What We’re Reading: Collaboration, Tablets and Google Glass

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.


  • Collaboration Goes Social For Banks

Bank Systems & Technology

The rise and popularity of social media have had a dramatic effect on the ways people interact and share information on a personal level, and many banks have embraced social media as a way to improve customer engagement. But when it comes to bringing social media tools into the enterprise for business uses such as collaboration and project management, the revolution has not been quite as pronounced. That’s especially true in banking, where the use of social tools for internal business collaboration is still in the nascent stages, according to some experts. However, when banks are able to adopt the best practices for taking advantage of social channels internally, it can lead to a much more efficient and collegial work environment.
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  • Credit Unions Lead in Online Satisfaction

Bank Systems & Technology

Credit unions top the financial services industry when it comes to online customer satisfaction, according to a survey conducted by customer experience analytics firm ForeSee. The firm this week released its “Financial Services Benchmark,” which reports on online and mobile customer satisfaction trends for various industry segments. The report used data from more than 335,000 surveys from the first quarter of 2013 in which customers shared their experiences with online websites, mobile websites and mobile applications.

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  • iPad, Tablet Point-of-Sale Systems Gain Popularity


Over the next three to five years, many of the existing larger and pricier point-of-sale systems will be replaced with iPads, says Dave Kaminsky, an emerging technology analyst with Mercator Advisory Group, a payments-industry advisory firm headquartered in Maynard, Mass. It’s impossible to predict when a total conversion of the market would occur, he says. In the same way that some customers continue to write checks in an age of online banking, some merchants will continue to use the older point-of-sale systems out of habit, he says.

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  • Wearable banking: Google Glass


Using touch controls and voice recognition, Google Glass will allow users to capture photos and videos, view emails, use apps and surf the web on the move. But what does this mean for digital banking? This rises to a quarter for 18 to 24 year olds, which means once the technology is available to buy, banks will need to ensure they have a clear idea of how to extend their digital banking experience to wearable technology. This has interesting implications for how consumers control their finances and suggests that if Google Glass does indeed form an ‘important branch of the tree’, it is likely that consumers will choose to manage their money using the new technology.

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  • Why The iPhone Still Matters To Mobile Payments


Months before the iPhone 5 was released, the industry was a buzz of rumours on the details of Apple’s new device. New connectors, a new OS, thinner, taller. But one feature that received wide-spread attention from the banking industry was the rumoured inclusion of an NFC Chip. Something that anticipated bringing mainstream scale to a technology that could replace the need for us to carry wallets full of plastic credit & debit cards. Who could forget Google’s George Costanza advert for the Google Wallet, the first NFC Mobile Wallet. Rumors about the new iPhone having NFC, but at this point, they seem like a total long shot.

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  • The Key to Building Bank Ads That Work

The Financial Brand

Consumers do not buy products and services, they buy the benefits they receive from them. Take Dove Soap, for example; For years, Dove advertised that its soap had ¼ cleansing cream, leaving skin soft. Dove didn’t become a top seller because it had ¼ cleansing cream, but because it made consumers’ skin softer. Tip: You may need to describe your product and its details, but this isn’t the same thing as selling the benefits the product and its features deliver. For every product feature, you can almost always find a corresponding consumer benefit.

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  • KeyBank Moves To Data Driven Decision Making


When Cleveland-based KeyBank reaches a decision about its optimal branch footprint, the decision is based on analytics, said David Bonalle, executive vice president and director of client insights and marketing.

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  • Banks Might Hold The Key To Mobile Wallet Adoption

Investor’s Business Daily

Banks and other companies worldwide are vying to get consumers to use their mobile wallets, which enable point-of-purchase payments via smartphones. A recent report by network gear leader Cisco Systems found that banks might have the upper hand in the battle to rule a payments technology that could revolutionize how consumers buy things worldwide. The Cisco “Customer Experience Report,” which focused on retail banking, found that mobile wallet providers must offer more personalized and secure banking services before consumers will flock to their offerings.

