The issue of customer loyalty in banking will become increasingly important over time, and addressing it from a structural point of view will be essential in order to overcome the challenges posed by a market that is more open, crowded, and competitive every day. It will be crucial for organizations to be perceived by their target audience as distinct entities with a distinct personality; crucial in attracting the attention of consumers and fostering an ongoing relationship of trust. 

There seems to be no alternative: in today’s hyperconnected market, loyalty in banking can only be achieved by designing customer experiences that live up to the already very high and constantly evolving expectations of contemporary consumers. The services offered—which in banking are particularly complex and not readily understood—must be communicated clearly, fairly, and transparently and enjoyed through smooth, frictionless ways. 

Here, the customer experience becomes the real competitive differentiator, the aspect that defines the banking industry today more than any other: financial institutions that invest in the customer experience are growing 3.2 times faster than competitors that do not.

There are many elements that can determine the success of loyalty projects in banking, but there are three where companies must focus their efforts: proximity, accessibility and, above all, trust. 

 

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The context: digitization and “face-to-face” interactions

Loyalty in banking is a process that can unfold to its full potential only by enriching the customer’s perception of the brand with positive associations. 

Experience—the final perception that determines sentiment—encompasses all the interactions through which the customer communicates with the banking institution: the touchpoints scattered along the customer journey, the flow through which information useful for making purchase and subscription decisions is transmitted, and the systems through which conversions (and transactions) take place at the different moments of the journey. All contact opportunities, online and offline, contribute to determining the company’s presence in the marketplace, in a context where digitization and “face-to-face” interactions alternate, depending on specific needs.

Today, most of us perform our banking transactions digitally and reserve personal interactions (conversations with a live operator or advisor, whether “face-to-face” or by phone) for more complex matters. 

This is according to recent research by Citizens’ Banking Experience, which found that nine out of 10 consumers (90%) and the vast majority of businesses (86%) would use digital banking channels systematically and continuously (up from 85% and 71%, respectively, as of July 2020). The adoption of digital tools in the case of financial services thus seems to be on its way to becoming “nearly universal and practically permanent.”

With widespread digital adoption now well established—at least 70% of consumer and business respondents say new tools have now entered everyday use—customers say they are increasingly comfortable sharing personal data with their banks. 

If these results highlight a radical change in banking habits, they also testify to the substantial preference of the human element, at least during some interactions. Human interaction—delivered in person—remains essential when it comes to obtaining financial advice or in the case of executing more complex transactions. Two-thirds (of both consumers and businesses) prefer it for obtaining in-depth and articulate financial advice (Source: Bloomberg).

If we want to activate banking loyalty mechanisms, how should a purchase funnel be designed that employ both digitization and the “human element”? Which dimensions of the experience are most suited to be enhanced in order to increase loyalty of the target audience?

 

Accessibility and proximity: eliminating friction in the customer loyalty process in banking

Accessibility (in time) and proximity (in space) are two strategic factors that banks must consider in order to improve the customer experience in bankingand increase loyalty as a result.

Making services accessible means developing the ability to reach customers at the right time with the rhythms of their daily lives. Clearing any friction along the funnel that may slow down or inhibit the conversion process becomes a top priority in this regard. The risk, if the obstacles that prevent customers from freely and consciously managing their time are not removed, is twofold: 

  • in the short term, the decrease in revenue caused by missed conversions can occur (every missed opportunity to communicate with the customer is one less sales opportunity for sales and consultants)
  • in the long run, the danger is the progressive deterioration of the organization’s reputation, which ends up being judged as immobile, rigid, and rejecting (the relic of a pre-digital past)

If communication is redundant and inconclusive and customer service responses fail to resolve user problems in a timely manner, the entire customer experience is irreparably compromised.

In the case of proximity, any further reflection cannot disregard the observation that over the past two decades the space where the customer experience takes place has expanded and diversified. New technologies have expanded the perimeter of the places traditionally reserved for the exchange between customers and financial institutions—an exchange that is increasingly taking place on a virtual reality plane—so much so that today, the customer experience in banking is for the most part an experience to be produced, managed, and enjoyed in a highly digitized context.

In a world where visits to physical branches have also declined as a result of increased digital activity—not to mention the long periods of social distancing imposed by the pandemic—the convenience of a behavior is no longer defined by geography but by the degree of engagement, the ease and speed of execution of transactions, and above all, as we shall see, the personalization of the services offered.

