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Is It Tech or Trust That’s Tanking the Bank Business?

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Schlesinger Group conducted research, in collaboration with Apex Scoring System, to explore what’s behind the sharp decline in banking customers’ loyalty. Is it booming technology and online banking or a complete loss of trust in “big banks”?

Leaders from both Schlesinger Group and Apex Scoring System then shared the results in a webinar Sept. 8, 2022. In the following webinar summary, these experts deconstruct the report to help you understand how to survive through major changes in how customers relate to their banks through times of trial and technological advancement.

  • Rob Berger – Executive Vice President of Global Quantitative Research at Schlesinger Group
  • Marc Whitehead – Co-Founder and CEO at Apex Scoring System
  • Nick Bond – Co-Founder and Chief Experience Officer (CXO) at Apex Scoring System

Why Did Apex Study the Financial Services Sector? 

In light of the COVID-19 pandemic, Apex noticed a change in the relationship between consumers and banks.

This change in relationship was measured based on eight common beliefs and eight common feelings expressed by consumers. This forms 16 common attitudes which constitute the Apex Scoring System model. Apex developed this model in partnership with Columbia University and Harvard University to get to the root of physiological and emotional impacts on consumer relationships:

  • Joy – Is the financial services experience enjoyable?
  • Uncomplicated – Is the financial service simple to use?
  • Empathetic – Is customer support and messaging from financial services providers empathetic to consumers?
  • Principled – What guiding principles does your finance company hold?
  • Predictable – Can consumers rely on your financial services?
  • Involved – Do you engage consumers and take their feedback onboard?
  • Authentic – Do you say what you do, and then do what you say?
  • Honest – Are you truthful and transparent with consumers, even if the news is bad news?
  • Distinct – Do you offer a distinct type of service? Are services specialized or generalized?
  • Affordable – Can your target consumers afford your financial services?
  • Dependable – Do your financial services work when consumers need them to, and do they work at a consistent level of service quality?
  • Responsive – How quickly can consumers expect to hear back when contacting you?
  • Respectful – Do you value and care for all customers, regardless of their socioeconomic or cultural background?
  • Forward-Thinking – Are you innovating and building new financial experiences?
  • Relatable – Do you understand consumers enough to form deeper relationships?
  • Meaningful – Are you striving toward a higher purpose, and do your financial services reflect that in a way consumers understand?

Apex Scoring System is a quantitative measure for specific audience relationships that can be tracked longitudinally. By putting all 16 elements together, it clearly defines the relationship between consumers and banks.

These elements also feed into the Net Promoter Score (NPS). This is a measure of customer experience (CX) that determines how likely a consumer is to advocate for your brand on a scale of 0-10:

  • Promoters – 9-10 scores: Loyal customers who buy and refer others to your services.
  • Passives – 7-8 scores: Satisfied customers who are not enthusiastic about your services, and who are prone to competitor offerings.
  • Detractors – 0-6 scores: Customers who are neutral or unhappy and may damage your brand image and growth through negative word of mouth.

In summary, what do customers expect? How can the business meet these expectations? Some consumers may want higher levels of empathy and authenticity, while others demand affordable and dependable services. By assessing against the 16 elements, you will understand what attitudes you should cater to for your target demographic.

How Did Schlesinger Group & Apex Scoring System Study Incumbent Banks and Challenger Finance Organizations?

As previously mentioned, COVID-19 drove significant fluctuations in consumer attitudes towards banks and finance organizations. People expect different things from brand relationships now compared to before the pandemic.

In the joint study conducted by Schlesinger Group and Apex Scoring System, clients from 20 of the largest banking organizations in the U.S. were surveyed to understand these fluctuating attitudes, and the results were compared against emerging challenger banks. These challenger banks are developing innovative new offerings and providing new channels for customer support and engagement.

Let us break down the research methodology:

  • Sample Size – 3,243 customers as part of a paid research panel
  • Legacy vs Challenger vs Local Bank Consumers – 2,147 legacy bank customers; 547 challenger bank customers; 549 local bank customers
  • Sample Age – 669 aged between 18-34; 1,229 aged between 35-54; 1,345 aged over 55+
  • Sample Gender – 1,906 women; 1,329 men; 5 non-binary; 3 who prefer not to answer

Nick Bond, Chief Experience Officer (CXO) at Apex Scoring System expressed how, “It’s great to have such a good representation of ages and regions and different types of bank users […] We got a positive read that gave us really strong, high levels of confidence in our results.” 

