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Customer loyalty in retail banking

Posted on: Thursday 22nd of November 2012

We’ve completed our major research project looking at customer loyalty in retail banking. The report, ‘What are banks for? Customer Loyalty in Retail Banking’ is compelling reading for anyone who wants to understand what customer loyalty means for banks in today’s digital economy.

We knew the research subject was ‘of the moment’ when we gained immediate interest and involvement from senior directors in the UK’s big four retailing banking groups, both big and small building societies, new market entrants and pure play internet banks.

The findings are significant for an industry under pressure to improve customer focus and agility: the report suggests that retail banks should not be as easily dismissed as some commentators suggest in terms of their ability to adapt to the information age.

Why loyalty?

In the research we set out to explore current loyalty strategies and the role of information assets and information driven services in driving change in the retail banking sector. In doing so we wanted to look in more detail at what banks are currently doing to seize the opportunity to use customer information as a source of innovation and a means of differentiating themselves, and what the obstacles might be.

Our hypothesis was that an increasingly digital world, plus the accelerating trend towards deploying information as a tool in the hands of the individual and peoples changing attitudes in terms of wanting to manage information about themselves, are casting a new light on traditional notions of customer loyalty. In the past, banks have been able to rely on customer inertia (rather than positive customer loyalty), but can this continue in a fast changing environment?

What we found is that banks know they need to rethink their loyalty strategies. This tag cloud shows the key things that banks state customers are now looking for.

The words ‘trust’, ‘fairness’ and ‘transparency’ are seen as key terms, rising most rapidly up the customer agenda. This is where banks most need to regain ground. Banks recognise they need to re-energise customer relationships, rebuild trust and become more customer-centric or face mounting pressure from new sources of competition. And they see that one of the ways to do this is through information driven services that enable them to provide a more targeted, dynamic and personalised customer service, that gives customers good reasons to stay, buy more from the bank, and recommend it to others, while also enhancing the value of the customer data banks can access and use.

The high level results

Some of the key findings include:

  • Banks are still driven to prioritise customer acquisition over retention but bankers know their industry is in flux and that they need to act quickly to become more customer-centric.
  • Innovators in the sector believe new digital information services, which help customers make better decisions and manage their financial affairs more easily, are crucial to rebuilding trust and satisfaction, and creating competitive advantage.
  • Competition in this area is intensifying and some progressive players are breaking away from the pack with confirmed investments in information services. This could trigger far reaching transformative change in the banking industry.

We think the report provides some new and radical insights. If you would like more information on the research, the findings or to discuss the opportunities arising from new information services please contact Chris.

Click here to read the Press release.