Seamless Digital Experience The Key To Retaining Banking Customers As Tech Threat Looms

Bain & Company's tenth annual study on retail banking trends finds that banks continue to lose business to fintechs and single-line specialists--but stopping the leak is possible

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Bain & Company

Nov 18, 2019, 14:11 ET

NEW YORK, Nov. 18, 2019 /PRNewswire/ -- For the first time ever, Bain & Company has tracked banking customers' experiences and moments during specific transactions that that both irritate and please customers on digital platforms, using its proprietary NPS Prism benchmarking tool. In a new report, As Retail Banks Leak Value, Here's How to Stop It, released today, Bain reveals that retail banks are leaking customer business to competitor banks, fintechs and single-line specialists at alarming rates—but these losses are usually hidden as customers typically keep low-activity checking accounts with their primary banks. Established tech companies like Google are also entering the fray, further exacerbating the need for action from traditional banks.

Bain & Company's tenth annual study on retail banking, conducted in conjunction with Dynata, surveyed more than 131,000 consumers in 22 countries. The research found that digital channels are the preferred means of purchasing banking products, with the share of product purchases via digital channels rising by 2 to 16 percentage points from 2017, depending on country. Total purchases via digital were between 18 and 60 percent by country, with the UK leading the pack.

Customers, especially younger ones, mostly use these digital channels when buying certain products, such as a credit card, from a competing bank. These young customers are also more willing to try banking with tech companies such as Amazon or Google, with 75 percent of survey respondents ages 18 to 24 saying they would use a financial product from an established tech company. Tech is capitalizing on this consumer trust, with Google being the latest heavyweight to enter the banking fray after announcing they will begin offering checking accounts as soon as 2020. Established specialist companies, such as Rocket Mortgage (by Quicken Loans) or Discover, are capitalizing on this defection as well and aggressively investing in digital channels and processes, in many cases leading traditional banks in customer loyalty. With younger customers preferring these digital-first, and increasingly digital-only, experiences, retail banks need to improve their digital channels' interface and functionality in order to stay in the game.

"The outflow will only get worse for banks unless they significantly improve and digitalize the customer experience and supporting back office operational processes to drive down cost," said Gerard du Toit, a partner with Bain & Company and co-author of the report. "Developing a seamless digital experience that resolves a customer's need the first time around, without forcing them to resort to a phone call or branch visit, is key for any bank looking to stop leakage and retain customers."

Right-first-time digital episodes, or tasks that customers need to complete at a bank such as "apply for a new credit card," cost less and inspire more loyal customers, according to analysis from Bain & Company's NPS Prism. For example, the Net Promoter Score® (NPS) from a major US bank's customers who started and completed a credit card application on digital channels was 50. However, unnecessary human intervention can lead to longer completion times or introduce errors which frustrate customers. When customers who started the "apply for a credit card" episode on a digital channel were forced to switch over to a human channel the NPS dropped 42 points to 8.

Identifying particular moments that frustrate customers most will be key for banks as they prioritize their digital strategies. Bain's research suggests that while customers want digital-only episodes for simple transactions such as applying for a credit card or opening an account, they prefer human interaction around larger purchases, such as applying for a mortgage. Banks need to work to drive certain purchasers towards digital sales, while maintaining some human interactions for key moments in order to raise purchase confidence and completion.

"Reducing costs by directing more customers to digital channels frees up funds to reinvest in better products at competitive prices and better customer experiences across the board," said du Toit. "Improving customer experience with 'simple, digital, right-first-time operations' is the only way traditional banks will be able to stem the rising tide of defections."

Editor's Note: To arrange an interview, contact Dan Pinkney at [email protected] or +1 646 562 8102

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Media Contact:
Dan Pinkney
Bain & Company
Tel: +1 646 562 8102
[email protected]

SOURCE Bain & Company