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  • Global mobile payment transactions to surpass $235B


Global mobile payment transactions will generate $235.4 billion this year, growing 44 percent over last year’s US$163.1 billion. Asia-Pacific will account for US$74 billion, with growth driven by both developed and developing countries such as Singapore, India, and South Korea.  According to a Gartner report released Tuesday, global mobile transactions volume and value will clock an average growth of 35 percent between 2012 and 2017, climbing to over 450 million users and a market worth US$721 billion by 2017.

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What’s Loyalty Got To Do With It?

There’s no question that the banking industry is working overtime to woo new customers—this blog continues to document ongoing initiatives to draw people in. This includes emerging demographics, such as folks who want a comfortable atmosphere, or those pesky millenials who need constant attention and rewards.

This leads to a related question: Once we get them in, how are we doing at keeping them there?

Not so well, as it turns out. The World Retail Banking Report 2013, an annual survey of 18,000 global customers conducted by Capgemini and Efma, provides a sharp counterpoint to the perceptions of success in retail banking. The bottom line seems to be loyalty ain’t what it used to be.

For a start, 10% of retail banking customers say they will ‘likely’ leave their bank within the next six months. But that’s not even the worst of it.  A surprising 41% of customers say they are actually unsure whether they’ll stay. In other words, one out of every two retail customers might just go elsewhere before the end of the year. And just to rub salt in the wound, the numbers are actually worse than they were in the 2012 study.

One underlying factor for the dwindling sense of loyalty is customer satisfaction. Fewer than half of all customers worldwide, 44%, express satisfaction with the banking experience their institution provides, and a sobering 63% voice the need for greater personalization, specifically learning about and meeting their unique needs.

Looking at these issues in a historical context is misleading. The typical retail customer today is a far cry from even the most demanding patrons of the past—they have too many options available at the click of a button, and in the digital era they’ve been weaned on a steady diet of instant gratification. If even the most complex problems can’t be solved in an instant, it’s surely a failing on the part of the bank.

In fact, even positive customer experiences can be undermined by unrelated events, such as high-profile scandals around rigging and money-laundering involving marquee institutions, not to mention huge government bailouts. Unlike, say, the retail industry, loyalty in this business has a lot to do with trust, and this has become a major issue. The survey reveals that 49% of banking customers don’t ‘completely’ trust their institution.

Even with all these clouds, however, there might be a silver lining or two. Most regions studied reported improvements in customer satisfaction levels. North American institutions checked in with a 5.5% jump—a respectable showing, but somewhat behind an 11.9% spike in Latin America and a 7.2 rise in Western Europe. That said, customer satisfaction is still highest in North America. Canada leads the pack a 61% rating, but the U.S. is close with 57%.

It’s hard to tell what the 2014 study will look like, and there’s clearly no panacea. But a pair of related statistics offers some markers to the road ahead.

First, the most recent report from research and consulting firm Celent shows the extent to which retail banking in changing. Branch density has risen steadily for a long time now, registering a staggering 281% growth in FDIC-insured branches since 1970. Now, it’s clearly going the other way, with a “dramatic reduction” in local branches. In 2012 alone, according to SNL Financial, 2,267 branches were shuttered. Main Street USA will never look the same.

Meanwhile, this is the year in which there will officially be more mobile devices than people. In other words, there might be far fewer branches but the opportunity to do far more banking.

The industry isn’t going away—consumers need financial institutions, and vice versa. The better the service, the more the business, and that’s the way it’s always been. But moving forward, customer loyalty and fidelity probably will be quite different.

Love at First Use: Three Tips for Building Awesome Products

It’s said that you never get a second chance to make a first impression. Nowhere is this more true than in product development. You may have built a truly amazing product, full of wonderful features that deliver lasting value to customers, but if you don’t have an amazing first-use experience, it’s game over!

