Banks need to 'reconfigure business models around customer needs' to regain some control of the relationship with customers who are becoming more assertive

Banks need to 'reconfigure business models around customer needs' to regain some control of the relationship with customers who are becoming more assertive
Banks ought to transform their marketing strategies from 'push' to 'pull', E&Y says.

Retail banking customers are becoming more assertive and taking greater control of the relationship with their bank(s) meaning banks ought to give customers' more power and recruit happy ones as advocates to regain control, says auditing and financial services firm Ernst & Young (E&Y).

In the second annual Ernst & Young Global Consumer Banking Survey the firm notes retail banking customer behaviour is continuing to rapidly evolve as they become less loyal to banks.

"This survey shows that customers are becoming more assertive and taking greater control of their banking relationships. They are increasingly less loyal and are more likely to try new banks. They are listening to each other and becoming more vocal as advocates - or critics. They are also demanding lower costs, better service and greater personalization and flexibility," says E&Y.

"Faced with this fast-changing environment, banks need to regain the initiative by giving their customers greater convenience, choice and control. This requires more than cosmetic changes; it means reconfiguring business models around customer needs."

Key ways of giving customers' more flexibility include providing pricing and service transparency. And customer advocacy is cited as a powerful tool. E&Y says customers are listening to each other more than to their banks or financial advisers. Globally, 71% of respondents to the survey seek advice on banking products and services from friends, family or colleagues, and 65% use financial comparison sites to find the best deals. The opinions of online communities and affinity groups are also growing in importance.

"The use of social media as a source of banking information, by 44% of customers, is amplifying customers' voices, giving them greater power as advocates or critics," E&Y says.

Shift marketing to 'pull' from 'push' strategies

This growing importance of the word of mouth and declining power of direct selling have implications for bank marketing strategies, which E&Y suggests ought to shift to "pull" from "push."

"Banks should aim to recruit their satisfied customers as advocates. They also could recruit online affinity groups as marketers by letting them select and shape the communication they receive," E&Y argues.

The firm says the proportion of customers planning to change banks is up to 12% from 7% last year, with discontent with fees and charges cited by 50% of respondents as the leading reason for changing. Customers' with just one bank fell to 31% from 41% and those with three or more rose to 32% from 21%. To try and stem the flow of customers out their doors, E&Y says banks ought to develop more flexible loyalty programmes to capitalise on customers' growing signs up to such programmes, with customers' able to earn upgrades to different service levels through loyalty.

E&Y says that despite the cost, banks need to offer financial rewards for loyalty with programmes that can be tailored, and are flexible, offering them huge potential benefits in loyalty and advocacy from happy customers.

"By regaining influence over customers' decisions, banks can manage their own revenue more effectively," says E&Y. "To do so they need to improve how they provide information and advice. Banks need to target self-directed customers and encourage greater self-service through financial planning tools, demonstrations of 'how people like you are investing', or ranges of product and pricing bundles."

'Cutting edge technology' important

E&Y describes the use of "cutting edge" technology as vital, suggesting banks partner with technology innovators as customers move towards digital banking and greater self service.

"Giving more power to customers may feel uncomfortable, but in the long run banks that do so will position themselves for success in the future."

The survey shows 70% of respondents willing to provide their banks with more personal information in exchange for tangible improvements in the suitability of products and services they're offered.

The survey was conducted in March this year via an internet questionnaire with 28,560 participants. Survey participants came from Europe, Russia, South Africa, North America, Latin America and the Asia-Pacific including Australia and China.

Meanwhile, the survey showed a decline in customer confidence in banking with 40% losing trust in the industry year-on-year and 22% gaining confidence. The numbers losing trust were especially high in economically troubled Italy and Spain at 72% and 76%, respectively, up from 48% and 58% in 2011.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


I think Gareth has hit the nail on the head here,l except on a very small scale.
Power comanies, fuel, supermarkets, insurance, communications...basically the whole of industry some how has totally lost the concept of the importance of loyality....or put in simple terms... the importance of keeping customers.
I had a 'go' as a side note to Telecom a while back on the subjest, suggesting they take the idea of a special loyality discount, or router or phone upgrade....couple weeks later a new cordless phone and some other bits and peices turned up in the mail.
For yrs I was a member of 25 yrs membership still had to wait another 10 or 15 yrs for a membership discount.
Kiwi bank sent out a 'loyaty' lapel badge a few yrs ago.... the person who dreamed that idea up would have to have a PhD in marketting/ propaganda and stuff all common sence....(All the ppl with PhD AND commonsence have left the country.)
These companies spend huge amounts attracting new customers/ marketting campains, penities, fixed term contracts....basically an attitude of "be loyal or else... it will cost you."
Lets say a Bank after 5yrs gives a  .5% extra on the mortage rate or desposit rates.May not attract new customs but certainly stops a churn. Insurance companies.. do have a no claim.. build in a loyaty discount ......Medical insurance.. spend 20yrs AND without a claim, They will sting one for a small fortune,  near$500/month, and then wonder why these people are dropping their policies...
In the trade supplies there still is a certain amount of importance put on customer loyality, and those companies that have done so are doing ok thru these times
I have been suggesting for many yrs now..there is a big marketing/propaganda opportunity right across all industry, by having a REAL insentive of loyality to keep current long term customers...which one will usually find these are the ones who pay bills on time...Doesnt get better than keeping these people.

You are right Steptoe, and well done on getting a little loyalty bonus from Telecon. Smellstra have told their loyal customers to take a flyiing jump by not offering the $75 free for two months to existing customers who signed up for another 2 years. It would seem they are going out of their way to p*** off customers new and old, with lots of complaints about rubbish service for people signing up to the new deal. So bye bye Telstra for me.

Bobbob.  I took Telstra to task over their 'new' customer offer.  They were prepared to give me the same deal, but I had to sign up for another 12 months.  Of course they wouldn't tell me why I had to sign up.  We all know the real reasons why.  In fact the letter was basically that they couldn't care less about me, a loyal customer.  They said (in not so few rods) they could do whatever they liked, when they liked and I if I didn't like it, I could sod off.   Of course they can do exactly that, but what a strange way to treat your loyal customers. 
I suggest all TelstraClear customers write in to Allan Freeth (CEO) and demand the same deal as the 'new' (likely dis-loyal Telstra customers from days gone by) customer without having to sign up for another 12 months.  A few thousand letters will get them to sit up and take notice.  They forget that we, the customer, hold all the power.  It's only a matter of time before Fair Go take up the challenge - again!
The power balance is changing and these greedy, inwardly focused corporations can't see it happening.  They are in for a shock. 

I wish! I tried and tried to get the deal and they told me to (indirectly to) sod off. I do hope that someone takes them to task. I have read a recent editorial from "NZ Today" magazine and he has nothiing but vitriol for them. Good number of people would read that.