How Building Digital Channels Improves Customer Experience For Retail Banks

Dan RowinskiDan Rowinski
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Retail banks must accelerate adoption of digital channels or risk consumers leaving them behind for financial technology upstarts.

“A strong correlation between positive customer experience and loyalty.”

Banks are having a “come to digital” moment.

Retail banks, those that primarily serve consumers, are beginning to accelerate adoption of digital channels like desktop and mobile banking. Why? Because bank customers expect their financial services to be everywhere and anywhere, all the time. The era of going to the bank and waiting in line is over.

Customer expectations drive the demand for great digital experiences. Banks all over the world have begun to realize that they must move into digital channels to attract and retain customers or risk being left behind.

Digital Channels Improve Banking Customer Experience

Retail banks and retail stores have much in common. The means of consumer interaction is becoming digital, replacing the need for robust, high overhead physical presences. And in the process of becoming digital, banks are actually increasing the customer experience of their clients.

The Netherlands is one of the most-banked places in the world. The Dutch have a long and venerable history of making and controlling financial markets, creating systems of stocks and bonds when other European powers still determined wealth by land ownership in the hands of the nobility.

And yet, Dutch banks were little better than middle of the pack when it came to customer experience in 2015, according to research firm Capgemini. According to Capgemini’s Customer Experience Index (CEI) in its World Retail Banking 2016 report, Dutch retail banks ranked 17th in the world (out of 32 countries in its survey) at customer experience.

Customer Experience Index Chart

In 2016, Dutch banks rose up to No. 2 in Capgemini’s CEI, despite actually closing hundreds of physical locations over the last several years. Capgemini says that the increase in customer experience in the Netherlands is a product of the rise of digital and mobile banking (in addition to increased access to credit and loans). The physical retail bank locations that are still open provide more specialized customer service tuned to the population in an area.

Most Dutch people are now banking primarily from their smartphones or tablets. The omnichannel has truly come to retail banks.

“Trends to downside branch networks and significant investments in digital channels are highly relevant and crucial in order to shape a sustainable business model,” wrote Stephan Linnenbank of Sia Partners on LinkedIn.

Driven by the adoption of digital banking channels, almost every region, except for Latin America, had an increase in customer experience on Capgemini’s index. That being said, younger generations—which are far more demanding of their digital products—had lower satisfaction levels from their banks.

In the North America, less than half (47.7%) of what Capgemini calls Gen Y (born between 1981 and 2000) reported a positive experience with their bank. About a third of Gen X (1961 to 1980) reported positive experience with their bank. The trend is the same around the world.

Positive Customer Experience for Gen Y, Gen X and other age group

Positive Experience Correlates To Profitable Behavior

Capgemini found that the higher the rate of customer experience, the more likely consumers are to engage in profitable behaviors.

Changes in Channel Experience and Usage

Capgemini states: > One way for banks to promote more profitable behaviors is to deliver positive customer experiences. While the industry has long purported that good experiences make for more loyal customers, solid evidence has been hard to come by. Our findings confirm a strong correlation between positive customer experience and loyalty, highlighting the need for banks to devote additional resources to improving all aspects of how customers interact with the bank. > > Simply put, positive experiences pay off in the form of retention and referrals. More than two-thirds of customers with positive experiences (67.8%) are likely to stay with their primary bank, compared to only 38.6% of those with negative ones.

That being said, improving customer experience faces diminishing returns when it comes to profitable behavior. While the overall customer experience index level for all regions increased by 2.9 points, customer loyalty (a customer stating that they will stay with the bank in the next six months) only rose 1.4% to 55.1%.

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