Global Consumer Banking Survey 2012

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Consumers are taking control of their banking relationships, are increasingly likely to change banks and expect to be able to choose between a range of service levels and costs according to Ernst & Young’s 2012 global consumer banking survey. The study, which questioned 28,560 banking customers across 35 countries, highlights how customers also expect to be financially rewarded for their loyalty.
Retail Banks around the world are facing intense margin pressure, slow balance sheet growth, an uncertain economic outlook and a growing threat from new entrants, especially in the payments area. Banks are also confronted with growing regulatory costs and increasing demands for greater fairness and clarity in their interactions with customers.

All of these factors are encouraging banks to increase their focus on their most important stakeholders – their customers. Unfortunately, as banks are only too aware, customers who are losing trust in the industry heavily outnumber those who are feeling more confident.

In this environment, understanding customer behaviour, attitudes and requirements is more vital than ever for banks’ strategic thinking, operational planning and day-to-day customer treatment. Retail banking remains a local business, and the impact of customer challenges varies from market to market. Nevertheless, our experience tells us that key themes are often remarkably consistent across continents and between countries.

The survey emphasises the following questions:

  • How likely are customers to switch banks, and if so, why?
  • Is customer behaviour toward their banks changing, and if so, how?
  • How are customers using different channels, and what do they expect from them?
  • What is driving customers' satisfaction, and what improvements do they want to see?
  • What steps can banks take to enhance customer loyalty and advocacy?

Customers are taking control

Overall customer confidence in banking continues to fall, with 40% of customers losing trust in the industry over the past year and only 22% gaining confidence. Despite improvements in the US, customer trust is falling in many other mature economies.  The trend is strongest in the European Union (EU), where more customers have lost confidence in countries like Italy (72% in 2012, from 48% in 2011) and Spain (76% in 2012, from 58% in 2011).

It is true that customer confidence remains resolutely high in a number of emerging markets.  In India, 72% of customers are feeling more confident. In South Africa 33% of customers say their confidence in the banking industry has increased, compared with 22% in 2011.

Even so, the overall direction of sentiment is clear. Globally, the extent of falling confidence is leading to some fundamental changes in customer behaviour.

Customers are more likely to use other banks

Customers are becoming less loyal and increasing the number of banks they use. The overall proposition of customers planning to change banks has increased from 7% to 12% since 2011. Sensitivity to fees and charges is the leading driver of attrition, cited by 50% of customers. Customers with only one bank have fallen from 41% to 31%, while those with three of more have increased from 21% to 32%.

  • In South Africa, customer attrition has increased from 34% to 39% over the last year.  70% of customers who have switch banks cite high fees or charges as the main factor.  Going forward, 13% of customers are planning to switch banks
  • South African customers with more than one banking relationship has increased from 55% to 61% this year
  • Behind China, South African customers have the strongest affinity to banks rewarding loyalty either through better service (65%) or lower fees (76%)

 Customer advocacy is gaining power

Word of mouth is gaining influence. Customers are listening to each other more than banks or financial advisors. Globally, 71% seek advice on banking products and services from friends, family or colleagues, and 65% use financial comparison sites to find the best deals. The views of online communities and affinity groups are also gaining importance. The use of social media as a source of banking information (by 44% of customers) is amplifying customers’ voices, giving them greater power as advocates or critics.

  • 76% of South Africans prefer face to face discussion with friends, family and colleagues for information on banking products which is higher than the world average of 71%
  • 45% of South Africans use social media to comment on services which is higher than the world average (34%) the EU (24%)
  • 44% of South Africans use social media to find out more about their products and services, which is in line with the world average

Customers want to play an active role in tailoring their products and services

Globally, only 44% of customers say their bank adapts the products and services to meet their needs. The survey results show that 70% of customers are willing to provide their banks with more personal information,  In return, customers expect to receive tangible improvements in the suitability of products and services they are offered.

  • 90% of South Africans would be willing to share personal information about themselves and their families if it enabled the bank to recommend more suitable products and services – the figure is the highest and way ahead of the World average of 70%
  • However only 43% of South African customers feel that the banks adapt products and services as their financial needs change
  • 35% of South African customers would be prepared to update information on their banks every six months, which is above the world average of 26%

Banks need to embrace the shifting balance of power

Banks are competing for the business and loyalty of increasingly demanding customers. In response, different models are emerging to serve different customer needs. Some are based on low-cost competition, some on high-touch service and some on accessibility. Large, full-service banks need to defend market share against specialist competitors focusing on particular products or customer segments, as well as new entrants in the payments space.  At the same time, full-service banks need to retain the ability to meet a huge range of customer needs.

  • 61% of South African customers prefer to use the internet to engage their banks for different products, services and activities (simple transactions).  This is the highest representation behind Canada (65%)
  • 70% prefer the branch for complex transactions
  • 91% of customers would like basic banking to be free with an alternative pricing structure for differing services levels

For large retail banks, choosing where and how to compete is a complex challenge. They need to deliver the level of personalisation and flexibility customers want, and develop differentiated products and services – all while lowering costs and generating sustainable profits. There is no simple solution, but as look across the industry we see nine key implications:

  1. Make pricing and service promises transparent
    Transparency over pricing and service promises is vital if Banks are to deliver value to customers and meet the demands of regulators and investors
  2. Offer segmented levels of customer service
    Banks should offer customers a choice of products, services and pricing.  Customers should be able to earn upgrades to different service levels through loyalty
  3. Move from multi-channel to omni-channel distribution
    Banks need to look beyond multi-channel distribution, recognising that customers care more about convenience than about channels
  4. Encourage customer self-service
    Banks need to make their information and advice more innovative and compelling, targeting self-directed customers and encouraging greater self-service
  5. Shift marketing from “push” to “pull”
    The growing importance of word of mouth means that banks need to change their approach to marketing. Banks should try to recruit and retain satisfied customers as advocates
  6. Develop flexible loyalty programs
    Banks need to offer financial rewards for loyalty. Despite their cost, loyalty programs that are flexible and can be tailored, offer huge, potential benefits in loyalty and advocacy.
  7. Make low-cost digital channels customers’ preferred choice
    Banks should encourage customers to use digital channels whenever possible, using price incentives if necessary
  8. Prioritise investment on critical customer interactions
    Banks should focus operational improvements on customers’ most valued interactions, optimising the resulting impact on attrition, dormancy and loyalty
  9. Use innovative technology to deliver the retail bank of the future
    The use of technology is crucial to delivering lower costs, greater reliability, more flexibility and personalised products and services

Customers see bank loyalty programs as playing a crucial role to play in retention and acquisition. For the banks, greater loyalty among more affluent customers has the potential to outweigh the cost of providing financial rewards. Enrolment in loyalty programs is accelerating fast, in particular in South Africa where the number of consumers that are enrolled in a loyalty programme doubled in the last year. Developing tailored rewards for specific groups of customer segments could help banks boost enrolment in other markets and interactions.

In conclusion, the behaviour of retail banking customers continues to evolve rapidly. This survey shows that customers are becoming more assertive and taking greater control of their banking relationships. They are increasingly less loyal and are more likely to try new banks. They are listening to each other and becoming more vocal as advocates — or critics. They are also demanding lower costs, better service and greater personalisation and flexibility. Faced with this fast-changing environment, banks are reconfiguring business models around customer needs. Just as no two banks are exactly the same, there is no single strategic response that will suit every institution.