11th Nov 2021

Banking on customer loyalty: how can banks and financiers improve their retention strategies?

THOUGHT LEADERSHIP

Long gone are the days of speaking to someone in a suit behind a piece of glass to withdraw money. Challenger banks, neo banks and the natural acceleration of fintech have really shaken up the market over the past five years and shown that you can get a great experience from your financial provider – whether you’re a business or consumer.

With fintech providers now popping up from every corner of the globe, offering a brilliant customer experience through streamlined digital journeys and instant customer service, traditional high street banks are now expected to deliver the same level of service but with less agile systems. Banks that want to keep customers loyal need to provide a service which takes this agile approach – any less just won’t cut it.

Some providers are however being left behind, so it was no surprise when research we commissioned recently uncovered almost a quarter of consumers admit they’re not loyal to their bank/financial services provider, while just one in five feel their bank values them as a customer.

The research of more than 2,000 UK consumers also uncovered just 18% believe it pays to be loyal to their bank/finance provider, with those surveyed citing good customer service, trust and reliability as having the biggest impact on their decision to stick with a provider.

In addition, the data revealed that over a 12-month period, the average consumer spends £140 on banking/financial services (not including big ticket purchases such as mortgages and loans etc.). They’re typically loyal to their provider for seven years and less than half (40%) have been a customer with their bank for more than 10 years.

While the new approach to banking is exciting, different, and wholly necessary, it also means that it tends to be harder to retain customers than it was a decade ago – particularly for traditional institutions. It’s not necessarily switching that’s the problem for banks – many customers are now keeping hold of their historic account, but opening multiple other accounts with a range of providers to fulfil different requirements. The problem here is that the custom of one person is now typically split three or four ways, rather than just one.

As a result of countless new innovations in recent times, loyalty is getting more and more difficult for banks to hold onto, as customers look to make the most of new offerings and diversify where they put their money. With this only set to accelerate over the coming years a fintech continues to thrive, financial services firms would be wise to assess their customer experience and loyalty strategies now, and get ahead before it’s too late.

Ranked in order of importance, the factors likely to result in increased spend on banking are:

 1. Good customer service.

 2. Reliable & good quality product and service.

 3. Trust in the brand and business.

 4. A loyalty scheme.

 5. Ethical business practices (including paying employees fairly, supporting employee wellbeing).

 6. Receiving regular offers relevant to them.

 7. Brand values aligning with their personal values.

 8. The business giving back to charities and communities.

 9. More engaging, personalised, localised marketing.

The research also revealed consumers are becoming increasingly conscious of who they bank with:

 • 60% of consumers admit bad interactions impact their loyalty to a brand and often result in them cutting ties.

 • Half would pay a brand more for a product/service over their competitors if they trusted them and knew they were reliable.

 • 24% would leave a brand if they found out they mistreated employees.

 • 72% say they’re loyal to their banking/finance provider.

 • Almost a quarter of consumers admit they wish their bank offered them more perks.

 • 25% confirm they’re rarely offered any perks from their bank.

 • Just 6% are often offered perks from their bank.

On the sectors it pays to be loyal to, this is how various industries rank according to consumers in comparison to banks/financial services:

 1. Retail (supermarket).

 2. Mobile provider.

 3. Food service and restaurants.

 4. Finance (banking).

 5. Hotels and hospitality.

 6. Travel (airlines, trains).

 7. Utilities (gas and electricity supply).

 8. Insurance (home, car, life, health.

 9. Telecoms (landline, at home broadband).

 10. Media (streaming services – TV, music, entertainment, etc).

 11. Retail (fashion).

 12. Leisure (gyms, cinemas).

We’re anticipating the banking and financial sector to innovate considerably over the next few years. With this will come increased competition, making it more crucial than ever before for those in the industry to be focusing on ramping up their customer retention strategies. Advances in technologies – notably AI and machine learning – are going to make personalisation a breeze, but it’s how financial service providers use this data that will make all the difference.

Building trust and making customers feel valued with bespoke rewards while offering great service and reliable products are the key factors that will instil long-term loyalty. We’re confident the next few years will bring with them a huge range of opportunities for bankers/financiers to build huge gains on the loyalty front, but it will be interesting to see who utilises the tools available effectively.

So how can banks – both traditional and challenger – keep pace with this constantly evolving market and foster a loyal customer base?

Learn more by downloading our full Banking on Customer Loyalty report below.

Download our report today.

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