digital banking customer 3.0: “what changed in the satisfaction and loyalty in the era of...

10
What Changed in the Satisfaction and Loyalty in the Era of Disruptive Innovation Digital Banking Customer 3.0 By Fabio Mittelstaedt July 2016

Upload: fabio-mittelstaedt

Post on 07-Apr-2017

113 views

Category:

Business


2 download

TRANSCRIPT

Page 1: Digital Banking Customer 3.0: “What Changed in the Satisfaction and Loyalty in the Era of Disruptive Innovation”

What Changed in the Satisfaction and Loyalty in the Era of Disruptive Innovation

Digital Banking Customer 3.0

By Fabio Mittelstaedt

July 2016

Page 2: Digital Banking Customer 3.0: “What Changed in the Satisfaction and Loyalty in the Era of Disruptive Innovation”

Point of View - 2

Digital Banking Customer 3.0

38% of Brazilians consider to use services from other Banks or Fintech Startups

ince the origin of banks similar to the current format, which accept deposits and pay interest, which emerged

from 1300, the consumer has faced the competition factor.

At this time in Italy traditional banking families like the Medici, Bardi and Pe-ruzzi competed for consumers offering attractive services, customer service and confidence in saving money.

Hundreds of years later, this scenario has not changed much. In Brazil about 1 in 4, or 24% of consumers believe that their banks have offers commodity products and services without major differentia-tions, according to research from Global Consumer Survey that Accenture held in 27 countries. Still in Brazil 38% are

considering search and use services of other banks or Fintech Startups in search of better services and prices. And needless to exchange bank for this, 31% of Brazilians have done what we call partial abandonment of the main bank, that is, begin to experience

the services of other banks or Fintech Startups to decide whether to migrate or not. In neighboring Argentina the rate of experiencing other Financial Ser-vices Providers is almost equal (50%). This number is also similar to Spain with 30% partial exchange and 14% of total main bank exchange (total of 44% of

part exchange + total), strongly driven by the crisis of confidence in Europe The highest incidences of so-called par-tial exchange of the Bank are in India

S

“With the lowest global satisfaction index, Brazilians shift torwards new Banks and Fintech Startups, looking for simple and effective servi-ces based on digital channels and with lower fees.”

Page 3: Digital Banking Customer 3.0: “What Changed in the Satisfaction and Loyalty in the Era of Disruptive Innovation”

Point of View - 3

“The new Banking Customer has a fragmented vision about services, they want smart apps, specialized in one single service, with a intuitive user experience that fit to the context of daily needs in a natural way:”

with 37% and Mexico with 36%. Japan has the lowest Global index, with 7% only of total abandonment of the main bank and 10% partial abandonment. Chi-na is the one that has higher incidence of complete exchange bank with 34%.

In conclusion, it is perceived in Brazil and the world a strong trend of customers looking for alternative financial services provders.

The intention to seek other providers or change brands, whose overall average in the financial industry is 27%, is however not the largest in the market.

Industries such as Mobile with 31% and Consumer Electronics products with 48% are the most affected, with the provider exchange champion who is the travel and tourism industry with 51%.

Page 4: Digital Banking Customer 3.0: “What Changed in the Satisfaction and Loyalty in the Era of Disruptive Innovation”

Point of View - 4

Digital Banking Customer 3.0

The New Patterns of Banking Customer BehaviorBut what leads consumers to take on this new pattern of behavior? One of the key factors is the search for higher quality care services. This demonstrates the need to take a closer look at the full consumer experience, either through an easy digital self-service channel to use, is in interaction with a branch mana-ger or a call center operator, where he most wait is that these professionals have good skills and knowledge and, especially, understand their needs and quickly resolve their requests, with transparent tariff schedules and costs. All this reflects a greater confidence. Sure, in the new days of smart technolo-gy, it does not matter if it is a video call with your Bank Manager or an Artificial Intelligence solution with cognitive learning.

