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Banks Might Be 'Angering' Customers, But Should They Really Care?

Brian Cantor

Even with the rise of technology, switching banks is far from the easiest challenge customers will endure, and the result is significant inertia. In many cases, banks will be able to endure increases in dissatisfaction without risk of a customer bleed.

Obviously, that philosophy has limits, and recent price hikes and fee changes have been pushing those boundaries. Powerhouses like Bank of America have come under fire, and recent reports have cited a wave of interest in online banks like Ally and PerkStreet. Thanks to lower overheads, these banks have already been able to promote advantageous features like rewards for debit purchases, ATM fee rebates and high-yield interest on checking, and if they can successfully market themselves as transparent, "people’s alternatives" to the evil, untrustworthy banking juggernauts, they are in position to make a real impact.

Still, overwhelming banking "loyalty" (see: inertia) persists. A new study from the CMO Council reveals that only 16% of customers have actually changed banks in the past twelve months (and 34% of those customers did so for location reasons). Even as the slow economy raises skepticism, the list of banking concerns and grievances exponentially grows and new alternatives rise, customers still seem to be looking for reasons not to leave their banks. 48% of customers, in fact, call themselves "rain or shine" loyalists.

Granted, that does mean that 52% are open to the idea of switching—a number that is poised to increase, albeit slowly, if banks continue to distance themselves from customers’ hearts through lapses in service and excesses in fees. "Hidden fees," "high-fees and surcharges for in-person assistance" and "increases in service fees without increases in service value" are, after all, the top three reasons for customer concern.

If customer attrition reaches a certain point, and the simultaneous acceptance of alternative banking options and outcry over traditional banking policies makes that point attainable, there will start to be a notable impact on the bottom line. The fee increases institutions like Bank of America identify as crucial to their business could theoretically serve to unravel the business once they drive customer frustration to that breaking point.

For as real as that possibility is, many banking organizations are going to remain unrattled. They see a minimal connection between media outcry (supposed "dissatisfaction") and customer departure; they have the CMO Council data to confirm that the array of customer concerns is not a high-probability indicator of customer churn.

This reality greatly discounts the value of "loyalty" to banking organizations. Sure, banking organizations have no reason to refuse strategies that boost satisfaction, but they do not necessarily see their customer loyalty as a make-or-break metric. They do not necessarily have a reason to see a decrease in loyalty as a guaranteed decrease in business. Whereas a trendy technology or fashion company risks massive customer erosion if it stops worrying about loyalty, the customer inertia within banking gives the institutions a degree of leeway and an entitlement to some complacency.

That complacency, on occasion, will drive a bank to issue a minor fee increase rather than undertake a massive customer experience endeavor. Aww, what are customers going to do, take their business elsewhere? Banks know they won’t.

With that focus on the lack of a negative (dissatisfaction does not necessarily mean customer departure), however, comes a lack of focus on the benefit of increases to customer loyalty and satisfaction. That customers cannot hold banks as prisoners does not mean they do not have actual, positive value. It does not mean the company, by virtue of appeasing the customers, will not see significant benefits.

Banking customers, in fact, remain reasonably-open to up-sells and cross-sells. Premium services are of interest to customers if they improve the banking experience, and rewards cards—which, in effect, should drive more customer spending—are a consistent draw. And yet instead of putting forth the promotion and engagement needed to drive customers to these new, premium product channels, many banks seem to prioritize introducing and justifying new fees and surcharges.

According to the CMO Council research, only 40% of customers see their bank as a "trusted partner"—such a relationship is tailor-made to initiatives that build loyalty and drive new business, as customers know that the pitched services are in their best interest.

And, on the specific matter of upsell opportunities, only 43% opted not to purchase upgraded services and only 7% are not upset that they have never been pitched on such services. That means 50% are fully willing to move into higher-engagement or higher-cost services if the right justification is provided.

Of that group, 22% either inquired about or purchased the service based on the promotion they received and 9% wish they actually received information about these premium services. If a bank is looking to improve its business, should it really be ignoring these customers in favor of defensive marketing strategies?

When customers receive relevant, valuable information from their bank, they listen—especially if it comes from a live rep/teller. And through that experience comes greater trust and loyalty in the bank (both, indeed, valuable assets) in the worst of scenarios and new purchasing in the best of them.

Instead of expressing confidence that their strategies will not produce lost customers, banks should be looking to attract new ones and turn their current customers into ones that bring more value to the business.

Are you a banking professional? Do you want to make your customers happy and more engaged? Do you need a call center strategy that helps get the job done? Answers at the 3rdCall Center for Financial Systems Summit!