Chief Investment Officer
Commercial Loan Automation
BirdsEye Viewthe impact of mobile banking on customer loyalty
Customer attrition is the bane of baking, and especially retail banking. Acquisition costs of new customers are high, and competitors are coming up with new schemes daily to lure customers away. It also takes a retail banking customer an average of 18 months to season and bring their full business complement to the bank, so replacing a mature customer with a green one isn't a perfect substitute. Bottom line - retention is golden. But how do you get there?
The typical answer has been - and still is - effective cross selling. Giving customers every single product they need, but only those products they do need, to perfectly match their behaviors with the appropriate, fully customized product suite.
The implications of mobile banking on customer retention remain largely unknown, as the channel has been bundled with online banking all too often. Bain & Company has studied the topic more specifically both in the US and elsewhere, and the results are interesting.
The facts above indicate that customer loyalty will be correlated to whichever bank app is on their smartphone or tablet's first page. Customers will get accustomed to the look and flow of your app and be reluctant to change, just like they do at the grocery store (they know where everything is). Hence, mobile functionality, which is already table stakes for customer acquisition, will become key for customer retention, especially when it incorporates convenience, ease of use and some "hot" functionalities.
This statement is especially true for affluent customers, who generally have lower loyalty scores than less affluent segments. Such customers typically expect premium service and tailored, expert advice. They want personal banking relationships beyond the convenience offered by digital channels. This is an important fact for banks, since an affluent customer who is a bank fan (net promoter) has 5X the economic value of a similar mass-market customer. Both the opportunity and the payback are significant and difficult to capture.
Two significant questions need to be effectively answered by bank management:
The answer to the first question is extremely bank-specific, and depends so much on current branch distribution, location within the US and competitive profile. The answer to the second question is also complex, since most banks claim to offer stellar, fully differentiated, inimitable customer service to all customers, let alone their MVPs. The key here is not just to figure out the funding of this effort through branch efficiencies, but also how to truly differentiate on the customers' terms, by giving them what they really want, which will induce them to stay with you through thick and thin. Starting from their needs is far more effective than developing a value proposition generated by the greatest brains in your bank. The customers know what they want. Let's not second-guess them. Use primary and secondary research to uncover what your most valued customers are after, and then give them that across channels to retain them for life. I'd bet that mobile banking plays a central role in this value proposition!