In Brazil this perception of trust is the most valued factor by 31% of consumers. As the expectation of quality service, the most demanding in the world are Canada (57%), USA (51%) and Mexico (52%). In Brazil only 23% consider cus-tomer care the most important factor, but here there is a counterpoint to 55% of the poor quality of service is the main Brazilian total abandonment factor of the main Bank. Already prices and banking fees are not what bothers the Brazilians. Only 19% say that they will keep the account in a bank due to competitive prices.

Digital & Mobile Banking adoption accellerateThe Brazilian is in an expansion stage of banking and has surpassed 160 million accounts (considering full accounts and the new digital accounts offered by tra-dional Banks and Fintech Startups), with average banked population oscilating from 80% to 90% of Banked population, depending on the survey methodology.

Each CPF (Brazilian Personal ID Number) has between 2 to 3 accounts on average, but in the class C checking account ownership rate still fluctuates between 70% and 80% and in classes D / E is close to 55%. But despite of having or not a checking account, com-monly all social clas-ses in Brazil consume new products and services by paying with credit and debit cards (linked to the bank account or not) that have surpassed 225 million cards in Brazil, plus around 75 million of pre-paid

German Mobile App S-Banking: MultiBank, allow the customer to manage multiple accounts, in-vestments, insurance and credit cards and makes graphical analysis by type of expenditure, one hand on the wheel to control personal finances. It has similarities with the Brazilian GuiaBolso App.

cards that grew a lot in Brazil, increasing the financial inclusion. But having or not a card, the main point here is the trend of increase of the channel of payment as to-day in Brazil almost 60% of all payments are done on digital channels like mobile and web.

Another point that is pushing level of banked people in Brazil is the higher offer o f new products for low income population. Before the current economic crisis we had at least 3 or 4 years, begin-ning in 2010, when credit, personal loan and financing of home and auto was faci-litated, creating a boom of consumption of the C, D, E. So a point that Brazilian consumers highly values is the range of products and services, in the opinion of 26% . And it is estimated that the volume of consumers using Fintech services in Brazil is higher than 30%, and most part of them are banked, what shows the high potential of Fintech in Brazil, when the unbanked population start using more these innovative services that commonly do not demand to open a checking ac-count and do notover-analyze customers with thousands of information to start using a mobile service. The only missing point here is that Fintech Services for people with bad credit, especially in the lower social classes, still is a important gap, and also a huge business poten-tial, since great part of this people have

Page 5: Digital Banking Customer 3.0: “What Changed in the Satisfaction and Loyalty in the Era of Disruptive Innovation”

Point of View - 5

money to expend. And I am not sayng just the opportunity of pre-paid cards potential, but new business models that go over the standard risk analytics model and use other factors more based on social behavior and future lifetime value.

“The changes in the behavior of the Banking Customer

are not only linked with digital, we need to understand

the root causes. The brutal truth is that nothing bother

so much the Brazilians as unfulfilled promises and not

understand banking fees.”

1%

3%

6%

10%

10%

10%

13%

16%

16%

16%

26%

35%

35%

55%

0 0.1 0.2 0.3 0.4 0.5 0.6

BANKDONOTHAVESUSTAINABILITYACTIONS

TRUSTINTHEBANKFALLING

LACKOFCOMMUNICATIONABOUTPRICES&FEES

INNOVATIONACTIONSDONOTATTENDMYNEEDS

QUESTIONABLEQUALITYOFPRODUCTSANDSERVICES

GAPSONPORTFOLIOOFPRODUCTS&SERVICES

LOWTRAININGOFCUSTORMERSERVICEPROFESSIONALS

NOBANKINITIATIVESFORCUSTOMERS'ENGAGEMENT

LOWCOSTXBENEFIT

WRONGLYCHARGEDSERVICEIHAVEN'TASKEDFOR

HIGHPRICESORNOTRANSPARENTSERVICEFEES

LACKOFPERSONALIZATIONONSERVICES&INTERACTIONS

DIFFICULT&BUREAUCRACYTODOBUSINESSWITHBANKS

BADCUSTOMERSERVICEEXPERIENCE

MajorOffendersofBrazilianBankingCustomers'Satisfaction

Page 6: Digital Banking Customer 3.0: “What Changed in the Satisfaction and Loyalty in the Era of Disruptive Innovation”

Point of View - 6

Digital Banking Customer 3.0

In mature countries like Japan, the banking portfolio is relevant only for 4% of the population. The Japanese value the speed and ease of doing business (17%) and many give little importance to issues such as cost-benefit ratio (7%) and price (5%). Part of it is explained by the fact that the Japanese are one of the people with the highest rate of use of self-service channels.