In today’s world, first impressions matter more than ever before. Prospects have little patience for friction or confusion. In a mobile-first world, potential customers will download and test-drive our app, and if it doesn’t deliver some benefit or WOW in its first impression … they press the app until it wiggles, hit the X, and go searching for a better solution.

This new reality has motivated us to take a fresh look at our first use experiences, and our observations have led to three guiding principles to successfully introduce customers to our products:

  • Time-To-Benefit: Make sure that the customer immediately sees how and why they would use the product. Resist the temptation to reveal all the great long-term benefits, but instead, focus on getting to real core customer value in a simple, fast and approachable manner.
  • Ease (Do It For Me): Only ask for the absolute minimum information to get started. Once you ask for it, don’t ask again. Every request for information introduces friction and can reduce conversion significantly.
  • Emotional Delight: Go beyond functionality and surprise your customers. Make the most important tasks easier than expected. Seek to create moments of “Wow!” that will generate positive word of mouth.

A great first use experience is the front door to powering growth for a new or existing product. Don’t let all the hard work that goes into creating a great product be sabotaged by not putting in the time and effort of designing a delightful gateway. None of us want to see the next thumb being placed on our wiggling app to delete it!

*This blog originally appeared on LinkedIn. You can follow Brad Smith on LinkedIn here.

Small Business: Respect and Dedication

In a recent blog on Banking.com, we explored how small businesses don’t always get the respect they deserve from the banking world. There’s no question that this sector of the economy is always vital, and increasingly optimistic. In fact, the number of businesses that report being ‘better off’ jumped from 16 percent in 2009 to 33 percent in 2012. This is also a market rich with possibility: on average, small businesses hold deposits four times greater and loan balances 15 times greater than retail banking customers.

And yet, this market continues to rank near the bottom in banking satisfaction.  So what’s going on—and what can the industry do to make thing better? The new J.D. Power and Associates 2012 US Small Business Banking Satisfaction Study, a comprehensive research report that identifies and highlights the situation described above, digs deeper into the problems and identifies many of the pain points.

As mentioned in the previous blog, credit is still the primary issue, but it’s not the only one.  The J.D Power study lays out more fundamental problems too. In particular, while small businesses are sometimes lumped in with retail banking, there are major differences between the two.

First, small businesses expect greater competence and responsiveness from their bank, since their needs are more complex needs and they bring greater value. Second, relationships are everything: they want an account manager who understands their needs and provides customized solutions. In both these areas, the study shows, banks come up short.

In routine transactions conducted both face-to-face and on the phone, small business customers say their experience either mirrors that of retail customers or doesn’t even rise to that level. By the numbers, 21% of retail banking customers have problems in a given year; 36% of small business customers say the same. Similarly, only 43% of small business customers say their assigned account manager (if they actually have one) ‘completely’ understands their needs. The latter problem is particularly acute: the J.D. Power study outlines the ways in which a good relationship with an understanding account manager makes a significant difference in terms of discussing loan options, receiving regular updates, etc.

The problems extend past business issues to even more basic headaches. The data shows that small business customers are less likely to experience in-person best practices than retail customers when they visit a branch, are less likely to be greeted by name, and are more likely to experience longer wait times.

The study does take into account equivalent concerns on the banks’ side: It’s perhaps unrealistic to expect that every account manager will have a full understanding of every small business account they handle, and it is only natural to assign bank personnel to accounts where they offer the greatest value. However, there’s also no question that there is plenty of room for improvement here.

The study does lay out some remedies. First, while there can (and should) be some discussion around whether to have a dedicated commercial-only window in particular branches, there needs to be more training staff-wide on paying greater attention to small business customers. Second, in the era of Big Data, we have more information at our fingertips now than ever before on each account and the market in general. This should be used more effectively to develop a greater focus on this critical market segment. Finally, while many institutions fully intend to create small business specialists within call center groups—with experienced representatives and specialized training—the final product often falls short. If, as the J.D. Power study makes clear, “a dedicated small business team is established—and the data suggests it should be—it needs to be sourced and managed appropriately.”

