By Cindy Griffin, Financial Services Marketing Specialist, Smart Communications
Banks shell out billions to chase new customers with better rates and shinier apps when research suggests the biggest threat to growth is retaining their own customers.
Customer churn is usually thought of as the result of one dramatic failure, like a declined payment or a failed transfer or an unpleasant call. But customer confidence can slip away far more gradually. A fraud alert that reads like small print. An update sent by post when the customer asked for email. A form that asks for information that the bank already knows.
Together they paint a picture for the customer that their financial institution doesn’t quite have their back or know who they are.
By the time that customer starts comparing the rates and services of other financial institutions, the decision to leave is often already made. The switch is just making it official.
The numbers back this up
The research, which surveyed thousands of financial services consumers globally, revealed that 62% would consider switching providers if communications failed to meet what they were looking for. That figure jumps to 71% among millennials and 70% among Gen Z, the customers that banks most need to retain for the long haul. Meanwhile, only 59% say their provider communicates through their preferred channel, a huge miss particularly as the research shows the importance of communications in customer retention.
And what about trust itself? Only 66% of consumers say they trust their financial provider always or almost always. That leaves a third who don’t. Among Gen Z it drops to 56%. The share who rate their bank’s communications as very good or excellent has slipped to 59%, from 62% in a single year.
It’s a slow decline. And slow declines don’t set off alarms in the way a sudden collapse does. But bit by bit, it shrinks the distance between a customer who stays and one who goes.
Trust needs defending every day
The mistake many banks make is that they don’t treat communication as a competitive advantage. If organisations cut corners on clarity or consistency to save money in the short term they’ll quietly but steadily impact loyalty.
Fixing this requires banks to get four things right.
First, meet customers on the channel they chose. When only 43% say they’re even sometimes asked about their communication preferences, and only 56% say those preferences are honoured even some of the time, it’s no surprise that people start looking elsewhere. An ignored preference reads as indifference, even when the underlying service is fine. It’s also not a one-size-fits-all answer. Email leads across generations, but younger customers lean far more heavily on SMS for time-sensitive alerts like fraud notices or payment reminders. Thus, it’s important to note that preferences shift depending on the content of the message.
Second, speak in plain language. Unclear communication is the biggest reason customers give up on digital self-service and pick up the phone, cited by 45% of consumers. This comes in ahead of confusing forms and impenetrable documents, and that drives up servicing costs and adds another check in the customer’s frustration tally.
Third, fix the friction that’s hiding in plain sight in data collection and forms. Just 34% of consumers find financial services forms easy to complete, and 61% say they’re likely to end an interaction altogether if a form or data collection process proves too difficult. For millennials, this latter number climbs to 69%. Half say they always or sometimes have to repeat themselves when switching between channels or representatives. The customer interprets this as a bank that doesn’t remember them or doesn’t care to remember them. Every outmoded application or account form is a type of communication too, after all, and a bad one unravels the goodwill you’ve built everywhere else.
Fourth, think of proactive updates and continuity across channels as ways to build trust. Proactive communication is now cited by more than 80% of consumers in the US, UK and APAC as a key trust driver, and 57% say they trust a company more when it offers a consistent omnichannel experience. But only 56% of financial services consumers are satisfied with that consistency. Increasingly, customers expect their bank to spot problems before they need to ask, to communicate to them consistently across channels, and to remember them whenever and wherever they show up next.
Communication as a competitive edge
The upside for banks that get this right is that 76% of customers say they’d recommend their financial institution to a friend if communications exceeded expectations. A smooth forms or data collection experience makes 78% say they’d stay loyal.
None of this begins with a bigger marketing budget. In a market where banking products and services quickly become commoditised, exceptional communication is one of the very few places banks can differentiate.
The institutions that treat every alert, every form and every channel choice as an integral part of the customer relationship are the ones that will hold onto the customers everyone else is desperate to win.