According to data from Goo Research and the Global Mobile Statistics, 65% of Japanese often use the Internet Banking as the preferred channel and 45% of the population has experienced Mo-bile Banking applications. In Japan we have about 121 million mobile phone users for a population of 128 million (95% of the population). Speed, productivity and reliability are the key words for the Japanese.

This gives an idea of the potential that Mobile Banking has to increase banking services in Brazil. In Brazil we have 257 million mobile plans for 200 million people, 128% or 1.3 cell per capita.

And among these cell phones, 168 million are smartphones connected to the internet. In Brazil we have more than 55 million consumers who use Internet Banking and Mo-bile Banking users already exceeded 33 million.

The sale of tablets in Brazil will also have an important role. More than 4 million consumers are expected to buy a tablet/iPad by 2016, and many should start coming with embedded banking applications due to agree-ments with telecom operators. “But tablets sales are still struggling due to the “appreciation of the dollar and competition with larger screens of smartphones”, said Peter Hagge, IDC.

“In Global average there are signs of Banks’ recovery in the

requirements of satisfaction and trust, where USA & Europe

(even after BREXIT) have the most weight, but emerging

markets like Brazil also have a

light in the end of the tunel”

Page 7: Digital Banking Customer 3.0: “What Changed in the Satisfaction and Loyalty in the Era of Disruptive Innovation”

Point of View - 7

Loyalty and Satisfaction, the weak link in the Banking Value chainAmong the 27 countries sur-veyed, Brazil has the highest rate of consumers dissatis-fied with their banks, with 19%, the global average is 11%. And why is that?

What generates this dissa-tisfaction of the Brazilian with their banks? 4 factors summarize this: bad service experience (55%), hard to do business with banks (35%), low personalization of service experience (35%), high prices and low trans-parency on banking fees (26%).

“Argentineans, Brazilians and Turks are the consumers who give more weight to a negative experience in any channel, when deciding to leave the main bank.”

Page 8: Digital Banking Customer 3.0: “What Changed in the Satisfaction and Loyalty in the Era of Disruptive Innovation”

Point of View - 8

Digital Banking Customer 3.0

Only 30% are satisfied with their banks in Brazil.

Assessing the world situation show the following Countries where there is grea-ter or lesser satisfaction of consumers with their banks, but assessing the avera-ge Global news is positive. The global of dissatisfied consumers with their banks is 13%. And the average global overall satisfaction with banks is 37%. Among the most dissatisfied globally, the vast majority are in the European continent, Spain and Ireland with 18%, England (15%), Turkey (14%) and Italy (13%). In Asia the highlight of dissatisfaction is Japan (16%). And we can also mention Australia, where 14% are totally dissatis-fied with their banks.

The most satisfied with their banks are consumers in Canada (56%), Mexico (52%), USA (48%), Germany (47%) and Argentina (46%).

The bad experience in customer care has the greatest overall weight in the opinion of the Argentinean Banking Customer: 60% impact on the decision to leave the main bank. In Germany, one explanation is that the Germans are globally consu-mers who perceive more clearly the di-fference in goods and services between the banks (47%), typical German Banking Customers are highly critical to choose and maintain their account in a bank.

Another major current paradigm of the financial industry is the not always linear correlation between satisfaction and loyalty. After all, the satisfied customer is more loyal to a specific bank? Not always. In Brazil, while 30% say they are fully satisfied with their banks, only 27% claim to be loyal and 19% have no loyalty.