 

A new customer: more autonomous and aware

One of the most macroscopic consequences of the digital transformation in banking (and in almost all sectors) is the change in the status of the customer, who, thanks to the tools now available to them, has gradually assumed an increasingly active position in the dialog with brands, coming to directly and often autonomously manage certain stages of the journey.

These are the so-called self-directed customers, those who prefer products and services built to enable them to perform a wide range of actions, using personal devices, including from mobile, and which allow a certain level of independence

This is the so-called “consumer empowerment,” but it can be consolidated only if two conditions occur simultaneously:

  1. If the organization implements personalized initiatives and projects
  2. if the customer trusts the communication and payment systems prepared by the company, so much so that he or she agrees to share sensitive data

This last line of reasoning leads us to the third determining factor for successful retention processes in banking, perhaps the main one: trust.

 

Trust: respecting data privacy and personalization

We highlighted in a previous post that the relationship that binds information, knowledge, and trust, identifies data as the key driver for implementing data-driven banking initiatives and trust as the resource that fuels the very existence of banking.

In that post, we also highlighted how with digitization, the substance of the phenomenon had not changed at all. Banks continued to have to be perceived as trustworthy and worthy of consideration and esteem, as much as the space of contact and confrontation between businesses and users had increased disproportionately. 

What has happened relatively quickly is that the channels opened up through digital transformation have greatly increased the amount of information that banking organizations can access, leading to, with the systematic use of Big Data, a real cultural shift, a (digital) revolution, we might call it. 

To explore this topic further, let’s take a look at some numbers:

  • According to a Statista survey of more than 59,000 banking customers in 28 nations around the world, the most important factor when thinking about your bank is trust.
  • Research conducted by Capgemini and Efma shows that 86% of bank customers are willing to share their data if it allows them to personalize their experience. Of this 86%, 36 percent agree to share data only with their bank but not with third parties, while 26% are willing to share if they are properly informed about how their data will be used and just 24% say they are willing to share their information directly. 
  • Consumers are not satisfied with the level of personalization they receive during interactions with their banks. JD Power found that 78% of the 101,000 people surveyed would stay with their current bank only if they received personalized support.
  • In the study conducted by Forrester Consulting on behalf of Blend, financial institutions are considered relatively poor at personalization, ranking fourth out of five industries considered. Only 14% of customers described these institutions as “extremely effective” in providing genuinely useful and meaningful product experiences and offerings.

As we can see by looking at the statistics above, the issue of trust is intertwined with both concern for the privacy of their data and the growing need for personalization.

To decisively address these two instances, banking players (banks, credit unions, and other financial institutions) must take a closer and more critical look at their products and services, aiming to make the customer central within the funnel and also to prevent privacy violations. The opportunity is unique and must be seized now: monetize digital capabilities while offering personalized banking experiences. 

 

The solution? Design personalized experiences based on data 

The gradual reduction in the number of branches has spurred the development of a new logic for designing customer experiences. Leveraging digital technologies has accelerated a trend that has transformed communication processes in banking, reduced costs, and streamlined and promoted a more advanced data culture.

Consumers, on the other hand, are looking for solutions to reduce friction and increase the value of their decisions. In pursuit of this goal, they are increasingly fragmenting their financial lives across different providers. It is their way of manifesting the need for tailored experiences that take into account specific needs and preferences and those that are contextually relevant and easily accessible. In other words, we’re talking about personalized data-driven experiences that consumers not only expect but to some extent demand. Here, customers model their expectations on the tried-and-true reality of other innovative sectors, from Retail to technology to entertainment. 

Both the depth and the overall significance of the relationship grow with the number of digital interactions that the customer initiates. And, the number of interactions depends on the value of these experiences. To foster a customer’s progression along the journey and create a series of truly meaningful experiences, banks, credit unions, and other financial players must use customer data and information proactively and across all channels to thereby develop relevant and timely communication. A clearly defined retention strategy combined with proper execution should maximize the effectiveness of communication for each of these interactions, on each individual touch point. Potential transactions, product offers and business proposals, insights, advice, and recommendations: each piece of content must be tailored to the customer profile with the ultimate goal of creating engagement.

Loyalty in banking can only be achieved by implementing new customer-centric business models, which in turn require new channels and, above all, new modes of communication, such as those provided by Doxee, which has been supporting Banks and Banking Institutions on their digital transformation journey for nearly two decades.

Communication enabled by the technologies developed by Doxee makes it possible for banks to consolidate and develop relationships with customers and markets on the one hand, and on the other, to make processes related to communication with the target audience increasingly efficient and scalable.