Ultimately, of course, any list of best practices runs the risk of being too generic, the same problem that frequently afflicts this market. The small business market is undeniably both vast and fragmented. It’s also vital—and for the banking industry’s purposes, potentially very lucrative.  It deserves respect, and that will come through customized solutions backed with knowledge and dedication.

* Now in its seventh year, the U.S. Small Business Banking Satisfaction Study measures small business customer satisfaction with the overall banking experience by examining eight factors: product offerings; account manager; facility; account information; problem resolution; credit services; fees; and account activities. The 2012 study includes responses from nearly 7,246 small business owners or financial decision-makers who use business banking services. The study was fielded from August 10, 2012, through September 10, 2012

For more information about the J.D. Power and Associates 2012 US Small Business Banking Satisfaction Study, please contact: Holly Zagresky at (248) 680-6319 or via email at Holly_Zagresky@jdpa.com

Small Business: Perception vs. Reality

In the most recent election cycle, like most others before it, the one sector of the economy that got the most attention was small business.  This is the future, we were told by every candidate—the very backbone of the nation’s economic infrastructure, the greatest source of employment and innovation, the foundation of America’ greatness.

The new J.D. Power and Associates 2012 US Small Business Banking Satisfaction Study paints quite a different picture. It uncovers an environment where optimism co-exists with uncertainty, and where tapping capital resources remains an unnecessarily onerous task. Far from being lauded, this is a market  that is looking for support, deserves it, but too often doesn’t get it.

There’s no question that as the economy continues to recover, however slowly, small businesses will play a critical role. Those already in the market are on track to keep growing, and this will turn help fuel the creation of others. Indeed, the study highlights a degree of optimism in this sector.  There’s a clearly perceptible spike in the percentage of small business banking customers who report being better off now than they were a year ago. It’s still far from a majority at 33 percent, but that’s still a 10 percent jump over last year’s corresponding number, and even better news compared to the 15 percent who now say they’re worse off.

“There is a long road ahead to economic recovery, but it’s positive to see that small business banking customers report they are better off this year over 2011,” said Jim Miller, senior director of banking at J.D. Power and Associates.  “Since 2009, we have seen the percentage of those who reported to be ‘better off’ jump from 16 percent in 2009 to 33 percent in 2012.”

For banks in particular, there’s even more good news.  The JD Power study reports that, on average, small businesses hold deposits four times greater and loan balances 15 times greater than retail banking customers. The people running the businesses are doing well too: these customers carry higher levels of personal banking business than the average consumer.

And finally, there’s the profit factor. Perhaps contrary to conventional wisdom, profit margins associated with small business customers are typically higher than those associated with larger corporate banking customers.

However, the gulf between perception and reality extends into other areas as well, with less happy results.  As the JD power study makes clear, this market doesn’t get the respect it clearly merits. For the record, there is a higher level of overall satisfaction in the most recent report, but that’s still cold comfort. In fact, it still ranks near the bottom among the financial services businesses that the study covers (only mortgage servicing ranks lower). Even the credit card business, which long languished at the bottom, has now moved past small business banking in satisfaction to levels enjoyed in the retail banking sector.

The elephant in the room, of course, is credit, or rather the lack of it. Oddly, the hard numbers don’t necessarily show a decline here: 82 percent of small business loan applicants say got approved for their most recent loan, the same as the year before.  However, a recent research effort conducted by the Small Business Administration that went a level deeper revealed that lending  this sector has been falling steadily since 2008, the year of the banking meltdown. This is likely  one factor behind the declining Availability of credit rating, which is down from 6.71 (on a 10-point scale) last year to 6.65 in this year. That’s actually  one of the lowest-rated attributes in the 2012 study.

