Solving the “Digital Experience Conundrum” for large U.S. banks

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I think one of the key issues faced by retail banks (and indeed most retail businesses) is what I’ve dubbed the “digital experience conundrum.” This is driven by two powerful trends:

  1. Consumers are embracing digital technology, via the Web and smartphones
  2. Companies want to encourage this digital shift to improve efficiency and cut costs

The conundrum is that automation can reduce opportunities for more engaging, human experiences that build loyalty. And increased loyalty is a key outcome for customer experience initiatives.

Let me say up front that there are no easy answers here. Retail banks must “go digital” and the large banks certainly are. In fact, recent PeopleMetrics research found that “customer-facing technology (mobile, digital)” and “internal technology / customer-facing processes” were ranked by banks as their first and second priorities.

Unfortunately, customers have different priorities. They ranked “products” (mainly fees and rates) and “put customer first” as their top priorities, as you can see in this slide presented by Kate Feather of PeopleMetrics at our recent CX Forum webinar focused on Retail Banking.


In an online poll with our live audience, 73% said they believed that the shift to digital experiences would improve customer loyalty. And Bruce Kasanoff of Now Possible argued that banks should use technology to provide more personalized and relevant services, as you can see here.


While I agree with Bruce, I’m not convinced that technology alone is the key to driving loyalty. I think it has everything to do with how the technology is used, and the leadership and culture of the organization. Simply automating for efficiency and convenience is table stakes in banking.

What does drive loyalty? In Kate’s research, they found that community banks do a much better job creating an emotional bond in relationship where customers feel “valued, appreciated, and cared for,” as you can see in this chart.


Now, some have argued (in LinkedIn discussions on this topic) that higher NPS scores don’t really matter. Large banks are doing just fine, thank you very much, without all that touchy feely stuff offered by community banks. One comment by Serge Milman in a LinkedIn discussion group summed up this sentiment:

Many Banks (and Credit Unions) have been unable to convert their high customer satisfaction scores / high NPS to customer loyalty as measured by hard quantitative factors such as wallet-share, revenue and profitability.

And indeed, in our audience poll, the top “major obstacle,” selected by nearly two-thirds of the attendees, was “ROI unclear.” Technology was No. 2 at nearly 50%.

For now, it may be true that large US banks can grow profitably without building “raving fans.” Look at their ACSI scores and you’ll find all the large US banks well below the industry average of 77. “All others” (which includes community and regional banks) earn a score of 79.

OK, so maybe the problem is that banks can’t be big and engaging. They are mutually exclusive! Then how do you explain the high loyalty scores of USAA? Somehow USAA, a very large and complex financial services business, is able to be emotionally engaging while also investing in digital technology.

My take is that large US retail banks are stuck in their old ways, and are successful enough that they don’t see the need to change. Yet.

Competitive stress could come from community banks that are being more aggressive in wooing customers with better service and higher rates. The partnership with Kasasa looks like an interesting way to shore up technology shortcomings.

Personally, I think the issue is leadership. Large US banks are doing well enough that they’ll stick with minor innovations (e.g. digital channels) around the status quo. They won’t focus on building genuinely loyal (retained and emotional engaged) customer relationships because retention is good enough.

That seems short sighted to me, but then, I don’t have a bonus riding on hitting a quarterly target. George Self said it well in a LinkedIn discussion:

The banking industry is ripe for structural change. The reinvention of banking is not many years away. I for one am looking forward to it.

Me too.


The slide images for this post were sourced from CustomerThink’s CX Forum webinar on June 6, 2013, sponsored by PeopleMetrics. Full recording and slides are available for download here (free registration required). My sincere thanks to Kate Feather and Bruce Kasanoff for their outstanding contributions to our CX thought leadership program.

1 COMMENT

  1. …experience conferences, in the U.S. and internationally, where banks also had featured sessions, your observation about their general complacency and overemphasis on new technology rings true for me. In many bank presentations, much of their focus has been on the greater digital sophistication they apply. In Kate Feather’s article, which preceded last week’s webinar, I responded with similar thoughts: http://www.customerthink.com/blog/customer_experience_trends_and_priorities_in_banks.

    As noted in my response, there are exceptions to this complacency and technological emphasis, such as community banks like Umpqua Bank in the U.S. and Metro Bank in the U.K.; and some major banks, such as SunTrust, are much better at building value and relationships.

    To echo your last point, in bank customer advocacy and bonding behavior research, the name of the game for successful banks is having a very positive reputation and image, earned by zeroing-in on the individual’s needs and wants. This was addressed, in detail, in a CustomerThink blog posted almost two years ago: http://www.customerthink.com/article/corporate_reputation_and_advocacy_linkage

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