Bank Customer Service Still Stinks

Banks and credit unions realize that there is a strong correlation between customer satisfaction, portfolio growth and financial results, yet recent studies of customer satisfaction indicate there is still a major gap in performance between the financial services industry and other verticals. 

Where are financial institutions falling short in their quest to become customer-centric and how can banks and credit unions begin to exceed customer service expectations? 

According to findings from a new Carlisle & Gallagher Consulting Group study, 65 percent of consumers say their primary financial institution is not as good as (47%), or much worse than (18%) leading customer service companies. This is despite increased investment in customer experience initiatives by the financial services industry. (A SlideShare presentation entitled, Are Two Calls Too Many in the Eyes of the Customer? is available for download)

The key findings of the report include:

• Customer culture drives great customer service
• Customer experience is defined by first problem resolution
• Most complaints involve core banking products (checking, debit card, credit card, mortgage)
• Banks are not listening to their customers
• There is a correlation between complaint handling, satisfaction, loyalty and new business potential

These findings correlate with the just released ForeSee Experience Index that found that the financial services industry had the lowest aggregate score of any industry, including the lowest scores in retention, upsell and referral potential. In addition, financial services as a category had the largest gap between the highest and lowest scoring brands (American Express is 82 and Santander is 65), suggesting that there is much work to be done in offering the experience that customers expect from companies in this category.

Quick Problem Resolution Provides Challenge and Opportunity

One of the impediments to customer satisfaction is that more than a third of consumers surveyed by Carlisle & Gallagher did not believe their problem* was completely resolved. Of the complaints resolved, a whopping 72 percent of the problems required two or more interactions, with close to 30 percent requiring 3 or more interactions. This is certainly not a path to success.

Source: Carlisle & Gallagher (2013)

From an opportunity perspective, more than half of the customers surveyed said they felt like a valued customer when their issue was resolved with a single interaction and that their confidence in the financial institution increased by 38 percent. Conversely, confidence dropped to 17 percent and trust dropped to 10 percent when a problem required two or more interactions to be resolved.

While some complaints may be complex and require further research, this insight shows the power of resolving a problem quickly and completely. In fact, several studies done in the past have illustrated that a customer who has had a problem resolved satisfactorily can be more loyal than one that has never had a problem.

Source: Carlisle & Gallagher (2013)

There is also a direct correlation between a customer's experience and future banking relationship potential according to the Carlisle & Gallagher study. As shown below, while first call resolution can often lead to more business, slower resolution requiring additional interactions leads to higher dissatisfaction and lower potential for relationship growth.

"Banks have one shot to resolve their customer’s problems before they hurt confidence, trust and future banking relationships. Two calls is just too many in the eyes of the consumer when it comes to solving problems," according to Patricia Sahm, Ph.D., Customer Experience and Channels Practice Lead at Carlisle & Gallagher

Source: Carlisle & Gallagher (2013)

Key Problem Areas

According to Carlisle & Gallagher, the key problem area for banks and credit unions are the core banking products, including checking accounts, credit cards, mortgages and debit cards, with fees and payments being the primary focus of service issues. As a result, focusing on resolving issues with these core products will have the greatest short and long-term impact on customer satisfaction.

"We were surprise that is was the rudimentary products that banks offer that are costing consumers the most headaches with personal checking leading the pack at 38%," said Sahm.

Source: Carlisle & Gallagher (2013)

Interestingly, the CG research also found that customers who did not have their problems resolved felt they shared ideas for problem resolution with their financial institution but were not listen to. This was especially true with debit cards (75%), credit cards (68%), mortgage issues (63%) and problems with checking accounts (60%). 

For institutions hoping to improve satisfaction levels, being able to collect and leverage these insights may provide the foundation for improved customer communication and problem resolution.

Opportunities for Improvement

From recent research from Carlisle & Gallagher as well as ForeSee, it is clear that customer expectations are increasing daily with industries other than financial services setting the bar for success.

According to Patricia Sahm from Carlisle & Gallagher, “Financial institutions have a long way to go to become great customer service organizations. In today’s world of instant gratification, consumer expectations are being shaped by experiences outside of the financial services industry where content, interactions and features are richer, delivering a more engaging and rewarding experience for the consumer.” 

