports the key theme that Harley Manning and Kerry Bodine focus on in their recent book, Outside In: Treating your customers well and providing them with a positive customer experience pays off.
The graphic below shows the drivers of retention for the US retail banking customers: The perception of trustworthiness is off the charts as a driver of retention, and offering good customer service is the second-most influential driver. What our analysis shows to not impact retention — and even shows a negative relationship with retention — is having low APR and many locations.
The other day, Smile*, one of the banks I have an account with, sent me a new contactless card.
The striking thing about this otherwise ordinary event was that the bank didn’t mention that it was a contactless card. I know it’s a contactless card because it has the contactless symbol on it. But nothing in the letter the bank sent with the card so much as mentioned the new contactless functionality. Logically, one of the following must be true:
Uncharitably, it could just be that the left hand doesn’t know what the right hand is doing, and the product team forgot to tell the marketing team it was doing anything new.**
Possibly, some slip meant that my envelope didn’t contain any marketing. But there’s no mention of contactless cards on the bank’s website either.
Alternatively, the bank simply reckons that the benefits of promoting the contactless functionality are so marginal that it’s not even worth the effort of changing its standard letter (which promotes card protection insurance in extensive detail).
In our research on eBusiness and channel strategy, we often come across clusters of innovation where innovation by one company in a sector causes its competitors not only to match it, but to try to leapfrog it -- resulting in a rapid cycles of innovation. Among the examples of these clusters are insurance companies in the US (Progressive, Geico and a growing number of others) and banks in Spain (Bankinter, La Caixa, BBVA and Banco Sabadell).
Another of those clusters is the retail banking market in Turkey. Last week I was in Istanbul and was able to see some of the innovations in person and meet a number of heads of eBusiness at Turkey's big banks. Turkey's banks have been quick to adopt digital technologies and achieved some world firsts for the banking industry. Here are a few examples you might like:
Ziraat Bank has deployed a network of unstaffed video kiosks (see picture, right), which it calls video teller machines, that use video-conferencing to connect customers with agents in the bank’s contact centre. Customers can use the kiosks to deposit and withdraw money, buy and sell foreign exchange, pay bills, transfer money and buy bonds. The kiosks let the bank expand its network much more quickly than building conventional branches would do.
Royal Bank of Canada (RBC) leads all of North America.RBC again took the top spot in the 2012 Canadian Bank Digital Sales Rankings, scoring 77 out of a possible 100. It continues to tweak and improve an already good design; the bank started a major redesign in 2009. RBC continues to excel in areas big and small: For example, the firm presents fulfillment options in an easy-to-read format (see screenshot below). In 2012, Royal Bank of Canada improved its navigation, content, and online application functionality, and its score for 2012 reflects that improvement.
Citi and Wells Fargo top the US banks.Citi and Wells Fargo topped Forrester’s 2012 US Bank Digital Sales Rankings by delivering on multiple levels. Both banks combine good usability with exceptional account-opening processes. For example, Wells Fargo uses presentation best practices to make its checking account fees clear to customers and prospects (see screenshot below).
The longer we spend researching mobile banking, the more convinced I become that mobile banking is the most important innovation, or cluster of innovations, in retail banking in years, arguably in a century. Here’s why I think mobile banking is a much bigger deal than cash machines (ATMs), credit cards or home-based online banking:
In developing economies that lack a dense infrastructure of branches, ATMs and fixed-line telecoms, mobile banking and payments are bringing millions of people into the formal banking system for the first time.
In developed economies mobile banking will become the primary way many, perhaps most, customers interact with their banks. Banks need mobile banking to provide a platform for mobile payments and to protect their retail payments businesses from digital disruption as mobile payments start to replace card payments in shops.
These are worrying times for people across Europe as the euro lurches towards another crisis, with leaders talking openly about the possibility of Greece leaving the euro and reports of customers starting to withdraw deposits from banks in Greece and Bankia in Spain.