Between the 10 largest banks, often referred to as incumbents, there was a 37 percent spread in consumer loyalty scores. If the top bank achieved 80 percent loyalty, this means the lowest bank scored a meager 43 percent in loyalty. This includes players like Barclays and the Bank of America.

Challenger banks have a much smaller spread at 21 percent. This means if the top challenger bank achieves 80 percent loyalty, the lowest challenger bank still scores 59 percent — 16 percent higher than the big players.

What is driving the difference in loyalty spread between incumbents and challengers? How do challengers achieve higher loyalty using digital platforms, despite less face-to-face interaction? It turns out challengers have a trick up their sleeve that trumps the physical presence of incumbents: digital transformation and technology-enablement.

What Do Consumers Want from Their Financial Services? 

The insights from the study reflect wider trends seen in other consumer categories. Simply put, expectations are higher now than ever before.

Bond highlights, “The first one that we saw is that a lot of banks lean hard into things like: We’re easy to deal with, we’re a cover, we’re your comfortable bank, you’re always going to get somebody on the phone within X amount of seconds or minutes.”

It turns out consumers view this as the bare minimum — these are table stakes. This does not create a uniquely good experience for consumers.

Bond continues, “The fact you are somewhat easy to deal with or move my money around when I need to change an investment will not earn extra points from a loyalty perspective. It’s not going to be why people leave you, but it’s also not a strong reason for consumers to stick with you.” 

Even then, if you start missing these core elements, consumers will start questioning your brand with scrutiny. Two of these elements are predictability and joy.

Can Tech-Enablement Drive Predictability and Joy in Financial Services? 

Yes, and tech-enablement is something many incumbents, challengers, and local banks are striving toward.

According to third-party research on the US banking industry, 75 percent of U.S. banks and credit unions have already started a digital transformation strategy, with another 15 percent planning to execute a strategy in 2022.

Many incumbents choose to advertise their services as “predictable and joyful.” What the research found is the messaging may say one thing, but the experience reflects otherwise. Consumers hear promises from incumbent banks without the real-world execution. This means consumers experience difficulty, or at least a lack of joy when using traditional finance services.

Challengers do this differently. They bring a smile to consumer faces with predictably intuitive user interfaces (UI) and enjoyable overall user experiences (UX). Challengers set the right tone and use language that makes consumers feel like they want to get in touch. Consumers look forward to interacting with challenger finance companies.

This reflects how challenger banks are successfully catering to the following consumer attitudes:

  • Forward-thinking
  • Innovative
  • Affordable
  • Empathetic
  • Uncomplicated
  • Dependable
  • Predicable
  • Joyful

What are the Three Big Recommendations for Finance Organizations?

Schlesinger Group and Apex concluded with three big recommendations, regardless of whether you are an incumbent, challenger, or local finance business.

1. Be Predictable by Saying What You Do and Doing What You Say

According to Bond, “Predictability is the number one thing people are looking for. Most banks are doing OK, but there’s still more they can do when they pick up the phone. They want to know what they can expect.”

Imagine a bank that says, “We are available 24/7, with friendly and fast service.”

Does the service actually run 24/7? What is the service uptime? Are there times when consumers cannot access your services? To become more predictable, banks should include a service level agreement (SLA) that defines what consumers can expect. Then, if marketing, customer services, or any other employee or department says they will do something, banks must ensure they follow through on their word.

To be friendly is to be pleasant and approachable while helping consumers. Do your agents follow this? What feedback are consumers sharing on their support experiences? If you say you are friendly, but consumer feedback says otherwise, this is unpredictable and a deterrent for consumers.

Finally, “fast” is an undefined term. Your personal definition of fast will differ from consumers. Define how “fast” you are within the previously mentioned SLA. Then, consumers know what they can expect — i.e., you are predictable.

2. Understand Consumers’ Emotional Expectations, Then Over-Deliver

Using a measure like the Apex Scoring System, all banks should aim to understand consumers’ emotional expectations. What will drive loyalty and attract new consumers is over-delivering on these emotional expectations.

