Allpoint Blog

Managing the Fleeting Nature of Consumer Loyalty

A decade ago, financial institutions (FIs) talked about how hard it was to lure customers away from competitors. Even customers who were not pleased with their FIs had a tendency to stay because it was a hassle to move to another FI. These days though, consumers who feel their FI does not offer the product they want, in the way they want it, and when they want it, find it’s very easy to go elsewhere with a simple click.
However, for FIs that haven’t fully embraced the Digital Age, it’s not a lost cause as attendees learned at the 2016 CEB Financial Services Technology Summit held in Boston this spring. This year’s Summit theme, “Reimagining Loyalty: Leveraging Technology to Earn Deep Relationships” focused on creating and retaining customers whose digital expertise seems to be rapidly surpassing that of the FIs that serve them. Here are just a few of the thought-provoking issues discussed at the Summit.
Customer Retention

How the Digital Era Impacts Customer Loyalty

Implementing strategies that focus on retaining customers or members is standard for most FIs. But how well are those strategies working when customers have fewer and fewer reasons to remain loyal to just one FI? Self-service (almost) everything has given customers the freedom to be less beholden to a single FI services provider. At any time 24/7, customers can:
  • Learn (in great detail) about the financial options available to them
  • Comparison shop for better pricing
  • Buy financial products from different providers to diversify their holdings
  • Use easy and convenient online tools to manage the various products and services purchased from different FIs
According to CEB, digital customers comprise all ages, not just the younger crowd, and are more likely to interact, buy and have money. So when this group’s loyalty starts to wane, what can an FI do to change that? What value proposition can it offer to stop the customer from straying?
CEB says that finances aren’t something customers tend to worry about unless they are financially stressed or money becomes short. And while FIs can easily provide the digital means for customers to manage their money daily (deposit checks, make withdrawals, check balances, etc.), what’s missing are what CEB calls “pivotal steps” – actions that help the customer stay on financial track.
According to CEB, customers consider staying on track critical and will stay loyal to the FI that has the tools for them to do just that. Motivating consumers to act on financial issues they may otherwise ignore isn’t easy – it’s akin to sticking to a diet. For FIs, it means making adjustments to what they see their service role to be – and change is something that traditional FIs are historically slow to do.
Yet non-traditional FIs are making adjustments with online tools that support and encourage customers to take actions that positively impact their goals. Take, for example, Ally Financial’s Splurge Alert app, which discourages unnecessary spending by sending messages to the consumer’s cell phone when he or she is in a “splurge danger zone.” A similar tool is Tangerine’s Small Sacrifices mobile app – instead of buying that $4 coffee, the app transfers money to the customer’s savings account and shows how that small sacrifice adds up over time.

FIs Must Become Digitally Modernized

Therefore, consumers monitor their finances by turning to non-traditional FIs that have entered the market with new, disruptive technology. Unfortunately, many traditional FIs lag behind in their digital banking offerings. To add value, CEB urges these traditional FIs to gain deeper insight into their customers’ use of financial products, because today’s consumers expect relevancy and discovery at the time they need it. If they don’t get it – they move on.
We’ve already seen market share grabbed from traditional FIs by such challengers as Moven and Fidor; bank-owned digital banks like Tangerine, Bluebird and Simple; and digitally focused business models spawned by Capital One, Ally and USAA and other established FIs. To compete effectively in the Digital Age, the traditional FI needs to digitally modernize itself, improve access and visibility for consumers, and create an appropriate balance between security and service.

Design Digital Origination for Long-Term Loyalty

The digital FI business model needs to be simple and convenient for the consumer. Otherwise, digital origination and onboarding can result in unprofitable customer relationships. CEB cautions that despite the shift in consumers’ preference to secure financial products online, there hasn’t really been an increase in online accounts opened. CEB attributes the lack of growth to consumer dissatisfaction, because they find the account set-up process complicated and issue-ridden.
Today’s consumers expect to be able to use digital tools for much of what they do every day – including banking – whether by email, video conferencing, computer screen sharing, text messaging, and social media, etc. Yes, they worry about online security, but they also want an app for purchasing the FI product they want, and they quickly abandon online apps that are too complicated to deal with. Digital origination and onboarding requires a simple, easy and collaborative process that allows for human interaction (such as via Chat or instant messaging) should the consumer need assistance.
In the end, CEB counsels FIs that the Digital Age is here and that it is a mistake to not take advantage of it to strengthen customer loyalty and build market share. But if the digital offerings and the process for buying them are not designed to be customer focused, or are only done because “everyone else has,” the customer will detect the superficial approach and quickly move on to another provider.
Corinne Schmidt
Director, Marketing Strategy - Enterprise FI/Allpoint

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