It's easy to feel powerless in the face of such powerful forces, but fundamentally the repeated euro crises are about two things: debt and confidence. Lots of individuals, small companies, banks and governments across Europe have a large amount of debt, and lenders -- depositors, investors and other banks -- aren't completely confident that all of them will be able to pay it back. It's critical to avoid a vicious spiral of declining confidence that will harm Europe's economic prospects and the livelihoods of its peoples.
What can bank eBusiness executives do about it? Remember that you control two of your bank's critical communication channels: the website and email. Use them to reassure customers. How?
Help customers understand what the crisis is about. Banks aren't just about products. Your purpose is to help customers manage their money. Help your customers understand the causes of the crisis and the reality of the hard choices facing Europe. Nobody likes realizing that they are poorer than they thought they were. Without getting political, help customers understand the situation and what it means to them.
Spell out why your firm is safe. My bank emailed me on Thursday to remind me that it's covered by the British government's Financial Services Compenstation Scheme, covering up to £85,000. Put a similar message on your home page and onto the secure site, where online banking customers are most likely to see it.
The past five years have been awful for most European retail banks. The financial crisis, and the resulting recessions in most of Europe's economies, nearly destroyed some banks and crushed the profitability of many of the remainder. Worse than that, it was a problem that was partly or largely of (some) banks' own making. Banks are being forced to shrink their balance sheets, sell off non-core businesses and cut costs (i.e. fire employees) just to survive. And Europe's ongoing financial crises are far from over as banks' fortunes are closely entwined with those of their indebted governments.
There's one small silver lining among these dark clouds. Over the past 15 years, eBusiness has evolved from providing an electronic brochure to become a fundamental strategic function within retail banks. One of the effects of the financial crisis has been to force most European banks to focus on how to generate profits in their core retail banking operations by serving customers efficiently. Digital banking is a big part of the answer. So, despite the bleak economic outlook, most retail banking boards know that they must continue investing in digital channels. Digital strategy is an increasingly important component in overall strategy.
I'm still surprised when I find heads of eBusiness who remain marginalized within their firms, reporting into IT or marketing rather than a centralized distribution channels function alongside branches. The leading banks no longer make that mistake. That has greatly increased the power and influence of digital banking executives, but also their responsibility for the overall success of their businesses.
Here's our view of the top five priorities for eBusiness and channel strategy executives at European retail banks:
There are a number of firms that we watch closely at Forrester because they stand out for sustained innovation. Behind the technology giants like Google and Apple, there are a number of established firms that are using technology to adapt rapidly and successfully to changing customer behaviour and needs. One of them is Commonwealth Bank of Australia. Over the past four to five years CommBank has introduced a series of digital innovations to serve its customers better including:
Finest Online. In the course of its "Finest Online" project from 2007 to 2009, CommonwealthBank of Australia redesigned its NetBank Internet banking service with the objectives of building an excellent customer experience and driving online sales. The bank implemented new content and functionality to support the customer journey and integrated new secure site sales processes with in-person channels and the bank's multichannel customer relationship management (CRM) system. The two-year, cross-organizational project boosted online sales, increased customer satisfaction, and improved the bank's image. (Forrester clients can read our case study.)
At our Marketing & Strategy Forum last November, Sean Gilchrist, head of digital banking at Barclays Bank, talked passionately about the importance of customer experience to the work being done by his team at Barclays. It's good to see some of the results of that focus on customers in two innovations introduced by Barclays in the past few weeks:
Firstly, Barclays has started rolling out a new online banking interface. While I'm sure that not every customer will like the change, the point is that Barclays is taking a modular (or widget-like) approach to displaying content and functionality in anticipation of having to serve customers on a rapidly growing range of digital devices. We think that approach is going to become increasingly common as eBusiness teams adjust to the fragmentation brought by the Splinternet.
For those of you who aren’t familiar with Finovate, it’s a fast-paced format with seven-minute live demos and pitches from 35 financial technology vendors. It’s produced by Online Financial Innovations, the people behind the excellent NetBanker blog.
I was lucky enough to go along to the show in London today. Unlike last year, when four or five themes dominated the day, this year’s exhibitors were more diverse. Among them were: