Brief

Retail Banking: What customers really want

By Walter Sinn, Dr. Dirk Vater, Dr. Dirk Lubig and Michael Kasch

First published on agosto 09, 2012
min read


A survey by Bain & Company of some 3,000 clients reveals that Germany's private banking customers are not satisfied and are ready for a change on a scale never before seen. This study explains the reasons, highlights the acute need for action by retail banks, and offers concrete solutions. Germany's banks are currently facing the worst crisis of confidence of the post-war era. Four years since the outbreak of the global financial crisis, client dissatisfaction is at a peak. One in two account holders of some of Germany’s largest institutions is considering a change. This dissatisfaction could not come at a more inopportune moment as the preparations for Basel III gear up to urge institutions to reflect on the advantages of private client business – stable returns that can be generated no matter what shape the economy is in and in spite of the pressure on these returns from low interest rates and flat yield curves – not to mention the vital contribution made by this business segment towards funding institutions’ lendings. For this business to be successful, institutions have to form lasting bonds with their clients and get them moving more effectively, as well as seeking ways of gaining new clients. Bain effectively uses this setting as the starting point for its unique survey. In close to 3,000 telephone interviews, account holders provided information about their banking relations, their degree of loyalty and their needs. The results are staggering. Not only are a large number of interviewees dissatisfied, they also feel misunderstood and left out in the cold by their banks. The Net Promoter® Score for measuring customer satisfaction, which Bain applied to all the banks in its survey, has fallen to minus 13 percent – the lowest level ever. The survey reveals two trends in need of close examination. First, many clients do not understand how their own bank has positioned itself nor what it wants to deliver. Second, a huge gap has opened between actual customer needs and what the banks are offering. It is not as if these clients are demanding the impossible! What they want is high-quality financial advice that they can trust, together with reliable and customer-friendly service – a satisfaction driver that is frequently underestimated. The question of cost only comes after this – with a simple, transparent and honest pricing policy being a crucial requirement. The greater the dissatisfaction, the lower the returns Many institutions fail to meet these needs. Instead they press ahead with automation to upgrade efficiency, and hope to attract new business by offering fees at temporarily attractive rates or higher interest rates on savings for a short period. Their compass settings are all wrong and this is having serious consequences for the industry. The per capita returns of dissatisfied clients – regardless of their earnings or financial situation – are a good 60 percent below the equivalent values of satisfied and loyal account holders. Consequently, in order to strengthen retail banking, a feeling of passion must be instilled into the existing client base, since loyal clients are known to acquire more products, stay with an institution for longer, and are more likely to recommend their banks to others. By consistently ensuring alignment of their organizations with their client needs, banks could, step by careful step, make their clients feel more favorable towards them – and for themselves create significant earnings boosting potential, especially among the higher net worth private clients, who are particularly worth the wooing. The pathway towards client orientation and ‘omni-channel’ retailing To exploit this earnings potential, banks must put every effort into implementing all necessary changes. The study names five factors for success for boosting client satisfaction and generating lasting profitability and growth. As well as (i) the clear positioning and emotionalizing of the brand and (ii) mobilizing all staff members, other success factors are (iii) maximizing client focus, (iv) seamlessly combining the online and offline worlds into an ‘omni-channel’ environment, and (v) revamping and streamlining branch structure. Most importantly, all actions must be geared around the client. The challenges are to consistently align consulting, services and processes with the client, to continuously measure client satisfaction and to systematically establish procedures for learning and change. No more, but certainly no less. At the same time, banks must take on the challenges of digitalization and combine the virtual with the personal worlds – it is vital to integrate the growing number of digital channels with the analogue world of the branches to form an ‘omni-channel’ environment. By developing the business model, branch networks can be restructured and new branch and service centre formats can be created that will underpin the basis for long-term client bonding. The clients of the future expect to be able to access their bank and its services via a broad variety of means – spanning computer-based online services, mobile telephone banking across to face-to-face interactions within the bricks and mortar of the business itself.

A survey by Bain & Company of some 3,000 clients reveals that Germany's private banking customers are not satisfied and are ready for a change on a scale never before seen. This study explains the reasons, highlights the acute need for action by retail banks, and offers concrete solutions.

Germany's banks are currently facing the worst crisis of confidence of the post-war era. Four years since the outbreak of the global financial crisis, client dissatisfaction is at a peak. One in two account holders of some of Germany’s largest institutions is considering a change. This dissatisfaction could not come at a more inopportune moment as the preparations for Basel III gear up to urge institutions to reflect on the advantages of private client business – stable returns that can be generated no matter what shape the economy is in and in spite of the pressure on these returns from low interest rates and flat yield curves – not to mention the vital contribution made by this business segment towards funding institutions’ lendings. For this business to be successful, institutions have to form lasting bonds with their clients and get them moving more effectively, as well as seeking ways of gaining new clients. Bain effectively uses this setting as the starting point for its unique survey. In close to 3,000 telephone interviews, account holders provided information about their banking relations, their degree of loyalty and their needs. The results are staggering. Not only are a large number of interviewees dissatisfied, they also feel misunderstood and left out in the cold by their banks. The Net Promoter® Score for measuring customer satisfaction, which Bain applied to all the banks in its survey, has fallen to minus 13 percent – the lowest level ever. The survey reveals two trends in need of close examination. First, many clients do not understand how their own bank has positioned itself nor what it wants to deliver. Second, a huge gap has opened between actual customer needs and what the banks are offering. It is not as if these clients are demanding the impossible! What they want is high-quality financial advice that they can trust, together with reliable and customer-friendly service – a satisfaction driver that is frequently underestimated. The question of cost only comes after this – with a simple, transparent and honest pricing policy being a crucial requirement.

The greater the dissatisfaction, the lower the returns

Many institutions fail to meet these needs. Instead they press ahead with automation to upgrade efficiency, and hope to attract new business by offering fees at temporarily attractive rates or higher interest rates on savings for a short period. Their compass settings are all wrong and this is having serious consequences for the industry. The per capita returns of dissatisfied clients – regardless of their earnings or financial situation – are a good 60 percent below the equivalent values of satisfied and loyal account holders. Consequently, in order to strengthen retail banking, a feeling of passion must be instilled into the existing client base, since loyal clients are known to acquire more products, stay with an institution for longer, and are more likely to recommend their banks to others. By consistently ensuring alignment of their organizations with their client needs, banks could, step by careful step, make their clients feel more favorable towards them – and for themselves create significant earnings boosting potential, especially among the higher net worth private clients, who are particularly worth the wooing.

The pathway towards client orientation and ‘omni-channel’ retailing

To exploit this earnings potential, banks must put every effort into implementing all necessary changes. The study names five factors for success for boosting client satisfaction and generating lasting profitability and growth. As well as (i) the clear positioning and emotionalizing of the brand and (ii) mobilizing all staff members, other success factors are (iii) maximizing client focus, (iv) seamlessly combining the online and offline worlds into an ‘omni-channel’ environment, and (v) revamping and streamlining branch structure. Most importantly, all actions must be geared around the client. The challenges are to consistently align consulting, services and processes with the client, to continuously measure client satisfaction and to systematically establish procedures for learning and change. No more, but certainly no less. At the same time, banks must take on the challenges of digitalization and combine the virtual with the personal worlds – it is vital to integrate the growing number of digital channels with the analogue world of the branches to form an ‘omni-channel’ environment. By developing the business model, branch networks can be restructured and new branch and service centre formats can be created that will underpin the basis for long-term client bonding. The clients of the future expect to be able to access their bank and its services via a broad variety of means – spanning computer-based online services, mobile telephone banking across to face-to-face interactions within the bricks and mortar of the business itself.