1 in 10 Europeans plan to change banking provider this year
Banks need to win customer loyalty war
1 in 10 Europeans plan to change banking provider this year
The financial crisis has caused customers to change their attitude towards their banks, according to new research from Ernst & Young. If they are not changing provider, then some customers are looking to diversify their banking portfolio spreading financial products across a number of different institutions to minimise their exposure to perceived risks.
Understanding customer behaviour in retail banks, a survey of 6,140 retail banking customers in Belgium, France, Germany, Italy, Spain and the UK, found that only 24% had changed their main bank provider at some point in their life, but 10% did it in the last two years alone. A further 11% said they planned to do it imminently, pointing clearly to a recent acceleration.
“Against the backdrop of the financial crisis, customer satisfaction has never been such a major concern for European banking leaders,” said Beatriz Sanz Saiz, Ernst & Young’s Global Customer Leader. She added, “our survey shows that customers are prepared to vote with their feet and switch to another bank if they are not happy.”
“Banks have a tough job this year to meet the challenges of retaining customers, restoring public confidence and providing the services and products that customers really want. Considering it costs banks six times as much to attract a new customer as it does to retain an existing one, the industry has some challenges ahead. New European banking initiatives, such as the Common Principles for Bank Account Switching, will make bank account switching easier for European customers and small businesses within their own country. Banks must wake up to this threat.”
NEW EXPECTATIONS
The financial crisis has had a negative impact on trust in the banking industry for 45% of respondents. Customers in Spain (20%) and Italy (14%) are most likely to change banks with only 6% in Belgium and France planning to do likewise.
Price (43%), service (42%) and products (31%) are the top three concerns driving customers across the six countries to change their banks. But lack of trust is a concern for a quarter of customers polled.
Clear differences emerged between each country about the reasons customers would change banking provider:
– Price was a key reason for German (55%) and Italian (50%) customers;
– Trust was a key reason for 26% of UK and Belgian customers;
– UK (39%) and Germans (38%) were most likely to move because of poor service;
– Spanish customers were most likely to switch because of products (35%), and
French customers were found to demand better financial advisor competence (22%).
REWARDING LOYALTY
The report revealed that there exists a small but growing discontent with the main banks – the one their pay cheque is paid in – and to date banks have taken customer loyalty for granted. The survey also shows that the concept of a main bank is eroding.
More than half (58%) of customers polled have stayed with their bank for more than ten years, with seven out of ten remaining loyal for more than five years.
French and Belgian customers hold the longest relationships with their banks with 85% and 82%, respectively, banking with their main provider for more than five years. In contrast, just 39% of Germans had been with their bank for more than five years.
Perhaps surprisingly, 54% of respondents would welcome a customer loyalty programme and this is particularly true in Spain (81%) and Italy (76%). Just 9% of Germans were interested in a loyalty programme.
Over 80% of European customers now use more than one bank but 74% have only one product type with each of their other banks.
Pierre Pilorge, Ernst & Young’s Financial Services Advisory Markets leader for Europe, Middle East, India and Africa practice, believes that banks must now take another good look at their customer base; examine what customers want in terms of banking interaction; and whether they value pricing, personalized relationships or innovative services.
“In this brave new retail banking world, banking customers increasingly expect the ease of 24/7 direct access to their banks but they are also keen to benefit from a personalised relationship too. There is room for innovation through combining these two expectations to build closer relationships with customers. This could be a winning bet for both,” Pilorge concluded.
