Retail banks in developed markets still losing customer trust
Banks in emerging markets may gain as their customers’ confidence soars Despite efforts by many banks to rebuild consumer confidence in the wake of the financial crisis, trust in banks fell in the past 12 months in countries hit hard by the downturn, according to a new survey report from Ernst & Young. By contrast, banks in some regions relatively unaffected by the crisis are seeing trust levels rise.
For its new report, A New Era of Customer Expectation, Ernst & Young conducted a global survey of more than 20,500 global retail banking customers in order to gauge what drives their relationships with their banks. The survey finds that 44% of customers worldwide say their confidence in the banking industry has decreased in the past 12 months.
Levels of confidence are even lower in regions deeply affected by the financial crisis. The UK has seen the largest drop in consumer trust (63%) within Europe, while 55% of US customers now have less confidence in banks than they did a year ago. Alternatively, in some markets which entered the downturn in better condition, confidence in the banking sector has grown in the past year. Three-quarters of customers in India report their trust in banks rose during 2010. In both Brazil and China, a majority of respondents say their confidence has grown or remained the same.
“In developed markets, customer confidence and trust in financial institutions has been severely damaged by the economic crisis, and our findings show that it remains under threat. Emerging market economies have suffered less from the credit crisis and recession and so their banks have seen trust endure,” Pierre Pilorge, Ernst & Young’s Financial Services Customer Leader says. “In order to get back on track the survey clearly illustrates that banks in developed nations must rebuild customer confidence, enhance the customer experience and stem customer attrition.”
Rebuilding customer confidence
Survey respondents cited several issues that continue to drive down trust levels. However, more than three quarters of UK respondents (80%) identified the banks’ bonus culture as the source of their dissatisfaction.
Mark Dynes, who leads the UK Financial Services Customer Practice at Ernst & Young, says: “Globally, the main reason given for loss of confidence was the economic crisis. Although this is reflected in the UK results, there were also concerns from respondents over bonuses paid by the major players, with little differentiation between retail and investment banking.
“This is having a detrimental impact on the banks’ brand, impairing their images and reputations. With almost half of UK customers identifying a strong brand as a key characteristic when choosing their main bank, developing initiatives aimed at restoring consumer faith should be considered a priority.
Preventing customer attrition
Attrition levels are highest in Europe with 39% having changed their main bank in the past. In the UK, service quality is the leading factor driving customers to switch their main bank, with 42% citing this as a reason to change banks. Other motivating factors include product offerings, branch proximity and lack of trust. As customers continue to demand higher quality service while levels of price sensitivity and distrust increase, banks must innovate to address customers concerns and remain competitive.
Enhancing the customer experience
Finding a way to deliver an effective personal service to customers will be a key success factor in the years ahead. While ATMs (87%), internet banking (82%) and branches (80%) are the touch-points UK customers are most satisfied with today, satisfaction with call centers is consistently weaker (49%).
Banks need to reconnect with their customer base by improving the customer experience across their operations. A number of banks are experimenting with new tools such as mobile banking but there is demand across all channels – including call centers and branches – for greater personalization and attentiveness.
The new era
The banking industry in developed markets has witnessed a significant shift in confidence, and never before have loyalty and personal customer attention been such critical issues. In contrast, the emerging markets now offer significant opportunities for banks looking to expand internationally, as most have felt less of an impact from the credit crisis and instead have a growing middle class of customers looking to diversify their bank relationships.
Pierre concludes: “Customers are demanding a more personalized service if they are to remain loyal. The successful institutions of the future will be those who offer customer-focused innovative services. Those that do will be able to differentiate their organization and drive for growth. The keys to success will be brand management, personalized services and efficient pricing. Retail banks that can deliver all three will prosper in a highly regulated and constantly changing global financial services market.”
Vicky Conybeer