Retail banking customers reported fewer positive customer experiences for the first time in three years, putting banks at risk of losing customers and profitability according to the 11th annual World Retail Banking Report (WRBR) released by Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services and Efma1.
According to the report, this decline underscores the challenges banks are facing in meeting the evolving demands and high expectations of digitally-savvy Generation Y2 (Gen Y) customers. This new reality requires banks to digitally transform as well as leverage social media.
More than one-quarter of the countries in the WRBR’s Voice of the Customer (VoC)3 survey reported a decrease of more than 10% in the share of customers with positive experiences, a major reversal from 2013 when increases of more than 20% were prevalent.
“The decrease in the percent of customers reporting positive experiences signals an early warning alert for the industry,” Jean Lassignardie, Chief Sales and Marketing Officer, Capgemini Financial Services Global Business Unit, said in a press release. “To reverse the troubling decline in positive experiences, banks need to fully understand evolving customer preferences and the expectations of ‘Gen Yers’, who are driving current and future demands in banking and its digital transformation.”
This year, for the first time, the WRBR measured the impact of positive experiences on a number of behaviors linked to increased profits. Specifically, the report found that customers with positive experiences are more than three times more likely to stay with their bank than those who have negative ones. Customers with positive experiences are also three to five times more likely to refer others and purchase another product.
The report says that the power of Gen Y demands will shape the future of digital banking. With Gen Y comprising one-quarter to one-third of the population in many markets, its attitudes and preferences are highly influential. This group’s expectations of how banks should serve their customers, particularly via digital platforms, are significantly higher than those of the general population thanks to their prolific and sophisticated use of technology. Retail banks must pay attention to the needs and expectations of Gen Yers, as their influence is only expected to grow.
The growing prominence of Gen Y, the tech-savvy population born between 1980 and 2000, is an important reason behind the overall decline in this year’s customer experience ratings, the WRBR found. Gen Yers are considerably less likely to have positive experiences with their banks. In North America, the difference is particularly noticeable, with only 41.7% of those between 18 and 34 years citing positive experiences, compared to 63.4% of those of other ages, a difference of 21.7%. In other regions, positive experiences for Gen Y lag those of other age groups by anywhere from 7%-10%.
Improving service delivery to Gen Y customers will also require banks to develop a social media strategy. The vast majority (89%) of bank customers today have a social media account, and more than 10% of customers say they already use social media at least once a week to interact with their bank. Yet most banks are still in the very early stages of developing a plan for social media. The WRBR found several gaps between the functionality banks make available on social media and what customers would like them to offer.
According to the report, to carry out a strategic social media strategy, banks will need a multi-layered infrastructure to include:
Appropriate platforms to develop and host apps
Big data analytics to process customer data and generate insights
Dedicated support staff to provide live customer care and address reputational issues
Governance mechanism to be used for training and risk mitigation
Enhanced safety and security of customer data
The need to address the requirements of digitally-savvy customers must be balanced against the reality that traditional channels still play a role, the report revealed.
“Banks are no longer a branch or a place where customers go, but a collection of services that take place, anywhere, anytime,” Patrick Desmares, Secretary General, Efma said. “Banks need to be prepared to respond to all customers, no matter how, when, and where they want to do their banking.”
Simon Short, Head of Capgemini’s recently launched Digital Customer Experience Global Service Line, said today’s end-users expect seamless interactions via multiple channels with faster, almost instantaneous responses.
“The findings in this year’s World Retail Banking Report demonstrate that retail banks need to be more agile, innovative, social, and mobile in order to create a more meaningful experience to engage their Generation Y customer base,” he explained.