Capgemini and Efma released their annual World Retail Banking Report. The 11th annual report shows that banks are still facing many challenges to retain and make new customers. Valentina Romeo looks closer at the new findings.

The 2014 World Retail Banking report (WRBR) doesn’t start with a very comforting statement. It says retail banks around the world are seeing a significant downshift in their level of customer satisfaction. For the first time in three years, retail banking customers reported fewer positive customer experiences, a clear sign that banks could be losing their customers and profitability.

The WRBR, the 11th annual survey from Capgemini and Esma, looks closely at behaviors and preferences of retail banking customers around the world and reveals the priority areas banks should focus on in order to remain competitive in the years ahead.

According to Capegemini’s Customer Experience Index (CEI), a measure of customer attitudes, standards and expectations, the percentage of customer reporting positive experience in the retail banking industry worldwide has decreased from 41.6% in 2013 to 39.5% in 2014.

Along with this drop, and despite a solid gain registered in 2013, the CEI itself declined from 73.5% to 72.9% in 2014.

"The positive customer experience is one of the key differentiators when analysing the retail banking industry," Jean Lassignardie, chief sales and marketing officer, Capgemini Financial Services Global Business Unit tells RBI.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

"[The negative figure] is the first and a bit surprising takeaway of this report. This year there is a negative trend which is pretty significant as in many countries there is more than 25% decrease in positive customer experience overall. This is a major and a true call for action to customers and bankers," he says.

Geographically, the report says the declines in positive customer experience were most significant in the Middle East and Africa (MEA), followed by Asia-Pacific (APAC) and Western Europe.

On a good note, Latin America experienced the highest percentage (1.7%) of positive customer experience.

Alarmingly, the report shows that over one-quarter of the 32 countries in the WRBR’s Voice of the Customer survey decreased of more than 10% in the share of customers with positive experiences, a major reversal from 2013 when increases of more than 20% were prevalent.

Positive experiences enhance profitability

The industry’s ability to reverse the drop in positive customer experiences is crucial given the powerful effect positive experiences have on various behaviours that drive profitability, says the report.

This year, for the first time, the WRBR measured the impact of positive experiences on a number of behaviours linked to increased profits. Specifically, it found that customers with positive experiences are more than three times more likely to stay with their bank than those who have negative ones. Customers with positive experiences are also three to five times more likely to refer others and purchase another product.

In APAC, for example, twice as many customers with positive experiences say they would purchase more from their bank compared
Compared to 2013, there has been quite a consistency in the positive experience rankings by country.

-As in 2013, Canada remains at the top of the ranking reaching 60% (though down from 82% one year ago) followed by the US with 54.5%.

– Czech Republic was a new addition to the top 10 ranking, jumping from 14th place to 3rd, mostly because of its improvements in how customers experiences the mortgage process.

Interestingly, some top-ranked countries in 2013 disappeared from the top 10 country ranks this year, according to the report’s latest findings. For instance, Switzerland, which appeared in 3rd position in the customer experience index in 2013, didn’t show up in the 2014 top 10. Lassignardie warns that a massive shift in the rankings undoubtedly represents another wake-up call for the leading institutions of a number of countries.

The report also says the decline in positive customer experience globally might reflect an inflection point in the expectations customers have of their banks and the types of experiences that result:

  • The growing influence of Generation Y is an important factor, and
  • Heightened customer expectations caused by increased adoption of digital tools and advances from non-bank competitors are also factors.

Moreover, the report stresses on the fact that channel preferences played a leading role in driving a positive customer experience. Customers showed a willingness to use alternative channels over more traditional ones. However, compared to 2013, a slight decrease has been experienced in mobile, phone and internet channels, while the branch saw the largest decrease in positive experience, followed by ATM.

Gen Y will shape the future of digital banking

This years’ downshift underscores the challenges banks are facing when meeting the evolving demands and high expectations of digitally-savvy Generation Y (Gen Y) customers.

With Gen Y comprising one-quarter to one-third of the population in many markets, its attitudes and preferences are highly influential. This group’s expectations of how banks should serve their customers, particularly via digital platforms, are significantly higher than those of the general population thanks to their prolific and sophisticated use of technology.