With new compliance requirements, expanded transaction and communication channels and increased competition, the potential cost of poor complaint resolution is high. The good news is that, in an industry struggling with trust and service issues, there is a great opportunity for those financial institutions that meet or exceed expectations.

In fact, according to the study from ForeSee, customer experience is highly predictive of future business success. When comparing the financial behaviors of highly satisfied customers (scores of 80 or higher) to less satisfied customers (scores of 69 or less), highly satisfied customers are:

Source: ForeSee (2013)

"Satisfaction studies are not beauty contests," noted Larry Freed, CEO of ForeSee. “We see more and more CEOs monitoring and improving the customer experience because research shows that, when measured correctly, satisfaction predicts future financial results, revenue and even stock prices."

Some of the recommendations provided by recent research includes:

• Manage customer expectations by sharing problems and solutions with transparency and communicating the type of service level that customers can expect. (if it’s going to take 24 hours for the problem to be resolved share this with the customer)
• Invest in solving the issues with core products first (this is where the most opportunity resides)
• Evaluate your complaint database to determine the primary issues needing to be resolved (spend time resolving those issues driving the most pain)
• Create a 'first touch' resolution process (find a way to avoid multiple interactions)
• Improve social channel problem resolution (consumers using social media to complain can impact the most consumers and expect the quickest resolution)
• Develop a robust listing program (customers are willing to share ideas on problem resolution . . . let them help)
• Share the results (employees will respond to tangible measurements)

As we look to the future, the impact of social media can't be ignored. "The social media channel will serve as the benchmark in customer care, enabling customer communication across the banking enterprise and help break down silos within financial services organizations," according to Pat Sahm.

"Beyond social media, banks and credit unions will need to create the feel of first touch resolution for the customer by enabling employees to take quick action to solve the customer’s problem. It’s all about creating a ‘prevent’ defense and a culture of customer advocacy," continued Salm.

"In the next five years, consumer demands will continue to increase and regulatory requirements will only become more intrusive. Customer experience will need to be built into every aspect of the institution, no longer its own department."

 

* 'Problem' as defined by the Carlisle & Gallagher research included inaccuracies, issues with fees, concern with speed of loan, mishandled funds or other concerns and did not include a basic inquiry about a transaction or to ask product questions.


To request a copy of CG’s research report on customer complaint management available in early 2014, email insight@cgcginc.com.

Additional Resources

Are Two Calls Too Many in the Eyes of the Customer? - Carlisle & Gallagher Consulting Group SlideShare Presentation (December 2013)

ForeSee Experience Index - ForeSee (December 2013)

ForeSee Mobile Satisfaction Index: Financial Services Edition - ForeSee (November, 2012)

Credit Card Satisfaction (and Confusion) Increases According to New Study

Despite being confused by the myriad of changes made by many institutions around rewards structures and terms, consumer satisfaction with their credit card issuer increased for the fourth straight year according to a just released 2013 U.S. Credit Card Satisfaction Study from J.D. Power.

According to the study, American Express continued their dominance of the credit card satisfaction ratings for the seventh straight year, with Discover Financial Services being ranked second followed by Chase at third.

The study, which surveyed 14,000 credit card holders in May and June of this year, found that overall satisfaction with credit cards rose 14 points in 2013 from 2012, to 767 on a 1,000 point scale. This was the highest level of satisfaction since the study was initiated in 2006. Satisfaction is measured by examining six key factors, including interaction, credit card terms, billing and payments, rewards, benefits and services and problem resolution.

"The fact that the economy is improving and consumers generally feel better about their personal financial situation is certainly helping to improve satisfaction with credit card issuers, especially considering there was such instability in the industry just a few years ago", said Jim Miller, senior director of banking services at J.D. Power. 

The study found that 27 percent of households reported being better off this year, up from 23 percent in 2012 and only 20 percent in 2011. Only 17 percent said they were worse off which was significantly better than 23 percent last year and 29 percent in 2011. In addition, fewer card holders saw rate increases in 2013 (5 percent), compared with 6 percent a year ago.

