Delight customers, and costs will drop out. It might sound counterintuitive, but this approach can change the trajectory of profits for large, traditional retail banks that have been frustrated by the slow pace of taking out costs.
1 in 10 customers switch banks if their branch closes, and 40% become less loyal. Mobile growth starts to level off: Despite the rise of mobile, high levels of routine transactions persist at branches and call centers. In the US, for instance, nearly 90% of respondents visited a teller during the previous quarter, and nearly half called their bank.
Top loyalty scores for an excellent branch experience miss the main point: Mobile channels have become the new way for busy consumers to do their banking.
The focus of loyalty has shifted in recent years from friendly service at the branch to other attributes, especially simplicity and convenience. And those features depend largely on creating strong digital channels, then teaching customers how to use them.
Potential cost savings for banks
Each mobile interaction incurs a variable cost of about 10 cents, a small fraction of the $4 cost of a teller or call-agent interaction. As interactions migrate to mobile, fewer tellers and call-center agents are needed at the same time opening opportunity for cost savings.
Growth in mobile banking is levelling off in many countries
While the use of mobile banking increases in most countries China actually reported lower mobile usage for routine banking interactions this year, probably because consumers increasingly use more convenient and engaging non-bank platforms.
Direct banks and fintechs are taking a substantial share of new purchases on the strength of their relatively simple product lines and streamlined user experience, and appear to be well-positioned to continue expanding their share.
Hidden defection is rampant
Many consumers—about 29% globally on average—said they would switch their primary bank if it were easy to do so. And hidden defection—purchasing a new banking product from a competing bank or financial technology firm—is taking place everywhere. It’s most pronounced in developing markets, where fewer consumers have long-standing relationships with an institution.
Purchases from a competitor are most likely when the consumer owns multiple products at a primary bank, gives a low Net Promoter Score and is older. Other elements also explain defections, such as exceptional products, pricing and salesmanship at the winning competitors.
Banks should continue to streamline the experience of using both mobile or online channels, so that consumers turn to those channels before the branch or contact center. That will require designing simple and easy apps. Improving the digital experience also entails eliminating bank policies or processes that impede convenience and reliability.
How branch closures affect customers?
Roughly 40% of respondents globally reported that they switched their primary bank or started using other institutions for purchases of new banking products after they experienced a bank closure.
Closures correlate with lower loyalty scores in every country surveyed, but the effect varies substantially. Banks in France, Germany, Canada and South Korea suffered the sharpest drop in Net Promoter Scores after closures. Closures can have ripple effects, depending on how a bank handles the transition. Consumers who experienced a closure said they are 3 percentage points more likely in Australia and 24 points more likely in India to switch their primary bank in the future. Globally, the gap averaged 11 points.
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Kilder: Bain.com.
