Your Customers Told Us
February 25, 2020
The recent Banking Benchmarks collected 644,898 reviews from consumers and businesses across Pennsylvania and New Jersey and revealed some interesting and surprising findings about how they use and view banking technology, and how gender, age and income drive that usage.
Absolutely. The analysis across every single bank in the two states show that consumers and businesses that use and like their bank’s technology are 26 percent more likely to remain loyal and to increase their share of wallet with the bank. On the flip side, bad, out-of-date technology increases the likelihood of a customer leaving by 202 percent!
Fortunately, most banks are doing a good job since only 10 percent of customers think the technology at their bank is subpar. (See the case study for 2 examples) Do you know how your customers rate your technology?
This answer is more complicated. Most consumers do say that technology is important in choosing a new bank. That much is clear. But what is less clear, in the minds of those same consumers, is which banks actually have the best technology. The latestBenchmark results show that 72 percent think most banks and credit unions have about the same caliber technology and tools as every other bank. Out of the thousands of institutions we cover, the vast majority were rated average in technology by prospects (potential customers). We asked prospects how good or bad they thought the technology would be at other places they do not yet bank at, and only 32 banks and credit unions in the MidAtlantic were seen and probably delivering low quality technology. While this is bad news for the largest banks that have spent hundreds of millions of dollars developing their tools and even more money marketing those tools, it is good news for many smaller institutions that are getting the benefit of the doubt from prospects.
When consumers are asked to rank banks they have not used, they are slightly more likely to assume that the larger banks have better technology and tools than smaller ones. However, this gap has been narrowing over the past five to six years as more and more customers tell us that they assume all institutions have basically the same level of online and mobile services. In fact, when we analyzed the latest Benchmark results for each individual town across New Jersey and Pennsylvania (Maryland is next), we found that in over 80 percent of the towns, there was at least one community bank ranked in the top three in technology by potential customers.
When consumers and businesses are asked to rate their own bank, it is a different story. As you can see from the regional rankings listed here, smaller community banks are rated as high or higher than the largest banks over 55 percent of the time. It also shows that some banks are inconsistent in different areas of their footprint: they are rated highly by customers in one area but lower by customers in another area. This is usually due to inconsistent training (see case study). This serves to remind all banks that while the biggest banks might have an advantage in spending and image, community banks can certainly hold their own.
Mid Atlantic banks have to ensure that they are ready for the continuing shift away from the branch toward technology. More than two-thirds of Pennsylvania and New Jersey customers say they will increase their usage of online and mobile banking tools in the coming year. For high income earners (earning over $250,000 per year), that increases to 71 percent, and for Millennials, that goes up to 74 percent.
Many bankers we meet with believe that the younger generation, the Millennials, are causing the branch to go the way of the dinosaur. And many others say that the only reason to keep branches open is to accommodate a handful of elderly customers who just want to come in for a chat.In Pennsylvania and New Jersey at least, both notions appear to be overblown. Across the region, less than half of Baby Boomers say they prefer using a branch or the phone over online and mobile. Among Millennials, about a quarter say they actually prefer the branch or phone versus online and mobile. Keep in mind that this does vary quite a bit from area to area, so it is very important to understand the dynamics in your particular trade area.
In a reversal of roles in years past, women in the Mid Atlantic are now almost 20 percent more likely than men to prefer online/mobile to branch/phone. Women are also going to increase their use of online and mobile faster, further widening this technological gender gap. This gender disparity is playing out in some interesting ways, with a few Pennsylvania and New Jersey and Maryland banks ranking much higher among women than men. With the financial and tech savvy of women compared to men, this could be a very lucrative approach for the banks with the right image.
Many articles have proclaimed the banking industry as doomed in the face of a fintech revolution, with companies like Apple, Google, Amazon and others supposedly poised to relegate the hapless old bank to the history books alongside the telegraph office and the general store. In the Mid Atlantic, non-banking technology has made some inroads, with 31 percent of customers currently using some non-banks to handle their money. While that is not a surprise to many, what might be a surprise is that Millennials are the least likely to use non-banks and BabyBoomers are the most like to do so. The reason lies not in age, but in wealth. New England residents with incomes over$100,000 are much more likely to have diversified their financial partners than their less well-off counterparts.
Since we are continuously interviewing so many households and businesses about their banking lives, we often take the opportunity to probe deeper for our subscribers into the issues they care about. A large number of them have been asking about non-banks lately, so we took it upon ourselves to ask if they would ever consider banking with some high profile non-banks that are thinking of invading the banking space. The results are below. As you can see, PayPal is in the best position, while Facebook is even less considered than Starbucks.
We also saw a big variation by geography:
We also saw some interesting differences by gender
The Banking Choice Awards will be awarded again in 2020 and the rankings below are a mid-year preview of those results. The ratings and rankings are based upon interviews we conduct with each institutions’ own customers. The rankings are likely to change before the Awards as some institutions roll out new services and as others (regrettably) stumble. Stay tuned!
Technology and tools really can make a difference in customers’ experience, and usually for the better. It is important to know how your customers rate your technology—is it making their lives better or causing hassle? Just as important is to know how those ratings compare to your local competition, so you know before you fall hopelessly behind. Once you have gotten the objective feedback from customers, then you can plan how to fix it and prevent attrition, or to leverage it to increase loyalty and gain new business.
Bruce Paul is the founder of the Pennsylvania, MD, NewJersey Banking Benchmarks, and leads the Banking CXlign team at the RivelResearch Group. For more information about your own customer ratings andrankings, contact him at 203-906-8923 or email@example.com
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The Bottom Line
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