If you say your services are available 24/7, make sure your IT team meets its defined uptime SLA as often as possible to show dependability and predictability. There are 10,080 minutes in a week, and every minute with downtime detracts from your claims. Notify consumers proactively when you cannot meet your claims to demonstrate that you are honest, authentic, and principled.

When you say you are friendly, live and breathe this claim across all consumer touchpoints. Build teams of empathetic and joyful employees that leave a positive effect on your customers.

Support your teams to deliver the best possible customer experiences (CX) and user experiences (UX) with supplementary market research. This provides actionable consumer insights that help you deliver more “friendly, authentic, and relatable” experiences.

3. Focus on the Little Things. Small Things Have the Biggest Impact.

This ties into making your financial services “forward-thinking and meaningful.”

Priorities are moving consumers’ money around, holding their funds in a secure environment, enabling payments with retailers. These are the basics the majority of finance organizations provide as standard.

  • What drives customer loyalty are the small things:
  • I can rely on my bank to provide friendly service.
  • I can trust my bank to let me know if my services are disrupted.
  • My bank remembers the problems I’ve had before and follows up.
  • My bank proactively works to resolve future issues without my input.
  • The process to send money is simple and repeatable.
  • I can make purchases everywhere I need to online without disruption.
  • I can verify purchases securely using my preferred method.

Loyalty is to banks what cultivating a field is to a farmer. It needs consistent tender loving care over long periods of time before roots form and shoots grow upward. The roots are loyalty, and the shoots are happy customers basking in your customer or user experience.

Consistency and commitment to cultivating the 16 attitudes found in the Apex model are what helps challenger banks to leapfrog incumbents and achieve repeatedly higher levels of consumer loyalty. You know what consumers need. Instead, dig into why they need your services, and cater to those needs to drive growth and satisfaction.

Question and Answer Session: What Do Webinar Viewers Want to Know?

Before concluding, let us briefly explore some questions from webinar participants.

What’s the One Thing We Can Do to Take Action on This, Starting Tomorrow?

Marc Whitehead, CEO at Apex Scoring System replied with:

That’s a great question, and one that we’ve been asked before. I was taught long ago that the best way to get someone to a new belief is to start with the old belief and hold their hand and move them toward the new belief.

One of the standard elements of banking relationships is Know Your Customer (KYC). This document summarizes the practical elements and behaviors of a particular customer. What is their financial situation? What are they looking for from their banking relationship? Is their mortgage due soon? Are loans due soon?

These kinds of practical things help in documenting a better understanding of the emotional drivers of that particular customer. Customers want empathy and dialogue, not a monologue from their finance provider. This puts the customer at the center of the conversation — customer-centricity.

Have You Had Any Success Connecting Transactional Customer Experience vs Relationship Customer Experience vs Business Results?

Whitehead responded with:

All the time. Basic behavioral science 101 will tell you that it’s the attitudes people have that drive their actions. So behavioral sciences believed in this idea for a long, long time. Most people in the commercial space have neglected to really dig into it, because they feel they don’t have as much influence as they would like to have in nurturing the attitudes that customers want to have with a relationship.

I can’t think of a case in any of the work that we’ve done, where:

  • An ability to understand the attitudes that are driving the actions that are underserved…
  • Paying attention to attitudes…
  • Increasing the ability of consumers to feel and believe in you in a positive way…

…did not result in positive transactional outcomes, which ultimately delivers the business results that you’re looking for.

We provide you with an opportunity to be able to map the two or three most important business metrics you have with your Apex score. This is so you can not only understand the correlations, but which is a leading or lagging indicator.

Do you need to build engagement before consumers enter your store? Or do you need someone to experience your store before you can tailor your engagement and experience to ultimately deliver the loyalty consumers are looking for?

Build Trust and Adopt Technology to Better Position Your Finance Organization with Schlesinger Group

Schlesinger Group understands consumer attitudes toward banks are shifting. In response, we recommend incumbents, challengers, and local banks conduct market research to improve their understanding of customer attitudes. Adopt a consumer insights strategy to become more customer-centric and increase loyalty among your target demographic.

If you have more questions about quantitative research, book a consultation with our team.