The twelfth annual World Retail Banking Report (WRBR) by Capgemini and Efma has found that, for the second year in a row, improvement in global retail bank customer experience levels has stalled.
According to the report, which draws on research from 32 markets and global data from over 16,000 retail banking customers, stagnating global customer experience levels, combined with an alarming increase in customers willing to leave their banks, points to weakening bank-customer relationships and the increased possibility of disintermediation by non-bank competitors.
These findings underline the need for retail banks to make investments to improve the customer experience. In particular they must look at their middle and back office processes, which have historically been ignored and are essential to providing engaging digital services through faster processing times and reduction in errors.
“Disenchanted customers, combined with the agility and innovative nature of non-bank competitors, is leaving the door wide open for capturing market-share,” said Jean Lassignardie, chief sales and marketing officer at Capgemini Global Financial Services. “Improving customer experience is the best strategy to deflect competition from non-bank players. While investments in improving front-office customer experience have expanded banks’ offerings, middle and back office transformation has been plagued by under investment and will be the key to resolving disjointed customer experiences and improving longer term loyalty rates.”
In addition to lower customer experience levels, the WRBR found that globally customers’ propensity to leave their primary bank (especially Gen Y) is on the rise, while willingness to make referrals or buy additional products has decreased significantly.
The percentage of customers who said they were likely to leave their primary bank in the next six months rose into double digits in every region except Western Europe. According to the WRBR data, customers’ likelihood to leave their banks increased anywhere from nearly 4% to over 12% last year depending on region. Globally, less than 50% of Gen Y customers are likely to continue with their primary bank in the next six months. Reasons for customers leaving banks could be the increase in non-bank competition, growth of start-up banks which offer attractive digital products, and the ease in logistically switching banks.
Also concerning for banks was the expanding number of customers who said they were not likely to make referrals or purchase an additional product from their primary bank. Customers unlikely to make referrals rose over 9.5% in some regions and the unlikelihood to purchase a second product from their primary bank increased as much as 25% in Western Europe.
Banks also appear to have stalled in their ability to steer customers away from the branch toward lower cost channels. Despite significant leaps to high rates of usage for both the internet and mobile channels, the impact on branch usage was minimal. In fact, branch usage rose modestly in North America and Europe during 2014, while decreasing only slightly in Latin America and barely at all in Asia-Pacific.
All of these factors provide non-banks with the opportunity to attract customers away from their primary banks. Internet and technology firms, in particular, with their simple, agile and intuitive offerings, and freedom from legacy systems, are at the top of the list of competitors, with 83% of bank executives viewing customers as comfortable with banking through these entities. Already, such firms have carved out a significant presence in the area of payments and credit cards, particularly in North America and Western Europe.
“With a thoughtful, methodical plan for digital transformation, banks can begin to improve their customer experience scores and position themselves to compete against nimbler, non-traditional entrants,” concluded Patrick Desmarès, Efma’s CEO.
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