Another potential reason for the increased satisfaction could be recent regulations surrounding disclosure and credit practices. The Credit Card Accountability, Responsibility and Disclosure (CARD) Act, signed in 2009 banned egregious billing practices, capped fees and limited interest rate hikes. It also required clearer disclosures.

"I think we can attribute much of the overall satisfaction to the CARD Act", says Ruth Susswein, deputy director of national priorities at the consumer advocacy and financial literacy group Consumer Action. This is supported by the finding that the largest improvement in satisfaction was in the category of 'credit card terms', which improved by 18 points from 2012 levels.

Consumer Confusion Still an Issue

Despite improved satisfaction ratings overall, the credit card industry still is impacted by consumers not fully understanding their reward structure, benefits and terms. According to the study, fewer cardholders reported they 'completely' understood how to earn rewards on their cards (59 percent in 2013 versus 66 percent in 2012). Roughly one third of the card holders surveyed said they were unaware of their card's benefits. 

Some of this confusion could be attributed to the many changes made to most rewards programs over the past 18 months (many programs have moved away from a clear 'points' program to a more confusing 'merchant-funded reward' structure).

Surprisingly, almost three-quarters were not clear about the interest rates they were being charged and 31 percent didn't understand late payment fees. "Customers who use their card's benefits spend an average of $400 more per month on their card, compared to those who are aware of these benefits but do not use them so clearly this is an area of importance to card issuers, said Jim Miller from J.D. Power. 

"While most customers change cards for a better rewards program, they often don't fully understand the rewards offered with their current card. There is a clear opportunity for issuers to better communicate rewards programs and benefits to not only keep customers loyal, but also attract new customers", says Miller.

Source: J.D. Power 2013 U.S. Credit Card Satisfaction StudySM  
© 2013 J.D. Power and Associates, McGraw Hill Financial. All Rights Reserved.

Source: J.D. Power 2013 U.S. Credit Card Satisfaction StudySM
© 2013 J.D. Power and Associates, McGraw Hill Financial. All Rights Reserved.

American Express Still Tops in Satisfaction

The satisfaction model used by J.D. Power looks at six factors (interaction, credit card terms, billing and payment, rewards, benefits and services and problem resolution), with five sub-factors being reviewed within the interaction category (website, online chat/email, automated phone, CSR and mobile interaction). The study also includes approximately 60 attributes that are rated based on customer experience.

Since the inception of the J.D. Power Credit Card Satisfaction Study in 2007, American Express has been ranked highest in overall customer satisfaction among 11 of the largest credit card issuers in the U.S. In 2013, American Express achieved a score of 816 (out of 1,000) and performed best in all categories measured, with notable performance in the areas of rewards, benefits and services and billing and payment. American Express again received top honors related to Customer Service Representative (CSR) interaction.

It is clear that American Express has not rested on their laurels despite being consistently ranked highest in customer satisfaction. Over the past year, American Express has introduced new offerings and has expanded digital support to improve the customer experience. Some of the enhancements include smartphone enabled gift cards, real-time purchase, account balance and alerts through Passbook, account alerts through a Facebook servicing app, online customer forums, and enhanced benefits on specific Amex and partner card offerings.

After American Express, Discover was ranked second in 2013 with a score of 812, performing well in credit card terms, interaction and problem resolution. The only other credit card issuer that ranked higher than the overall average score of 767 was third ranked Chase, with a score of 783.

Source: J.D. Power 2013 U.S. Credit Card Satisfaction StudySM
© 2013 J.D. Power and Associates, McGraw Hill Financial. All Rights Reserved.

Key Performance Indicators Provide Guidance for Success

Key Performance Indicators (KPIs) are considered the best practices that have the most influence on customer satisfaction. The 2013 J.D. Power study identified 14 core KPIs, with each having a different level of importance from the customer perspective. The KPIs were segmented into three levels based on prioritization that was determined by the potential impact on satisfaction as well as the percentage of interactions that meet the KPI. 

The importance of a satisfactory website experience is clear. The range of services that can be performed on the site, the usefulness of information provided and the clarity of this information all had an impact on the improved scores this year.