But there are major gaps between satis-faction and loyalty. In Germany this gap reaches 15%, meaning that while 47% are satisfied, only 32% say they are loyal to their banks. In England this gap is 10%, with 32% of consumers satisfied with their banks and 22% loyal.

“Loyalty is not a comfortable situation in the financial services industry, and even customers who say that are satisfied, can migrate at any time to the competition, this can come from any Indus-try. Fintech players are not the only challengers.”

Page 9: Digital Banking Customer 3.0: “What Changed in the Satisfaction and Loyalty in the Era of Disruptive Innovation”

Point of View - 9

The lower ratio between satisfaction and loyalty in the world appears in Japan, while only 14% are satisfied, an even smaller population is loyal (10%) and the Bank’s recommendation rate is also the lowest in the world with 7%. The concept of loyalty was put in check in the finan-cial industry. The loyalty programs still have a strong membership adoption rate, on average 31%. But this means a greater loyalty to the Bank? Industries such as Mobile (34%) and retailers (53%) have greater adherence to these programs and, at the same time, are sectors where the change of provider and portability are extremely frequent.

channels. That is, here is the opportunity to alert marketers to stimulate these feedback channels and relationship with the customer.

Stay with my bank or not, that is the questionUntil a few years ago it was considered a complex movement to close the account in a bank and open an account at a new bank. Today, globally, opinions are divided. 30% do not consider that hard to change the main bank, some even open a new account at Bank and do not close the previous account. And 28% still

believe that gives a tremendous job close an account in a bank. In Brazil 27% find it easy to close the account with the Bank and 35% difficult.

But the question is if it is not useless to change from one bank to another. Not always, but it is a right to be exercised. In open economy markets, the most power-ful tool of the consumer and that also im-

proves competitiveness, level of service and prices, is still their free will to come and go, leaving to work with a bank and knowing the services of another bank, or Fintech, that is the new actor in the value chain.

Being a contract where the relationship is often long-term, the customer experien-ce has a strong weight and importance. Experiment new products and services and realizing greater customization and personalization in the interaction can make the difference between a short or long stay with your bank, and the level of investments and daily payments that you

will concentrate with the provider.

The operational channel that you will use is not the most important: on smartpho-nes, tablets, web, IVR, at the agency or even in social networks. The key point is if the experience model is truly relevant and adds value with information and solutions according to the customer pro-file and family composition. Digital and

In the case of Brazilians, 70% prefer sim-ple and direct channels of communica-tion established with companies, rather than simply offering prizes or financial rewards for loyalty or relationship time. Brazilians yearn for opportunities to contribute suggestions for improvement of products and services (56%). But today only 24% of Brazilians give suggestions for improvement in offline channels such as retail stores and 31% in online

Page 10: Digital Banking Customer 3.0: “What Changed in the Satisfaction and Loyalty in the Era of Disruptive Innovation”

Digital Banking Customer 3.0

Point of View - 10

analytics are simple words, and alone they mean nothing for customers. The point is if your bank has a clear and sim-ple strategy to use these enablers in such a simple way that banking becomes an everyday easy task as it is to write a post in the social network or visit a dealership to know the latest vehicle model that has been just launched.

As we have seen, satisfaction and dissa-tisfaction with the banks often have com-mon grounds and is not hard to explain, so even the Brazilian customers need to increasingly compare services, prices and quality of service in the Banks channels, providing feedback and changes su-ggestions because the called “customer view”, sometimes considered complex when analyzed by experts in marketing and product development, usually brings simple and incredibly valuable lessons.

These lessons can be decisive for this cycle of relationship between the consu-mer and their bank turn into a lasting vir-tuous circle, which increases satisfaction, the share of wallet and new services are experienced. Proof of this is that in Brazil

33% are willing to consume more goods and services from their banks, above the global average of 24%.

Surely a greater focus on the customer and their needs, heavily exploiting the full digital experience end to end will have a key role in the Brazilian and Glo-bal Banking market transformation.

The next chapter of this innovation history is being written right now or the next fastantisc banking application too, and not necessarily by bankers. Just wait and see.

Fabio Mittelstaedt

Digital Banking Innovation

July 2016