"The decrease in the percent of customers reporting positive experiences signals an early warning alert for the industry," says Lassignardie. "To reverse the troubling decline in positive experiences, banks need to fully understand evolving customer preferences and the expectations of ‘Gen Yers’, who are driving current and future demands in banking and its digital transformation."

The report found that Gen Yers are considerably less likely to have positive experiences with their banks:

  • In North America, the difference is particularly stark, with only 41.7% of those between 18 and 34 years citing positive experiences, compared to 63.4% of those of other ages;
  • In other regions, positive experiences for Gen Y lag those of other age groups by anywhere from 7% to nearly 10%;
  • Banks need to fully embrace digital transformation to meet the high expectations of this generation, but also need to provide high-quality baseline services to ensure positive experiences for customers across of all ages across all channels, and
  • Banks also need to keep up with non-bank competitors when it comes to digital innovation. The report says banks need to be quicker in catching the latest trends in the market or they will likely lose out. One way, the report suggests, will be effectively leveraging customer data, a value that most banks don’t see.

Lassignardie explains: "When you talk about customer experience, what it is important to understand is that it is measuring the gap or the absence of gap between customer expectation and real experience.

"Expectations, context and environments have evolved. The technology disruption impacting on digital channels is now accelerating and growing faster than the banks’ programs in place."

Back to basis?

According to the report, it is necessary for banks to keep delivering on the basics of their offering, including fair pricing, broad product sets, and dependable services.

Fees and prices, for example, are the number-one driver in most regions and remain a priority for customers seeking new banks.
Also, customers indicated that the products being offered by banks are just as important as in the past.

However, even if checking and saving accounts, mortgages and credit cards are still the core demands, the level of positive experience with each product has considerably declined. Not surprisingly, in the payment area, customers are opting for more alternative methods, like mobile and internet payments, as bankcard fees in some markets have gone up.

As positive customer experience also declined for banking information gathering, the report suggests banks must urgently improve their execution of basic banking tasks.

The power of social media

When it comes to leveraging data, social media happens to be banks’ best friend.

Almost 89% of bank customers surveyed now have a social media account, indicating significant new opportunities for banks in this area. In addition, more than 10% of customers say they already use social media at least once a week to interact with their bank.

"Social media creates a new environment and it is an imperative for reinvention, not just evolution," Lassignardie says.

However, the WBRB says there’s currently a gap between how customers would like to interact with their bank via social media and the services banks provide. For example, customers rank access to account information via social media as important but less than 1% of them currently receive that functionality.

Critically, more than half of the interviewed banks (58%) said they would not offer access to account information via social media and almost half (42%) said they would not offer transaction services.

Simon Short, head of Capgemini’s recently launched Digital Customer Experience Global Service Line comments: "We know that today’s end-users expect seamless interactions via multiple channels with faster, almost instantaneous responses. The findings in this year’s WRBR demonstrate that retail banks need to be more agile, innovative, social, and mobile in order to create a more meaningful experience to engage their Generation Y customer base."

The WRBR says among the reasons why banks are slow in adopting social media as a transaction tool, there also is the lack of clarity on regulations governing it. The main concern remains privacy protection, so governance and compliance groups must set up properly articulated rules in order to avoid any data breaches and improper data usage, the WRBR states.

In addition, the report stresses on the urgency for banks to reshape their social media strategy, being aware that this needs to be constantly monitored and updated.

"Banks are no longer a branch or a place where customers go, but a collection of services that take place, anywhere, anytime," says Patrick Desmarès, secretary general, Efma.

To carry out a pro-active social media strategy, banks are pursuing various initiatives, despite the multiple challenges surrounding the channel. For instance, the report says banks will need a multi-layered infrastructure to include appropriate platforms to develop and host apps, big data analytics, dedicated support staff, governance mechanism, and enhanced safety and security of customer data.

As the WBRB concludes, several banks are actively engaging their customers through social media, but to guarantee a solid competition with new non-bank players, ‘the industry as a whole’ has still much more to do.