Digital has changed retail banking: this is how banks can adapt and thrive

Alex Thomson, VP EMEA at Quantum Metric, examines…

Swapping checkbooks and going to branch offices regularly for online services and mobile apps is now the norm. Our own research shows that 48% of consumers now bank exclusively via digital services. Interestingly, however, a lack of contact points with bank branches does not seem to stand in the way of engagement. Our research found that people are highly emotionally driven when it comes to their finances and frustration can lead to customers losing trust in their bank.

When faced with challenges, 19% of people give up instead of seeking help (aka digital leakage), and to make it even more difficult, it has become easy for customers to transition as their primary bank does not provide all the services they need.

Ensuring loyalty through digital channels

Providing an excellent online experience is essential when it comes to retaining customers. More than half (57%) of consumers admitted to closing an account because they encountered poor customer service (CS) or found an establishment with the same offering that may have provided a better experience.

It is vital that banks prevent consumers from looking elsewhere by building loyalty and demonstrating a commitment to solving problems. This can be done by spotting key customer frustrations, empathizing and innovating to meet changing customer needs — not just by fixing occasional failures and bugs. In addition, banks can use data-driven analytics to offer personalized products and services for an enhanced customer experience (CX).

Understanding the Human Element

Due to current economic challenges, such as rising inflation and the cost of living crisis, customer stress and anxiety levels are likely to be high. Since 67% of people say that the state of their finances regularly affects their mental health, the link between financial and mental health should be recognized by banks. To cope, these vulnerable individuals have become more vigilant, with two in five (39%) checking their balances almost every day, as consistent digital experience provides a sense of control and alleviates financial anxiety.

Vulnerable customers are another group at higher risk for making impulsive or poor financial decisions, such as falling victim to a scam, and these situations can be exacerbated if they receive subpar support from their bank.

People with other frailty characteristics also have additional or different banking needs. Banks have both a moral and a brand responsibility to recognize these vulnerable people and respond effectively by improving messaging and usability across all touchpoints, be it mobile, app or desktop. For vulnerable customers, good banking results are achieved when their needs are understood and effective responses are implemented.

Why banks need to move now

Digital technology has and will continue to change the way people manage their finances. Today, consumers are more emotionally driven, won by experience rather than offer. It is the organizations that can establish an emotionally empathetic (digital) connection that emerge as the best.