Bankers are losing customer trust and loyalty as the industry fails create a personalized banking experience and inspire trust in customers. A recent IBM study demonstrated serious gaps between how banking executives feel they are doing and how their customers feel they are doing.
62 percent of surveyed banking executives believe they offer “excellent customer service,” although just 35 percent of retail customers agree therewith.
The 27 percent gap poses an obstacle for banks who hope to foster customer loyalty into the future. Merely 30 percent of customers feel they receive a personalized customer experience, with 45 percent of bankers claiming to believe they deliver such an experience.
The study, called Banking Redefined: Disruption, transformation and the next-generation bank, was conducted by the IBM Institute for Business Value. As the report states, “...banking executives are far too optimistic on many fronts. Customers don't believe their banks are providing differentiated or personalized service, and for the most part, they would readily change banks.”
Traditional banks are facing increased competition from financial technology firms, mobile payments companies and startups which offer banking services, the report concludes. This week, for instance, Virgin published a blog titled, “In focus: The future of money”. The piece details modern modes of value transaction, including Bitcoin, Stripe, local currencies and more. (The blog includes interviews with two cryptocurrency personalities, Charles Hoskinson and Jon Matonis)
The report also uncovers an overly optimistic stance on social media amongst bank executives, who believe social media is important for their bank’s customer relationships with 54 percent believing social media helps build customer bases. 18 percent of customers engage on social media.
80 percent believe banking mobile apps are user friendly, and 86 percent find them easy to use. Just 10 percent of banking executives foresee mobile devices carrying the majority of banking transactions. Forty-one percent of customers anticipate their transactions to be conducted on a device in the coming three years. The IBM report concludes banks have a few choices:
They can pretend it isn't happening and be cannibalized by their competitors; they can try to compete in low-margin services, acting as a processor for various organizations; or they can recognize the incredible value in their customer relationships and build a powerful ecosystem around them. For example, TD Bank Group, one of the largest banks in North America, pursued a social transformation promoting collaboration across the bank and with a wider set of partners and the fintech community. TD Bank has achieved substantial success in its collaboration initiatives, with thousands of communities created comprising well in excess of a million network connections.
"Traditional concepts of what a bank does will change fundamentally and permanently," said Likhit Wagle, IBM Global Industry Leader for Banking & Financial Markets. "Bankers will no longer be bankers in the traditional sense. The most successful banks will be focused on collaboration, agility, innovation, analytics and above all on going beyond digital and transforming into becoming a Cognitive Bank."