Global banks are making a sizeable comeback after surviving the 2008 financial crisis.
According to opens in a new windowBrand Finance’s opens in a new window2015 Global Brand Finance Banking 500 reportopens PDF file , the global banking industry is re-gaining momentum as the world’s top 500 bank brands are now worth $988.3 billion – a 5.7 per cent increase from last year.
Despite this increase in brand valuation, banks cannot afford to become complacent. Banks must opens in a new windowcontend with increasing competition, including from non-traditional players. Add to this a customer base that demands greater flexibility, diversity, and value in their retail banking solutions and banks have no option but to actively work on enhancing organic growth prospects and improving efficiencies to remain competitive.
Large retail banks have responded to the challenge of increasing competition by racing to build on their legacy systems in order to compete with the impressive pipeline of fintech players on the rise. Yet, in the midst of this digital revolution, successful banks must also invest in innovation of a different kind: customer loyalty.
Customer Loyalty: The Crucial Piece
According to a new study by Collinson Group, opens in a new windowretail banks have an opportunity to capitalize on affluent customer segments by rewarding and recognizing them as individuals. After all, traditional banks have a significant advantage over challenger banks and fintech disruptors: a large and generally loyal customer base.
Here, loyalty stems from the fact that most customers will stick with a bank they’ve been with for years – it would take a significant error on a bank’s part to tarnish that trust and move customers to look elsewhere.
However, for banks to truly be successful in an era of increasing competition, they must pro-actively engender customer loyalty by listening to what consumers want – and step up to the challenge.
In the Collinson Group study, nearly two thirds of the affluent middle class segment surveyed opens in a new windowexpected greater recognition from banks for their loyaltyopens PDF file . Here are some interesting statistics from the study that are worth considering:
- Customers who feel loyal to a bank are 72 percent more likely to purchase a banking product in the future
- Customers who are willing to purchase additional products through their bank are less willing to switch providers
- 70 percent of customers are prepared to recommend a banking brand to their friends and family
- Less than a third of U.K. retail banking customers believe they receive a high level of personal service
- Not being rewarded for loyalty is a significant frustration for customers, ahead of unnecessary fees and poor interest rates
Clearly, banks have a significant opportunity to re-align their retail banking services to respond to customer concerns.
So why haven’t banks leveraged loyalty as a key investment priority?
For one, there is a opens in a new windowsubstantial gap between how board members and senior management see key investment priorities. While senior management recognizes the importance of improving customer experiences in banking, boardroom discussions are often centred on margins and growth targets. While business goals are important, sustainable growth can only come from taking the long-term view of understanding and responding to customer demands.
Focusing banking strategies around long-term customer goals is one key way to shift the conversation. According to Christopher Evans, Director of the Collinson Group:
“The key … is for the financial-services industry to identify how they can deliver the same, or increased, level of loyalty to their customers while still protecting profits.”
Given the general level of dissatisfaction experienced by customers on the loyalty front, banks must move beyond account-based rewards alone to understanding – and delivering – more transparent, personalized packages to varying customer segments.
Fortunately, banks are well-placed to make this transition:
- Banks are well-entrenched when compared to their competitors, especially given that customers have been using traditional retail banking products for far longer than the offerings of challenger banks and non-traditional players.
- Banks have access to mammoth levels of data on customer transactions and behaviour – far more than their up-and-coming rivals – and are consequently better-placed to leverage this data into meaningful insights to boosting loyalty.
- Banks are well-structured when compared to their competitors and have the kind of monetary and human capital necessary to improve the customer experience.
As banks look to drive innovation, the ability to leverage loyalty will mark the difference between banks that push forward and those that remain behind. Ensuring loyalty is a boardroom discussion is the first step in helping to enable that kind of innovation.
Looking to find ways to foster loyalty in your banking customers? Get in touch with Zafin today!
Zafin (@zafin) is a leading financial technology provider that enables banks to form richer, more personalized client relationships. Built from the ground up for financial services, its platform empowers banks to enhance revenue and operational efficiency. Founded in 2002, Zafin sits among North America’s top FinTech companies, and is trusted by retail and corporate units at some of the largest banks worldwide. Headquartered in Toronto with global offices, Zafin has a proven track record with a 100 percent client retention rate as validation.
This blog post was written by Noushin Khushrushahi, Marketing Manager at Zafin. You can email her directly at opens in a new email@example.com create new email