Earning loyalty in the banking industry

With the cost of customer acquisition rising, retention is a priority for banking institutions. Providing effective, meaningful service is key to reducing churn. But while companies often assume that customers want human interactions above all else, the research doesn’t back it up. Ultimately, the most important factor is providing an effortless experience for customers.
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Retaining customers in the financial services industry is a challenge. Banks need to make interactions as effortless as possible.

When a bank onboards a new customer, it may seem like a long time before they’ll need to worry about account retention. But in fact, the honeymoon period immediately after the customer says the equivalent of the matrimonial “I do” is critical for setting the stage for a long and mutually beneficial relationship.

According to a recent article in CustomerThink, the costs of acquiring a banking customer are estimated to be around $200 while the typical customer generates only $150 in revenue each year. That means the relationship does not become profitable for the bank until well into the second year. Unfortunately, the annual churn rates on new customers hover in the 20-25 percent range during the first year, with half not making it past the first 90 days after opening their accounts.

With customers apt and willing to churn, banks and other financial institutions need ways to improve the odds of keeping a customer long enough to get them out of the red and firmly into the black side of the corporate ledgers. One way banks try to do this is with a welcome call. When J.D. Power evaluated customer satisfaction with their experience of taking out a car loan or mortgage, they found that lenders who actively welcomed their new borrower scored significantly higher than those who did not, increasing the likelihood that the customer would recommend the lender to friends and family.

So the question is not if customers should be welcomed, but how.

The CustomerThink article suggests that despite the higher costs involved, “a follow up call from the associate who handled the account opening will be more meaningful than a robocall or a call from an anonymous call center rep.” But I’m not sure that’s the case.

Like my eggs in the morning, I want my welcome calls the same way – easy and over. What customers need in a welcome call is confirmation that an account has been established correctly, without muss, fuss or objection handling. This can be easily accomplished by either a customer service rep, or at times, an automated voice message may work as a better alternative.

Consumer research backs me up on this. At the end of the day, receiving a phone call from an associate is not the primary issue customers are concerned with. That’s not the difference maker. According to Harvard Business Review, while many companies believe that consumers prefer live, human phone interactions over self-service, data shows that customers are largely indifferent. HBR concludes that the number one most important factor in a customer’s loyalty is reducing customer effort. Furthermore, Forrester reports that customers have little tolerance for long or difficult service interactions. Instead, customers reward companies that offer effortless customer service. And this is all the better for the bank, as these methods cost significantly less than a call from a salesman.

It’s true that earning customer loyalty in the banking industry is challenging. But a humanized phone call isn’t the magic bullet. Instead, to provide the experience that customers truly care about, make it easy as possible.

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Demands for Effortless Service Must Influence Your Customer Strategy

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Brian Moore

About Brian Moore

Brian Moore, senior principal, industry solutions of Nuance’s Enterprise division, brings more than 30 years of experience in financial services, mortgage and collections operations and technology to the company. He is also our resident compliance expert, advising companies on the TCPA, FDCPA, TSR and other regulations impacting customer engagement.