Bad for business? Frequent bank branch users three-times more likely to switch banks

BAD FOR BUSINESS? FREQUENT BANK BRANCH USERS THREE-TIMES MORE LIKELY TO SWITCH BANKS

Bain & Company's sixth annual report on consumer banking behavior identifies six criteria for delivering a better experience while taking out costs

New York – Nov. 18, 2015 – The writing is on the wall: customers view having to use bank branches for basic transactions as an inconvenience, which makes them more likely to turn away from their primary bank and flock to more on-demand ways to bank.  Bain & Company, in its sixth annual report on consumer banking behaviors, Mobilizing for Loyalty, asked which consumers would miss more for a day, their mobile phone or their physical wallet.  The survey found mobile reigns supreme, with more than half of the 115,000 bank customers surveyed choosing their phone over their wallet.  That share climbs to nearly 80 percent in China. Further, the survey revealed that those who rely on mobile and digital channels are 40 percent less likely to switch banks versus those who use mobile rarely. Conversely, those who frequently use a bank branch say they are three-times more likely to switch compared to those who rarely use branches. Yet, even as more banking activities go mobile, a major challenge for banks is identifying the right sequence of moves for delighting customers through a great mobile experience, while funding the investments in digital channels through cost reductions in the branch network.

Bain's research reveals mobile interactions now exceed online interactions in 10 of the 17 countries surveyed, with the Netherlands and South Korea leading the pack. Dutch consumers' mobile usage has risen four-fold in the last two years and, in South Korea, roughly half of all bank interactions happen through mobile devices. Meanwhile, Japan and Germany lag well behind, due to the high adoption of ATMs and online banking, which provides less incentive for banks in these countries to invest heavily in trying to convert their customers to mobile.

Overall, banks' investments in mobile are paying off in greater customer loyalty. Mobile apps used for routine transactions are one-third more likely to delight customers as similar transactions in the branch, whereas a routine branch visit is 2.4 times more likely to annoy – a pattern that repeats across many counties, including the U.S., the Netherlands and South Korea.

"As an example, our experience in the U.S. is that 60-70 percent of branch interactions in a typical bank are bad or avoidable," said Gerard du Toit, lead author of the research and a Bain partner.  "So, most of the time a branch visit results in an inferior customer experience and comes at a higher cost for the bank. Clearly, the branch as currently configured is headed for extinction."

As such, some banks have been trying to shift routine transactions, such as deposits and cash withdrawals, away from their branches and into digital self-service channels instead, but progress is varied. For example, Mexico has more than six times the number of routine transactions per respondent compared to the Netherlands.

For the average bank, the most critical first step is to focus on improving the mobile experience – make it fast, intuitive, convenient and capable of handling basic needs to delight the customer. In many cases, this means forgoing the website for the mobile app. Bain found that, on average, customers use mobile apps twice as often as mobile web browsing for routine interactions, and apps are consistently more likely to delight.

"Just because you build a mobile app doesn't mean customers will come," said du Toit. "Banks need to take deliberate actions to inform customers about the app's benefits and encourage adoption at every opportunity."

Next, banks must improve on their product sales capabilities:

  • Nearly 60 percent of buyers used both digital and traditional channels for their research and purchase. In China, that number climbs to 80 percent.
  • Already nearly 30 percent of customers globally use mobile channels to research or purchase banking products, and that behavior is most pronounced in Asia.
  • In China and India, 52 percent and 43 percent of customers, respectively, do their product research through mobile, and in China and the U.K., 20 percent and 18 percent, respectively, actually buy through mobile.

"To make the product research and purchase experience shine on a mobile device, the products themselves must be reworked to make them easier to understand.  The internal processes must also be overhauled to simplify the chain of activities," said du Toit. "This is essential to stemming the ‘hidden defection' issue we detailed in last year's report – more than one-third of existing customers bought a product from a competing bank during the year."

To succeed in banking, Bain identifies six new capabilities that bank organizations must have:

  • Extraordinary design discipline, given the small screen, slow speed of accurate typing and impatient users
  • Radical simplification of products, processes and communications
  • Personalization powered by good data and analytics so that only relevant information is displayed to the user
  • Contact methods that allow for anytime, anywhere chat and video calls with fast authentication
  • Much faster development cycles to keep pace with new functionality and consumer expectations
  • A new operating model that provides organizational agility, based on breaking down barriers that divide internal departments and a willingness to collaborate externally

To receive a copy of report or arrange an interview with Mr. duToit, contact Dan Pinkney at dan.pinkney@bain.com or +1 646 562 8102.

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