Reducing customer churn for banks and financial institutions

In the banking industry, there’s no shortage of options for customers when choosing where to put their money. Where once you simply chose your local bank - after all, you needed a convenient branch to visit - now, the world is your oyster with online and mobile banking leveling the playing field.

With increased competition from both existing players who are revamping their digital offering and newcomers threatening to disrupt the industry, customer experience is an increasingly important battleground for financial institutions.

After all, customer experience drives loyalty and reduces customer churn. And in financial services, where customer lifetime value is a key metric, loyalty is everything.

Ebook: Start seeing results through improving customer loyalty

Poor service is the #1 reason for bank customer churn

The Qualtrics Banking Report found that customers who are sure they’re leaving their current bank or credit union ranked “poor service” as the number one reason they’re leaving, and 56% of customers who have left say the bank could have changed their mind. Yet, according to the customers, banks and other financial services institutions are not making an effort to keep them.

Why, you ask? Because the banks don’t know. They are not plugged into what their customers are feeling, as many financial institutions don’t provide a means for customers to provide feedback in real-time across every brand engagement.

Instead, customers may receive a single annual survey, which is most likely too late for the institution to address the issue. The most successful financial institutions are keyed into what their customers need by including feedback loops across every channel and every customer touchpoint. This feedback drives those organizations to create exceptional customer experiences that drive customer loyalty, referrals, and reduce churn. Simply put, your company’s commitment to customer experience can either mean your company’s success or the success of your competitors.

Improved CX reduces attrition

One of the first and most visible reasons companies decide to prioritize customer experience is to reduce customer attrition, commonly referred to as “churn.” In financial services, churn is of particular concern to companies with non-binding contracts, like credit card companies, insurance agencies, credit unions, and banks. For these organizations, attrition rates as high as 25-30% are not uncommon, and even companies with some type of annual contract may experience attrition rates around 5-7%.

The solution? Customer experience management. Many companies use Net Promoter Score (NPS®)as a quick way to gauge their overall customer satisfaction, and for good reason. A recent Temkin Group study indicates that your company’s promoters are 81% more likely to repurchase your products or services, compared to passives and detractors, who have a 44% and 16% likelihood to repurchase, respectively. Your company’s policies or services may be the best in the financial services market, but if your customer experience is lacking, you may find yourself losing business to your customer-conscious competitors.

Your company’s promoters are 81% more likely to repurchase your products.

After you’ve used NPS or another method to take stock of where you customer experience currently stands, begin identifying what drives satisfaction for your customers. When you know what drives satisfaction, you are better able to prioritize those areas and provide “wow” moments for your customers that will turn their satisfaction into long-term loyalty. These “wow” moments don’t need to be over-the-top or hard to execute - it may be as simple as depositing $20 into a newly opened checking account or waiving a late fee for a valued customer. However you choose to thank your customers, make it genuine and personal.

Next, address sources of dissatisfaction. Is your website hard to navigate? Do customers have a difficult time finding your customer support phone number? Put your customer feedback program to work by asking your clients to tell you what causes them frustration and what they’d like to see your company do differently. The information you collect will help you optimize your product and service offerings to give customers more of what they want and will help you find and resolve potential problems before customers become frustrated. Proactive engagement will always delight and let your customer know you care in contrast to reacting after an issue has already occurred.

CX Study: Learn how to increase the ROI of your customer experience

What areas of your offering need to be checked for customer centricity?

1. Fees - Raising fees on financial service products is the number one reason why customers consider leaving in the first place. However, poor service ends up being the primary reason for actually leaving. Offering lower fees to match online competitors is a difficult initiative for banks looking for short-term growth, but there are other levers you can pull. Customers appreciate it when they feel taken care of, and a Customer Experience Impact study found that 86% of consumers are willing to pay more for a better customer experience.  Look for “wow” moments as mentioned above to delight customers.
2. Rates - Much like fees, the return rates offered by products like Money Market funds and savings accounts are highly competitive across fintech startups, new online entrants, and the incumbents. By implementing a long-term strategy to offer lower fees on entry-level products and better rates on more profitable products (e.g. mortgage and auto loans), companies can increase the customer lifetime value and increase loyalty.
3. Branch locations - Some institutions have adopted an online-only model recently to save costs, but the majority of customers still like having a physical bank to get in-person guidance from a valued advisor on investment strategies. The same Qualtrics Banking Report found that 73% of online-only customers said they would switch to a brick-and-mortar bank, while only 40% of brick-and-mortar customers affirmed they would switch to an online-only alternative.
4. 24/7 customer service and wait times - No one wants to be on hold for any amount of time, especially when there is financial risk involved. If your wait times are at or above the industry average, consider implementing an online chatbot to address easy questions and a guaranteed call-back system from a live support rep for more complex issues. Around the clock live support is expensive, but most customers can be satisfied as long as there is some option to raise an issue, whether in-person, online, or over the phone.
5. Breadth of product offerings - Customers want options and to feel they received the best rate when shopping for big-ticket items that require financing. Qualtrics research found that many consumers maintain checking and savings accounts at a primary bank, but shop around for better rates on mortgages, car loans, investments, and credit cards. As mentioned above, deploying a strategy to offer competitive rates on long-term, higher profit investment vehicles, your personal relationship can help keep your customer’s finances in-house.
6. Quality of digital tools - All banking customers surveyed spend 69% of their time online or using the mobile app, with millennials even higher at 79%. As more of our daily needs can be accomplished with a smartphone, you must ensure your online and mobile experiences are smooth, easy, secure, and enjoyable for managing one’s finances. Adding educational resources about financial investments and other non-conventional services is also a valuable option to digital customers.

The above are just a few areas and ideas where you can look to offer your customers additional value and a premium experience across channels.  Pick and choose the options that make sense for your company, but make sure you have systems and tools in place to gather feedback and uncover your own insights.

If you would like to learn how to build a world-class Customer Experience program, please download the brand new eBook from Qualtrics, “Experience leadership in financial services”