Why banks need to put the customer first
Putting customers first will win the race to lead the retail banking market in South Africa.
It has been hard to open a newspaper, recently, and not see a new survey or piece of research on the South African retail banking market. This is indicative of just how competitive the market is and of the challenges and opportunities facing banks in the country.
On one hand, the South African financial services sector is very mature. For example, South Africa ranks second in the world for the availability of financial services and third for the soundness of its banks in the World Competitiveness Index produced by the World Economic Forum.
On the other hand, South Africa still has nine million adults who are unbanked, according to Finscope. In 2013 alone, 3.5 million consumers were newly banked. This makes it a market ripe for growth but also a complex one, with banks having to cater for the highly financially literate through to those more used to putting their money under a mattress.
The opportunity lies in the fact that there is not (yet) one bank with total dominance in the market. The nine million unbanked adults are very much up for grabs and, as incomes grow, so will the number of financial services consumers want from their banks.
Good news for consumers
All of this is as good news for consumers as it is for the banks themselves. While one might assume that banks would focus most of their attention on attracting new consumers, in fact, they stand to gain just as much from ensuring they offer the best service to their existing customers.
EY’s 2014 Global Consumer Banking Survey, entitled Winning through customer experience,* found that the more satisfied a customer is, the more likely they are to recommend their bank to others. This is a fairly logical conclusion, but spells out to banks that they take their eye off their existing customers at their peril.
For instance, the survey found that satisfaction with problem resolution had the highest impact on the likelihood that a customer would recommend their bank to others, outstripping the impact of their satisfaction with the products they used or the benefits they derived from them.
The importance of trust
The trust that customers have in their bank was also found to be a strong determinant of advocacy. Sixty-eight percent of customers who expressed complete trust in their bank said they were very likely to recommend it to others, compared with just 20% of those who had only moderate trust in their bank. This is particularly relevant in South Africa, where newly banked customers may be generally wary of financial institutions. The second highest reason for having complete trust in their bank was: “The way I am treated,” showing how central customer experience is in building trust.
Not only does customer satisfaction and trust drive recommendations from existing customers to new ones, but EY’s survey also found that those who were very likely to recommend their bank are also more likely to open new accounts or services themselves – 44% had recently opened new accounts, compared with just 20% of those who were neutral or unlikely to recommend their bank. Furthermore, customer experience was a stronger determinant of customers opening or closing accounts than rates and fees.
How to focus on the customer experience
If all of this means that banks need to focus on offering the best customer experience in order to grow, how can they do this? The customer’s experience is largely determined by the people and systems that a customer deals with during interactions with their bank. This means banks need to get the right skills and systems in place to provide a seamless experience for their clients.
For instance, EY’s survey found that customers prefer electronic channels such as online or mobile banking for key transactions, balance inquiries and administrative matters. Yet, for sales and advice, the majority of customers still prefer to visit their branch. Among other things, this suggests that banks need to invest in adjusting the skills balance in their branches – having more sales and advice staff than tellers, for instance. As consumers become more savvy and willing to use multiple channels to interact with service providers, banks also need to ensure integration between these channels. If a customer logs a dispute through a call center, they want to be able to track the status of that dispute anywhere and anyhow, whether online or at their branch.
Not only is improving customer experience central to growth for banks, but it has recently become part of the country’s regulatory framework with the implementation of the Financial Services Board (FSB) “Treating Customers Fairly” approach.** It includes provisions to ensure customers receive accurate and complete information during sales, that customers are sold services appropriate to their needs and that customers do not face unreasonable barriers to changing products or service providers. Failing to meet these requirements will therefore mean a double penalty for banks – a potential fine from the FSB and, arguably more damaging in the long run, losing out to competitors in the race to lead the South African banking market.
* Winning through customer experience: EY Global Consumer Banking Survey 2014, EY, 2014, ey.com/Publication/vwLUAssets/EY_-_Global_Consumer_Banking_Survey_2014/$FILE/EY-Global-Consumer-Banking-Survey-2014.pdf, accessed November 2014.
** FSB website, www.fsb.co.za/feedback/Pages/tcfhome.aspx, accessed November 2014.
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