J.D. Power's Jim Miller Describes How Retail Banks Can Drive Digital Banking Customer Engagement By Improving Customer Experience
The banking industry has been rapidly transformed by the rise of online and mobile banking. Digital customers, for a growing number of financial institutions now represent the lionís share new revenues, creating new opportunities to streamline operations and offer new services. However, according to an upcoming J.D. Power Retail Banking Satisfaction Study there appears to be a gap between the expectations of digital customers, and the service that they are actually receiving. We had the opportunity to sit down with Jim Miller, Vice President of the Banking and Credit Card Practice for J.D. Power, to get his views and insights based on the information his team gathered from 90,000 banked U.S. consumers about their digital experiences with retail banks.
Here is what he had to say:
Q: So, Jim let's start by talking about what is different today about engaging with digital banking customers versus traditional in-branch customers. What have you seen in this evolution within these two different channels?
Miller: The key difference we see is that todayís digital banking customers have ever increasing expectations of their banks. In comparison to customers who still transact through physical channels, our data shows that the digital banking customers have higher expectations for the communication and the product information they receive from their banks. They want it to be relevant, consistent and tailored to their needs.
The evidence in our data strongly shows that these expectations are quite different within the digital segment of customers compared to those who transact primarily through branch channels.
Q: What is the contributing factor to this high level of expectation on the digital front?
Miller: Part of it is that consumer expectations across the digital frontier have expanded markedly. The other is that some types of digital engagement are actually fun, but banking doesnít have that luxury to indulge too much in this option because institutions operate in a highly regulated environments.
For this reason, banking is at a disadvantage compared to other industries. But that does not excuse a lack of account awareness that is expected by digital customers.
Our findings show that -- from the opening of an online account and the start of the relationship -- many digital banking customers believe that they receive product recommendations before the bank has gotten to know them. This situation snowballs, leading to low levels of customer satisfaction and customer engagement.
Q: What are the consequences then of retail banking executives ignoring these new expectations?
Miller: We see that these digital centric banking customers have lower levels of engagement because they feel they havenít received communication thatís tailored and is relevant to their needs. As a result a few things happen.
We see lower customer satisfaction rates, we see a lower likelihood to repurchase from the bank and a lower propensity to recommend their bank to colleagues and friends and family members. Finally, and perhaps most tragically, we do see higher likelihoods of attrition.
In many ways, this is a byproduct of what I call the self-service dilemma.
Banks over the years have encouraged customers to move into self-service banking channels because theyíre less expensive. Itís more cost effective for customers to do things online rather than visit a branch or speak with somebody in a call center. However, the consequence is that opportunities for banks to provide advice and solve problems with a personal touch have been reduced.
Q: You really have to think across a variety of levels in terms of how you deal with customers in the digital realm. What are the key drivers of satisfaction as well as dissatisfaction in that digital retail environment?
Miller: I believe that what really lies beneath this issue is that retail banking customers, particularly those who are heavily online -- and who do tend to be younger -- would really like to get more help in gaining control over their finances.
Our data shows this time and time again. Yes, customers want their banks to get the basics right, and increasingly they want their banks to provide more value with the information they provide. Customers increasingly want their banking information to help them save time and money and make better decisions to gain greater control over their finances.
Our data also reveals that digital banking customers want digital tools and information to provide reminders that help them pay bills on time or warnings when they might be running out of money prior to a paycheck.
We see that these are the most demanded types of information from these younger digital customers and it really comes down to quick tips and information and tools to help them better manage and gain control over their finances.
Q: So, as you engage with executives in the industry, what are you advising them or what are the things that can be done to improve that engagement?
Miller: There are a few really critical elements: it's about having the right data, clean data, and good data.
That's a whole issue by itself.
A second element revolves around targeting the right customer segments.
When you get into a topic about engaging digital customers, it is important to really recognize that one segment of customers will be very different from another.
Beyond these elements, we see two or three other important points.
* One is identifying the right financial needs. Banks sit on a tremendous amount of information about their customers, and their customer know it. It is often a point of frustration for retail banking customers banks send customers irrelevant information; customers are left wondering why they are receiving information about products or services that are not pertinent to them. Identifying the right needs is important -- and more often than not -- these are linked to key life stages and life events.
* The next critical element for banks is identifying the right frequency and methods of delivery for this information. Our study reveals that most customers want to receive proactive communication from their banks on a quarterly basis. They want to get advice, they want to receive information about products and services so, there's the right frequency and then the right methods of delivery. One of the interesting things that's come out of our study recently is that nearly 60 percent of customers surveyed say that they want to receive advice and guidance from their banks through a digital channel whether online, through the app or email. Only 12 percent of them are receiving information through the channels that they would prefer. The final critical element is simply delivering the right message and this is where banks often fall down by failing to provide relevant and tailored information. This is due to the misalignment and inaccurate implementation of all the elements that I just described which come before the messaging stage.
Q: Very interesting. Well these insights of course are the byproduct of a pretty broad outreach that you've made to banking customers across the region, across North America. How can banking institutions better leverage J.D. Power's Voice of Customer insights to support more effective customer engagement in their operations?
Miller: We like to think about this in a couple of ways, first of all we advise banks to think about this in terms of providing customer service, customer experience and then truly becoming customer centric. We believe that our data can help banks on all of these fronts.
J.D. Power provides metrics, KPIs, and a whole range of data that can let a bank know how it's doing in the day-to-day interaction with customers -- including interactions via mobile apps, branches, contact centers. We measure critical elements -- such as problem resolution rates and other information that people on the front line need to manage employees and to change employee behaviors when necessary to make sure service is being delivered effectively.
J.D. Power also works with banks to develop a much broader view of the customer experience, so that executives can see how their banks performs versus the competition.
These two pieces are critical and provide the basis for changing a bankís culture and management philosophy -- if it is necessary.
Q: What are some low hanging fruits of opportunity that exists for a banking institution that pay attention early and often to this evolving customer experience opportunity?
Miller: Problem prevention and resolution is the first low hanging fruit. Our metrics tell such a clear story: if customers have problems and if those problems are not resolved, dissatisfaction rates go up, customer attrition goes up and the expense of serving that customer goes up.
So, every bank out there needs to have very disciplined processes for problem prevention and resolving problems as quickly as possible when they occur.
The second critical metric is attrition. Itís about knowing your customer attrition and where it's coming from. Our data and every piece of internal operational data I've seen from a bank clearly indicates that as customer dissatisfaction rises so does attrition.
Customers who are less satisfied will move their business somewhere else. They will purchase less from a brand or they may stay with a brand but they won't really engage anymore.
Q: Tell us about the methodology of the report and what we can do and how people can access and benefit from the intelligence and insights that you're bringing to market.
Miller: JD Power's Retail Banking Satisfaction Study collects customer feedback every quarter and during year information from 90,000 US consumers about their experiences with their primary retail bank.
Our questionnaire is designed to capture this information from the two hundred largest banks in this country.
Whether an institution is a smaller regional bank -- or one of the largest banks in the country -- there is a robust set of information in this report that will help executives understand where their institution sits with customers and what customers think of the experience they are receiving. Most importantly, the benchmarks to the various competitive sets and categories.
A bank can go into our online reporting platform and run reports by customer segment, by geography, by combinations of product ownership, etc.
The information found in our study helps a management team take the guesswork out of the customer experience and make decisions based upon real metrics.