Again, all the clichés ascribed to the small business sector—hardy, entrepreneurial, innovative—are real. This is a risky proposition, and we all know just how many new ventures don’t survive. At the same time, as every good candidate will point out in every stump speech, small business is exactly what will fuel overall economic recovery.

In the next piece, we’ll look more closely at the pain points in this market. But for now, the unmistakable takeaway is that small businesses are healthier than they’ve been for a while, they’re vital for economic growth, and there are significant profit margins involved. The market is good for companies, good for individuals, and good for the economy. Given those considerations, the banking satisfaction levels identified by the new report are lamentably low, and it should be the industry’s goal to do better.

* Now in its seventh year, the U.S. Small Business Banking Satisfaction Study measures small business customer satisfaction with the overall banking experience by examining eight factors: product offerings; account manager; facility; account information; problem resolution; credit services; fees; and account activities. The 2012 study includes responses from nearly 7,246 small business owners or financial decision-makers who use business banking services. The study was fielded from August 10, 2012, through September 10, 2012.

For more information about the J.D. Power and Associates 2012 US Small Business Banking Satisfaction Study, please contact: Holly Zagresky at (248) 680-6319 or via email at Holly_Zagresky@jdpa.com

Satisfaction With Social Media Interaction

Guest post by Karen Licker, Social Banker & Content Contributor (Independent) at J.D. Power and Associates

Social media, a non-traditional method of customer interaction is clearly becoming increasingly important for banks to understand.

It’s no longer just a vehicle for customers to vent about poor experiences, praise their bank for exceeding expectations, or read about other customers’ positive or negative experiences—it has now become a legitimate service channel!

Social media sites not only allow customers to interact with their bank, but also provide another medium to converse with representatives, get questions answered, and resolve problems. For example, data from our 2012 J.D. Power and Associates US Credit Card Customer Satisfaction Study shows that during the past 12 months, 5% of credit card customers have contacted their issuer through their social media site to ask a question, resolve a problem, or make a request.

Although many questions or problems may need to be handled outside of the social media site that was the initial contact, it is important for banks to show they are listening to their customers’ “pain points” by providing an actual response to the social media posting.

Did you know that only 60% of customers who contacted their credit card issuer via social media received a reply?

Needles to say, the impact of replying to a posting on overall satisfaction is profound, as Interaction satisfaction among customers who have received a reply to their social media contact is notably higher than among those who did not receive a reply (802 vs. 748, respectively). Findings from our recent study also revealed that optimizing customer satisfaction with their social media experience does not end at merely responding to the request, but that issuers should continue to focus on the following:

  • Resolving the initial issue at hand
  • Offering additional assistance
  • Thanking the customer for their business

When each of these best practices are met, Interaction satisfaction increases to 839, which is 91 points higher than when they are not met.

Source: J.D. Power and Associates 2012 US Credit Card Satisfaction StudySM    

The Bottom Line:
With the continued advancement of technology shifting the way customers interact with financial institutions, it is vital for banks to proactively respond to the changing demands of their self-service channels and understand the importance of being responsive to feedback posted on social media sites.


FI Spotlight: Arvest Bank

In our latest FI Spotlight we got the opportunity to speak with Jason Kincy, Marketing Director at Arvest Bank. In our Q&A below, Jason talks to us about the J.D. Power and Associates 2012 Retail Banking Satisfaction Study, customer satisfaction and social media. Arvest Bank ranks highest both in the South Central Region and in the Southwest Region in the J.D. Power and Associates 2012 Retail Banking Satisfaction StudySM. This is the fourth year that Arvest has been recognized with a regional award. Arvest has been ranked highest in satisfaction with retail banking in the Southwest (2010, 2011, 2012), Southeast (2009) and South Central (2010, 2012) regions.


Q: In a few sentences, can you tell me about Arvest Bank?
A: Arvest Bank operates more than 240 bank branches in Arkansas, Oklahoma, Missouri and Kansas through a network of 16 locally managed banks, each with its own board of directors and management team. These banks serve customers in 90 communities with 12-hour weekday banking at most locations. Arvest also provides a wide range of banking services including loans, deposits, treasury management, asset and wealth management, life insurance, credit cards, mortgage loans and mortgage servicing. Arvest operates a mortgage company, asset management company, insurance division and mortgage servicing company.

