According to a recent IBM banking study, 87% of customers have only one account with their primary bank and only 58% of their investments lie with them. These statistics present potential business opportunities for other banks to take advantage of the remaining 42% of customer investments with the help of analytics-backed personalization.
This clearly indicates the growing need of banks in understanding the nuances of investment behavior and preferences of their customers, the study says.
According to the study, 30% of banking customers transact with more than one bank with 2.4% of churn expected among primary bank customers within one year.
Private sector banks fare slightly better in customer penetration due to a larger portfolio of account offerings and their ability to leverage process capabilities to unlock higher revenue opportunities.
While multi-banking is on the rise, private sector banks are at a higher risk of losing their customers to others as compared to PSU banks due to non-satisfactory customer services, the study says.
Ensuring quality experience is critical for customer acquisition and retention. The findings reveal that 41% of private bank (as primary) customers transact with more than one bank, versus 24% of PSU Bank customers, and 86% of the 41% customers of private banks possess accounts at PSU banks as well.
“Banks are increasingly realizing the need to give their customers a more holistic, seamless experience throughout the value chain,” said Venkatramani Subramanian, VP and Leader for Banking, Financial Services and Insurance (BFSI), IBM ISA. “The need of the hour is to understand individual consumer’s transactions and nuances of their unique investment behavior. Integrated and consolidated solutions by IT partners become imperative as technology will drive the business priorities of banks in the future.”
Subramanian added: “The survey reveals that word-of-mouth is a source for more than half of customers, which shows that the days of push marketing are over and creating brand advocates is a priority.”
Here are some other survey takeaways:
Need of enhancing Customer Experience and harnessing customer advocacy: According to the survey, 50% of customers acquire information about banks through word-of-mouth and 2.4% of churn is expected among primary bank customers within one year.
Evolution of Omni-Channel Distribution: The prime reasons for customer dissatisfaction are unsatisfactory branch experience (63.6% of respondents), problem resolution (55.3%) and channel experience (41%). Uniform experience across channels is a prime factor to increase satisfaction levels.
Driving account/ customer penetration through Cross-selling: The survey reveals that there is a huge gap between the numbers of monthly transactions (81% versus wallet share (58%). It’s important for banks to understand the customers’ selection criteria in the context of their savings and investments, customizing services accordingly.
Developing Social media platforms: Nearly 26% of customers use social media for banking-related activities; 25%-35% of these same customers use it as an information ‘exchange’; and 61% use social media as an information source. With technology in place, banks can leverage analytics to identify new revenue sources from customer interactions and information captured through conversations and online discussions.
Channel Adoption - Primary and Alternative Channels: The survey reveals that the adoption of Internet banking (22.1%), mobile apps (13.6%) and credit cards (24.1%) is still low; less than 45% of customers prefer ATMs due to safer use and error free transactions. Through technology adoption, banks can even further improve security/errors through intelligent and secure ATMs.
Personalization and Loyalty Programs: According to the survey, 72% of customers are ready to update their personal information at least once every six months and 67% of customers mention that their bank has not made efforts to personalize their services. With better CRM/ POS/ web solutions integrated with cross-channel customer data sources, banks can offer better advisory service and loyalty programs.