Banks need to win customer loyalty war as one in ten Europeans plan to change banking provider this year

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Madrid and Paris, 1 February 2010 – The financial crisis has caused customers to change their attitude towards their banks, finds new research from EY. If they are not changing provider, then some customers are looking to diversify their banking portfolio spreading financial products across a number of different institutions to minimize their exposure to perceived risks.

Understanding customer behavior in retail banks, a survey of 6,140 retail banking customers in Belgium, France, Germany, Italy, Spain and the UK, found that only 24% had changed their main bank provider at some point in their life, but 10% did it in the last two years alone. A further 11% said they planned to do it imminently, pointing clearly to a recent acceleration.

Beatriz Sanz Saiz, EY’s Global Customer Leader, says: “Against the backdrop of the financial crisis, customer satisfaction has never been such a major concern for European banking leaders. Our survey shows that customers are prepared to vote with their feet and switch to another bank if they are not happy.”

“Our research demonstrates that banks have a tough job this year to meet the challenges of retaining customers, restoring public confidence and providing the services and products that customers really want. Considering it costs banks six times as much to attract a new customer as it does to retain an existing one, the industry has some challenges ahead. New European banking initiatives, such as the Common Principles for Bank Account Switching, will make bank account switching easier for European customers and small businesses within their own country. Banks must wake up to this threat.”

New expectations
The financial crisis has had a negative or very negative impact on trust in the banking industry for 45% of respondents. Customers in Spain (20%) and Italy (14%) are most likely to change banks with only 6% in Belgium and France planning to do likewise.

Price (43%), service (42%) and products (31%) are the top three concerns driving customers across the six countries to change their banks. But lack of trust is a concern for a quarter of customers polled.

Clear differences emerged between each country about the reasons customers would change banking provider:

  • Price was a key reason for German (55%) and Italian (50%) customers
  • Trust was a key reason for 26% of UK and Belgian customers
  • UK (39%) and German (38%) customers were most likely to move because of poor service
  • Spanish customers were most likely to switch because of products (35%), and
  • French customers were found to demand better financial advisor competence (22%).

Beatriz Sanz Saiz comments: “We believe that banks can turn around customer discontent around. But they must be prepared to listen again to their customers to take care of their new expectations.”

Rewarding loyalty
The report revealed that there exists for European customers a small but growing discontent with their main banks – the one their pay cheque is paid in – and to date banks have taken customer loyalty for granted. The survey also shows that the concept of a main bank is eroding. “Banks simply cannot afford to rely on customers’ past behaviors,” says Beatriz Sanz Saiz.

More than half (58%) of customers polled in the six countries have stayed with their bank for more than ten years, with seven out of ten remaining loyal for more than five years.

French and Belgian customers hold the longest relationships with their banks with 85% and 82% respectively banking with their main provider for more than five years. In contrast, just 39% of Germans had been with their bank for more than five years, with 25% banking at the same institution for ten years or more.

Perhaps surprisingly, 54% of respondents would welcome a customer loyalty program and this is particularly true in Spain (81%) and Italy (76%). Just 9% of Germans were interested in a loyalty program.

Over 80% of European customers now use more than one bank but it is interesting to see that 74% have only one product type with each of their other banks.

Pierre Pilorge, EY’s Financial Services Advisory Markets leader for Europe, Middle East, India and Africa practice, comments: “Are we seeing the dawn of new specialist banks? Our research demonstrates that customers are now more likely to select a specific bank for a particular product. Banks clearly need to have skilled advisors to benefit from this rather new client openness.”

Pierre Pilorge believes that banks must now take another good look at their customer base; examine what customers want in terms of banking interaction; and whether they value pricing, personalized relationships or innovative services. “It is clear that banks must consider these different customer priorities when segmenting their customer bases,” he says.

He concludes: “In this brave new retail banking world, banking customers increasingly expect the ease of 24/7 direct access to their banks but they are also keen to benefit from a personalized relationship too. There is room for innovation through combining these two expectations to build closer relationships with customers. This could be a winning bet for both.”

-ends-

Notes to Editors

About the survey
This research was conducted using an internet questionnaire between 25 August and 3 September 2009. A total of 6,134 Europeans were questioned: 1,020 French; 1,003 British; 1,004 German; 1,022 Spanish; 1,005 Italian and 1,080 Belgian.

EY EMEIA Financial Services
The EMEIA Financial Services business includes 400 partners and 5,500 financial services professionals from across 12 European markets. It serves financial institutions in the asset management, banking and capital markets, and insurance sectors, and works closely with our financial services organizations in the Americas, Far East, Oceania and Japan.

About EY 
EY is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 144,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

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