Based on the chart below, issuers should place initial focus on KPIs with the greatest potential impact.

Source: J.D. Power 2013 U.S. Credit Card Satisfaction StudySM

© 2013 J.D. Power and Associates, McGraw Hill Financial. All Rights Reserved.

The importance of the KPIs identified is illustrated best when J.D. Power associates the meeting of KPIs with both satisfaction and bottom-line metrics. According to the research, when KPIs are missed, satisfaction declines considerably, with satisfaction falling below industry averages when an issuer misses more than 3 KPIs. Additionally, as more KPIs are missed, advocacy and loyalty metrics also decline measurably as shown below.

Source: J.D. Power 2013 U.S. Credit Card Satisfaction StudySM

© 2013 J.D. Power and Associates, McGraw Hill Financial. All Rights Reserved.

Future Opportunity

While not shown as a specific KPI, the sub-factor of mobile functionality had an impact on satisfaction, with ease of use and speed of completing a transaction being important. However, less than one-quarter of customers can currently use a mobile app to view their card benefits, redeem rewards or get special promotional offers. It was also found that there has been a much slower adoption of mobile app technology among credit card customers compared to retail banking customers (5% vs. 19% respectively) possibly reflecting the lack of functionality available.

It is expected that mobile offerings and functionality may be the next battlefield for customer satisfaction, providing a differentiator that doesn't currently exist in a relatively 'me too' product category.

For more information on this study, visit the J.D. Power website here.

All Bank Customer Experience Initiatives Are Not Created Equal

Despite an increased focus on customer experience initiatives by banks of all sizes, new research has found that not all of these efforts may be resulting in revenue growth. 

In fact, while some banks and credit unions are significantly outperforming peers, others aren't focusing on efforts that customers care about most.

In a just released study from PeopleMetrics entitled, "A Shifting Landscape: Customer Experience Trends and Practices in Retail Banking", it was found that banks are engaged in a surprisingly large number of customer experience initiatives. In fact, it was found that 7 out of 10 executives were working on customer-centric practices. 

While a good start, the research found that most banks have shied away from activities that require investment of human or financial resources. Part of the problem is a lack of association by banks between customer experience initiatives and a tangible ROI.

The important question is which activities lead to revenue growth. By evaluating activities being implemented at growth and non-growth banks, the research found that there were four fundamental customer experience practices that could be directly tied to revenue growth at financial institutions. These insights were drawn from a more encompassing PeopleMetrics study 2013 Most Engaging Customer Experiences (MECx) completed earlier this year. 

The practices that were found to be most correlated with financial performance were:

1. Taking action on individual customer feedback
2. Utilizing a decision-making process that emphasizes the customer
3. Sharing a common definition of what a positive customer experience is
4. Establishing a goal for customer experience improvement

The two most important differentiators are that growth banks have invested in technology that helps to close the loop between customers who report a problem, indicate a need or recognize an employee who performs well. Growth banks and credit unions also have a set of criteria they follow when prioritizing, funding and resourcing customer-aligned initiatives. 

According to Kate Feather, EVP of PeopleMetrics, "Growth banks have embraced practices that create customer understanding and action taking at all levels of the company. Banks just beginning their customer experience transformation, or struggling to see results from their current efforts, should start with these four disciplines."

Perception Versus Reality Disconnect

Unfortunately, while bank executives are well intentioned in their customer experience efforts, many may be focusing on the wrong objectives and the result is a disconnect between the impact banks believe they are making and the impact customers feel on a daily basis. In fact, the PeopleMetrics study found that 78% of bank executives believed their efforts were successful, while only 28% of customers said they had seen noticeable improvements in their banking experience.

Moving forward, it will be important for banks to align their priorities around what the customer cares about most. For instance, while banks continue to focus on technology advancements as a way to improve the customer experience, the customers place technology improvements much farther down their list of needs. Alternatively, customers believe banks should focus on improved products and a stronger focus on putting them first, with banks similarly giving these improvements less focus.

Because moving forward with new technologies is still important to most banks, the key will be for banks to build out technology in a way that demonstrates a customer centricity.

 

What Are Customers Looking For?

