By Mark Gibson
For decades, banks have encouraged and incented customers to use digital channels. The good news: nearly half of U.S. banking customers are now “digital-centric,” meaning they predominantly use online or mobile channels. The bad news: digital folks are less satisfied than customers who use branches more frequently. And perhaps even worse: they are far less valuable than branch-based customers.
These and other findings from the latest J.D. Power 2018 Retail Banking Satisfaction Study may send the digital strategists at many banks back to the drawing board.
Paul McAdam, senior director of the banking practice at J.D. Power, says, “There is no doubt that digital banking channels give banks an enormous opportunity to reduce costs, but the risk is that those cost savings come with lower levels of customer engagement.”
Specifically, the J.D. Power study found that 41 percent of retail bank customers are now digitally centric. Those are customers who “use digital banking channels exclusively or only use bank branches very infrequently.” According to the study, these digital-centric customers pose new challenges for bank management.
Because although customer satisfaction increases when branch-dependent customers supplement that interaction with digital channels, satisfaction levels decrease when customers fully disengage from the branch, relying solely on digital banking.
On top of that, digital-centric customers generate less revenue for banks than their branch-dependent counterparts.
Why are digital-centric clients less satisfied?
The J.D. Power study suggests it’s attributable to three factors:
- New Account Opening – Digital centric customers are much more likely to have opened up an account using an online or mobile application, and are therefore less likely to feel that a bank employee identified their needs prior to offering a product.
- Products and Fees – These customers are less likely to understand the features and benefits of the product they purchased, less likely to understand the fee structure, and more sensitive to monthly service, NSF, and ATM fees.
- Communication and Advice – This group is less likely to recall receiving advice from the bank regarding relevant products and services, and less likely to believe the information received was tailored to meet their needs.
On an intuitive level, this all makes sense. Without any human assistance, digital-centric customers are trying to figure out which product is right for them—and using an often less-than-ideal online account opening application. They’re making decisions without personal feedback on the features and benefits of the account, the fees associated with it, or how to use it to get the most value from it. Finally, no one is there to assess the customer’s broader financial situation and recommend other products and services to meet those needs.
Reliability and availability of online banking can also negatively impact satisfaction. A branch is nearly always open when it’s supposed to be. However, according to the study, 25% of study participants have found the bank’s website inaccessible in the past 12 months when they needed to use it.
Why are digital-centric customers less valuable?
As customers move to digital channels, they lose physical contact with bankers. And bankers, in turn, lose the ability to identify changing needs, provide advice, and sell additional products.
Imagine a new customer joining a bank through a digital interface.
Rather than meeting with a banker to discuss priorities, the reason for changing banks, the purpose of the account, and other potential needs, the customer goes to the website, reviews brief descriptions of the products, selects one, and buys it.
Depending on the online application, the cross-sell of debit card, checks and savings accounts may not occur. Even worse, onboarding might not include enrollment for online banking, direct deposit, and mobile banking. Related products like loans and investments are almost never introduced. These shortcomings translate into a situation where a customer’s needs are not fully met during the initial account opening session, and occur in a haphazard manner after that.
A paltry digital onboarding process can explain a significant portion of customer dissatisfaction, as the next chart shows.
Incidence of Onboarding Follow-Up and Customer Satisfaction after Account Opening
Onboarding should occur quickly, and it should consist of multiple touches to accomplish a variety of objectives (Is the customer in the right product? Has the customer signed up and using various services? Is the customer satisfied with our service?).
When those items are neglected, it’s no wonder clients are less satisfied, provide lower revenue to the bank, and have less commitment and engagement to stay with the brand.
What it all means.
The J.D. Power study isn’t the first to highlight that personal interaction with a banker adds value to a client relationship. But it does introduce some new evidence that bankers need to find the right balance of digital capability and human intervention if they want to continue attracting new customers and growing revenue.
The study reinforces the notion that digital leadership can be a double-edged sword. Banks with robust digital offerings, are benefiting from reduced branch costs and enhanced efficiency. But those same banks may find themselves with a large group of digital-centric customers who are less satisfied and less likely to purchase a full range of products.
While the shift of customers to digital channels is as inevitable as the tides, banks can benefit from taking the time to “do digital right.”
For banks of all sizes, there are five important to-do’s from this study:
- Continue to invest in digital channels. Customers love them and they are much more efficient. Push your service providers for more functionality and a better UX. Find ways to effectively communicate what you have and encourage customer adoption.
- Improve the online account opening process. Specifically, use chat or other methods to introduce the human element into the needs assessment and product selection process. Make sure your online account opening process is as customer friendly as it possibly can be. Hint—don’t require the mailing in of a “wet signature.”
- Develop more effective onboarding of new digital clients. Explain what they purchased, how to use it, how much it costs, and what accompanying products and services might be helpful.
- Introduce the human element into the digital-centric relationship. Figure out how to make personal contact on an ongoing basis to increase engagement and emotional connection. Umpqua’s Best Financial Friend (BFF) is a great prototype to learn from.
- Use data analytics and a multi-channel approach. This will help you understand each digital customer’s unique situation and financial needs, and offer up content and advice on a regular basis, using the “human touch” of a digital banker or BFF.
The critical take-away for banks is that digital channels are an attractive choice for consumers, but are not a replacement for a personal banking relationship. For those institutions that offer the right blend of digital convenience and skillful personal attention, customers will continue to beat a path to your door.
Mark Gibson is senior consultant at Capital Performance Group, a strategic consulting firm that provides advisory, planning, analytic, and project management services to the financial services industry. Email: [email protected]. LinkedIn.