Q: In the J.D. Power and Associates 2012 Retail Banking Satisfaction Study, Arvest Bank scored among the best in all categories: overall satisfaction, product offerings, facility, account information, fees and account activities. What do you attribute to your success in scoring so high on the J.D. Power Rankings?
A: No bank is perfect and we have areas that we’re working hard to improve. Arvest focuses on providing many of the banking attributes that drive customer satisfaction. We operate a way that makes banking convenient no matter how the customer defines convenience – whether that’s at an extended hours branch location, on the phone, online or via mobile banking. When we do interact with customers on a personal transaction, our associates provide an efficient and courteous experience for the customer. These interaction experiences combined with fairly priced fees and an account lineup with options for everyone combine to create a satisfied customer.

Q: Do you have any advice for FI’s looking to raise their banking satisfaction scores?
A: Every institution and market is different, but there are some general principles that banks performing highly in customer service rating generally share, so we, like many banks study customer satisfaction studies and trends to learn from the top performers. Creating value to the customer is key to their satisfaction. Arvest is very responsive to customer feedback provided in person or through customer surveys and will take action when an adjustment is needed. This responsiveness allows us to fix small issues before they become large customer frustrations and to tweak our products or services based on customer needs, which leads to happier customers.

Q: On your website, you have a “How are we doing?” survey for customers. How long have you had this survey on your site?
A: We have conducted online surveys for several years. The customer has the option to choose to provide feedback on a branch, telephone or online experience.

Q: Is it a useful tool for obtaining customer feedback?
A: Yes. We receive many surveys from customers and they are generally very transparent in their feedback. The surveys are provided to the local market where the customer does their banking so that local management can address service levels accordingly and follow up directly with the customer when appropriate.

Q: Arvest received a high score in the product offerings section of the J.D. Powers Rankings. What range of products do you offer to your customers?
A: We believe our product lineup has something for everyone, whether you want an extremely basic account or an account with total relationship value added services.  The addition of perks that are becoming more popular like family identity theft coverage has created an overall perception of value. Our checking accounts range from free with no balance requirements to fee based accounts with the options and perks customers have told us are important to them.

Q: We know mobile banking has grown by leaps and bounds over the past few years. Have you seen the same trend with Arvest customers?
A: Arvest has provided free mobile banking since late 2007 and transitioned to an improved offering in October of 2011. We have SMS/Text banking, mobile web banking and apps for iPhone and Android. Our growth over the past 12 months has been phenomenal, with our user base doubling in size. Mobile banking will continue to grow at a torrid pace and we expect it to become increasingly more integral in how customers do their banking.

Q: Let’s talk social. Arvest is on Facebook and Twitter. Do you view social channels as a good way to interact with customers?
A: Yes, it allows us to participate in communication spaces where many of our customers are. It’s another way to share your brand themes and persona.

Q: How has social media helped Arvest with customer communication?
A: Social media has allowed us to share information that doesn’t fit a traditional website such as community events, up to date announcements and consumer education. A very valuable component of social media to banks is the ability to observe customer sentiment and opinions and then apply those to maintaining quality service. Many customers will be more unfiltered with their opinion in social media than they will in a formal survey.

Q: Is there anything else you want to add?
A: Maintaining quality service requires an ongoing effort to continue to deliver on customer expectations. Even though Arvest has won multiple J.D. Power and Associates trophies over the past few years, we have a team of associates who look for weaknesses in the study to identify areas where we can improve. We also research the top performers to try and learn what makes them successful.