As most research studies confirm, customers banking with community banks and credit unions give their institutions, on average, higher customer satisfaction ratings. But size alone doesn't matter. USAA and other larger organizations reviewed in the study still show they can deliver a strong customer experience. 

The PeopleMetrics study found that regardless of the size of organization, all customers are first and foremost looking for an 'enjoyable experience' followed by functional elements such as 'easy' and meets needs'. When organizations of different sizes were reviewed, the largest gap between organizations was in the 'enjoyable' dimension (15 points). 

Since 'enjoyable' is more of an emotional dimension, it is more difficult for a bank to achieve (when was your last enjoyable banking experience?). PeopleMetrics has an extensive discussion of this concept with case studies provided in their report (available for free download here), but five dimensions were found to be the most impactful with organizations who make the customer feel valued, appreciated and cared for doing the best:

• Secure
• Confident
• Cared For
• Appreciated
• Valued

Recommendations

PeopleMetrics provides several recommendations to organizations that want to realize revenue gains from their customer experience initiatives.

Take Action on Feedback

Growth banks not only ask for customer feedback, but have made the investment in technology that allows them to take action on the feedback immediately. Without this feedback loop, both customers and employees will not get maximum benefit from customer experience initiatives.

Commit to Guiding Principles

Moven and other growth banks examined in the study put the customer experience at the center of all that is done by the organization. These Guiding Principles not only lead the organization but provide a standard for measurement.

Make It Personal

While smaller organizations have an inherent advantage in making the customer experience personal and enjoyable, larger organizations can leverage technology that can help to replicate this engagement. With the help of internal and external data, larger organizations can better identify needs and provide solutions that are in the best interest of the customer.

Invest in Long Term Relationships

Moving from a transactional mindset to a customer centric view benefits both the institution and the customer. By taking a long term view, banks and credit unions can focus on growing relationships that are mutually beneficial.

Focus on Your People

The foundation of a strong customer experience culture is the ability to find (and keep) the best possible front line employees. Through effective training and a Cx rewards structure, it is possible for any organization to take the customer experience to the next level.

According to Kate Feather from PeopleMetrics, “For banks and credit unions who have mastered the practices discussed in the study, there’s a big opportunity to create a truly innovative customer experience." She adds, "Customers in the study told us they want banks to make them feel 'valued' and 'cared for'. This is far beyond the functional elements of banking, and offers insight on how leaders can design a customer experience that actually builds lasting, emotional connection with a customer.”

Additional Resources

2013 Most Engaging Customer Experiences (MECx) - PeopleMetrics (2013)

Retail Banking: Customer Experience Transformation Trends and Priorities - PeopleMetrics (June 2013)

A Shifting Landscape: Customer Experience Trends and Practices in Retail Banking - PeopleMetrics (June 2013)

Do Customers Look Forward to Seeing You? - CustomerThink/Jeanne Bliss (May 2013)

Are Corporate Customer Experience Intentions Overwhelmed by Senior Exec Risk Aversion and Other Roadblocks? Can That Be Changed? - CustomerThink/Michael Lowenstein (February 2013)

How Chase Delivered an 'Enjoyable' Banking Experience to Me - CustomerThink/Jessica Sampel (May 2013)

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Online Banking Key To Satisfaction and Growth at Credit Unions

According to recently released research, credit unions continue to score higher than banks in six key areas that have been found to drive customer satisfaction.

Interestingly, however, while lower rates and fees are still a significant component of a positive member experience, the impact of improvements in the online/mobile channel delivery will have the greatest impact on increased customer satisfaction in the future.

CFI Group, a customer satisfaction technology and analytics firm, in an inaugural study entitled "2013 Credit Union Satisfaction Index," measured six primary drivers of customer satisfaction on a 0-100 point scale and found that credit unions consistently scored high in all categories, with each driver scoring in excess of 80 points. This score was higher than many other industries including retail banking. 

CUSI Satisfaction Driver Scores

Of the six drivers of satisfaction measured, however, the 2013 CUSI found that only four play a significant role in driving member satisfaction and, therefore, should be the focus of the industry. At the top of the list for primary drivers that could impact future satisfaction were "online banking," "branch staff," "branch convenience," and "information/communications." 

