Building Loyalty in a Digital Age

  • Iain Dey
  • 26 March 2019
  • Blog | Fintech and Innovation in Banking | Blog

How can banks build loyalty with their customers in a digital age? Iain Dey at Edelman explores the critical issue of trust.

When Steve Jobs launched the iPod, taking Apple into the music business, the outside world missed the broader point of what he was doing.

Not only was Jobs proving, against the odds, that the general public could be made to pay for media content online – thus paving the way for Netflix, Spotify and newspaper paywalls. He was also creating a payments infrastructure that would support a whole new digital economy.

Some 17 years on from the launch of the iPod, the vast majority of consumers are wholly-comfortable making online payments. The typical consumer prefers to bank online, ideally via an app. Digital-only banks like First Direct frequently top customer service polls. Having a PayPal account is a relatively normal thing among online shoppers. Using a thumbprint to authorise a payment is increasingly standardised.

Trust in tech

Edelman’s Annual Trust Barometer Surveys – the latest of which came out in January 2019 – continues to indicate that tech companies are more widely-trusted than financial services firms. That’s in spite of Silicon Valley’s high-profile issues with data usage and tax payments.

Companies earn trust by telling the truth, being straightforward with their terms and conditions – but mostly by delivering upon what they promise.

For banks, that means app-based transactions that actually work - with simple security measures, and call centres that treat you like a human being.

Big banks all know this, of course, and are investing heavily. But can they keep pace? It is hard to compete in a world where digital start-ups like N26 or Monzo can offer slick “Know Your Customer” checks to get accounts up and running in a blink of an eye.

Bureaucratic, old-fashioned lenders that have long and bitter experience of dealing with regulators need to be wary that their innate conservatism does not become their undoing.

Switched-off consumers?

Yet those banks that can prove that they are at least competitive in an online environment are likely to benefit from some momentum. In spite of all the governmental moves to encourage account switching and competition, a great many consumers can’t be bothered to do so.

A survey we conducted for Compare the Market in 2017 showed that 62% of consumers had never switched their current account, and 59% of those who had would never do so again.

It takes a lot to drive a customer away. A more recent survey for the same client showed that 79% of consumers that had fallen victim to an online fraud or account hack did not switch bank afterwards. This has been borne out, to some extent, by TSB. In spite of the bank’s well-publicised IT problems, there was no particular run on deposits that followed.

Complacency is never a strategy, however. With every passing day, the average consumer becomes more digitally savvy – and more cognisant of the companies with which they do business.

All of our studies into consumer sentiment show a broad increase in belief-driven buying. In all major economies globally, customers tell our pollsters that they want to give their custom to companies that have a sense of their societal role. They expect businesses to think about things like climate change, and inequality.

This is now true across all demographics; the over 55s care as much about a company’s purpose as millennials do. Our recent Institutional Investor Trust study demonstrated that fund managers also expect the companies they invest in to have environmental, social and governance concerns front of mind at all times.

And it’s not enough to send your chief executive out with a photographer to plant some trees, or to tweet about a trip to a local hospice. Trust can only be earned. There are no shortcuts.

Read our feature on customer loyalty in the latest issue of Chartered Banker magazine

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