How Banks Charge Fees Without Jeopardizing Customer Satisfaction

*Guest post by Karen Licker, Social Banker & Content Contributor (Independent) at J.D. Power and Associates

As banks continue to explore ways to manage the sensitivity around charging fees while minimizing the impact associated with charging those fees, it’s important to focus on the following three areas:

1. Stability
The data from our 2012 U.S. Retail Banking Satisfaction Study shows that fee structure changes not only have a significant impact on customer satisfaction, but they also lead to an increase in problem incidence and intended attrition. The following are some best practices banks should consider when making changes to fee structures:

  • When changes are necessary, focus on limiting the number of changes customers are forces to accept. For example, making two or three changes to fee structures per year may be more confusing and less satisfying than making multiple changes at one time.
  • When fee changes are necessary, it is critical to communicate the changes well in advance so that customers are not caught by surprise.
  • While communication of fees is mandatory, there are some other ways for financial institutions to help ensure customers are aware of changes—e.g., communicating changes more than once and preferably via multiple channels, such as mailed letter and online notification.


Source: J.D. Power and Associates 2012 U.S. Banking Satisfaction Study

2. Communication

The impact of communication on the fee experience goes far beyond simply providing advance notice of any changes to the fee structure. There are other best practices that banks can follow to provide their customers with more information regarding fees or information on other product pricing options available:

Account initiation: Starting with account initiation, it’s vital that representatives perform a detailed needs assessment and identify the products that meets customers’ needs. Performing a detailed needs assessment during account initiation provides a big lift in fee understanding (22 percentage point difference for “completely” identified needs) , while also providing a significant lift in satisfaction.

Online account information: It goes without saying that providing customers with clear and concise access to account information and other pertinent information via the bank’s website is crucial. Clarity of account information and Clarity of information provided on the website provide considerable lifts in Fees satisfaction, while also improving fee understanding by 16 percentage points.

Outbound communication: Proactively contacting customers three or four times per year regarding banking products and services enhances satisfaction and understanding of both fees and product offerings, without creating information overload. Study findings show that satisfaction and understanding both begin to decline when customers receive five or more proactive contacts per year. This also includes performing account reviews to ensure customers have the right products. Empowering branch tellers and call center representatives to proactively review customer accounts and make recommendations for alternative products and pricing options provides lifts in Fees satisfaction and understanding and significantly improves the bank’s Brand Image rating for being Customer driven.

3. Value-Based Pricing

Despite the current level of price sensitivity related to service charges, such as maintenance fees and minimum balance requirements, there is still an opportunity for banks to generate revenue through maintenance fee charges by creating a clear value proposition aligned with the differing needs of their customer base. It’s also important to review the options that banks currently provide their customers with respect to maintenance fee charges.

Many banks have installed a minimum balance requirement so that customers are able to avoid maintenance fee charges, but it has created various levels of dissatisfaction. At the same time, customers indicated that discounts for students, senior citizens, military personnel, or multiple products are not widely offered, which may be related to poor communication of the discounts by the institution and, thereby, low customer awareness. But most importantly, many banks do not clearly communicate the benefits customers will receive in exchange for the maintenance fees they pay, nor are banks providing different pricing options based on channel and product usage.

By understanding the key drivers of high fee/above-average satisfaction across segments, as depicted above, banks should consider the following strategies:

Explain the value proposition—When considering how to roll out a new monthly maintenance fee structure for customers in a particular segment, banks should emphasize the offerings most important to that specific segment. For example, in their explanations to customers in the Affluent segment, banks should promote their mobile banking applications/improvements; their ability to provide proactive advice on accounts; their focus on an efficient and courteous branch experience; and their product offerings, such as debit card with rewards and mortgage discounts.

Develop unique pricing options—By understanding channel preference and usage, banks may potentially create unique pricing strategies. For example, since data shows that customers in the Affluent/Emerging Affluent segment tend to have lower levels of branch usage and preference than do other customers, banks may potentially offer these customers a special rate for low branch usage, such as visiting a branch once every 4 months. From the perspective of customers, they are getting a special deal for something that relates directly to them, and from the bank’s perspective, they tend to benefit by minimizing branch traffic and staffing needs.