The chart below illustrates the contribution of each primary driver towards increasing member satisfaction. The two missing drivers of satisfaction ("rates and fees," and 'products and services") have already 'maxed out' as a driver of additional satisfaction according to the study, thereby limiting any the impact that an improvement in these two drivers would have on future member growth.

Driver Contribution to Increasing Satisfaction

When viewed in terms of the "impact" of each satisfaction driver, the study also provides quantification of each driver's potential to improve the overall satisfaction score. For instance, for each point of improvement in the driver score (left side of chart), the overall satisfaction would increase by the value of the impact (right side of chart). Again, there is nominal impact for any improvement in either "products and services" or "rates and fees".

It should be noted that the impacts of each driver can also go either way, so a decrease in any score on the left will have a negative impact on satisfaction by the multiplier on the right.

This research supports several other industry studies that highlight the importance of a strong online and mobile banking offering. While once used by only early adapters, online and mobile banking are now 'table stakes' in the competition for members and deposits, and are becoming a point of differentiation for many organizations as they continue to roll out innovations (mobile check capture, photo bill pay, ATM locators, etc.).

Because of the importance, credit unions need to be in a position to at least keep pace with the leaders in the marketplace (including major banks), and potentially find solution partners that can provide differentiated applications for online, mobile and tablet service delivery.

In addition, at a time when financial institution branch and employee consolidation is inevitable, credit unions should be sensitive to the potential risk and opportunity for following the consolidation trend. With "branch staff" being the second most important driver of member satisfaction, the potential for cost savings through consolidation should be evaluated against the backdrop of the importance of the front office team to the perception of credit unions as being more consumer focused than their banking counterparts. 

“CUSI is an important tool for benchmarking and tracking its competitive differentiators," said CFI Group CEO Sheri Petras. "CFI Group is proud to have worked so closely with the industry to apply the proven ACSI methodology to evaluate current customer satisfaction, and how that satisfaction level will impact the ongoing success of its financial institutions."

Impact on Future Behavior

The CUSI model also measured the impact of each driver on potential future behaviors using the American Customer Satisfaction Index (ACSI) methodology. By using multiple questions around the importance of each driver and applying optimal weightings, the study was able to determine how the current overall satisfaction within the credit union industry could impact growth opportunities for the industry.

As shown below, all potential outcomes were strong, with retention of a member being most likely and the recommendation to a friend also being strong. While the score for using an additional service was also rated high, it is up to each credit union to take advantage of this future opportunity.

Relationship Growth Opportunities

In addition to analyzing member satisfaction, the CUSI research also determined product and service penetration among those surveyed. Similar to most financial institutions, the penetration of primary financial services (checking, savings, debit card) by credit unions was high across all age categories. For other product types, the penetration was lower than in the banking industry, and differs significantly across age groups (mostly caused by lifecycle needs).

Credit Union Product Penetration

Product Penetration by Age

Of more importance than product penetration, however is the purchase intent of the 400 random credit union members surveyed. Consistent with many other studies conducted for the banking industry, auto purchases are on the horizon for many households in the coming months. What may be somewhat unique to the credit union industry may be the high percentage of households that indicated a CD opening was in their future plans, possibly reflecting the older demographic mix at many credit unions.

Purchase Intent

What is important to note is that 'purchase intent' does not perfectly reflect reality, since people's financial plans and the reality of the economy, etc. can impact new account openings.

In addition, in light of the primary findings in this study, the potential for effective cross-selling can be significantly impacted by households doing more of their transactional banking through online and mobile channels. As online banking grows, interaction with branch staff will decrease.

This phenomenon will make it even more important that branch staff continue to have a strong interest in member’s well being, making sure that they (the members) are well aware of the additional products availability and the benefits of obtaining them through the credit union.

In addition to an increasing level of importance of the branch staff and all direct customer contact personnel, credit union marketers will need to find new ways to connect with members and to present product offers to members at the right stage of their buying cycle. This will require new technology tools and potentially new systems to better understand your customers and their needs.

Additional Resources

2013 Credit Union Satisfaction Index - CFI Group (May 2013)

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