The Bottom Line:
There are a few banks across the industry that are able to charge customers maintenance fees without jeopardizing satisfaction, including Frost National Bank, Woodforest Bank, Hancock Bank, and S&T Bank. Customers of these institutions are more likely to be charged maintenance fees, compared with industry average, yet Fees satisfaction remains significantly above average.


3 Reasons Customers May Break up With Your Bank and How to Avoid Them

*Guest post by Karen Licker, Social Banker & Content Contributor (Independent) at J.D. Power and Associates

Just like with couples, the relationship between retail banking customers and their financial institution is complex.   As with any relationship, a healthy connection between two parties is one that develops over time and is typically based on mutual respect, trust, honesty and support.

Most of us know that it takes effort for healthy relationships to work!  Whether we like it or not however, breakups do happen and in the case of bank customers, they get over them quickly and move on to another bank relationship.

The following are a few valuable insights about why retail bank customers may break up with you and how you can implement a few change initiatives to maintain a healthy connection with your customers….to avoid the bank break up.

Reason #1:  Callous Communication – Problems become a customer’s biggest problem

Problem prevention needs to be a high priority for all financial institutions, given the incidence of problems (22% of customers[1] indicate experiencing a problem) and the significant impact that problem incidence has on overall customer satisfaction.

Prevention Tips

  • Ensure customers understand fee structures, deal honestly with them and explain the fees right up front – it improves awareness of fees and minimizes complaints.
  • Engage new customers during account initiation to identify their needs and sell them the products that meet those needs …..it lowers the incidence of future problems if they are happy from the start.
  • Empower bank representatives (branch and call center) with the necessary authority, and provide proper training that will allow them to address any customer misunderstandings at the first point of contact.   It will eliminate confusion for future problems.

Reason #2 – Unmet Needs – You’re not giving them enough of what they want

To successfully manage customer expectations, it is critical to offer the product features and services that meet customers’ needs, such as direct deposit; electronic statements with check images; and overdraft protection. When customers are offered six or more features or services, satisfaction is 58 points higher than when customers are offered fewer than six features or services.

Prevention Tips

  • Show them some love, and offer customers the other innovative products and services that meet their needs at the time of account opening—more than the standard banking products (i.e., checking, savings).
  • Explain the benefits of the services associated with these products (i.e., overdraft protection), not just the features
  • Proactively contact customers.  They love personalized follow-up service, and it leads to greater product penetration and increased satisfaction.
  • Creatively communicate with your customers and use interactive channels —customers who cite communication via email, phone, or at the branch have a higher incidence of opening new accounts than those customers who are just contacted via mail.


Reason #3:  Feeling Underappreciated – In-branch or phone customer service is painful

It is key for financial institutions to focus on providing basic customer service elements in branch offices and on the phone.  From the moment a customer steps into the branch or calls on the phone, each point of the interaction shapes perception of the banking relationship as a whole.  The optimal in-branch or phone experience begins with a focused lobby management program designed around key elements of customer satisfaction is vital.

Prevention Tips

  • Show them you care and provide personal service during customer visits to the branch.  Some include activities such as: greeting, calling the customer by name; offering further assistance; and thanking them for their business after completion of the transaction.
  • Show them you care and provide personal service during call center calls.  Some include activities such as: greeting customers in a friendly manner; providing their own name to the customer; having the customer’s information available; handling any problems without transferring customers; and concluding with offering the customer further assistance and thanking them for their business.
  • Courtesy counts, so provide a level of service that shows patience, respect and empathy.   This not only increases satisfaction, loyalty, and retention but also has a significant impact on reducing future problems.
  • Ensure executive management and company-wide ownership of basic service elements and initiatives. Managers must regularly communicate to employees the bank’s priority on satisfaction.

[1] J.D. Power and Associates 2011 Retail Banking Satisfaction Study