F O R E S E E E X P E R I E N C E I N D E XB A N K I N G R E P O R TA U T H O R

Jason Conrad

R E S E A R C H A N A LY S T S

Angela DiNicola Andrew Hyclak Karly Szczepkowski

© 2017 ForeSee

Banks are struggling to gain new footholds amid mounting

industry disruption. Digital migration, increasing competition,

and rising customer expectations weigh heavily on the banking

industry, bound by regulatory hurdles and prone to cultural

inertia. Competition is fierce and relentless, notably from

fintech companies that offer everything from lending

to personal finance, payments, and investing, often at a

lower cost and with greater convenience.

Although consumer behavior has undoubtedly shifted to

web and mobile, banks can’t risk abandoning branches and

call centers.

More than ever, customer experience (CX) across all the

channels in the customer journey is a top business imperative

and key competitive differentiator for banks fighting to compete

and remain relevant. Great CX turns digital migration from

a challenge into an opportunity because CX is directly tied to

business impacts like revenue, overhead costs, acquisition rates,

loyalty, lifetime value, and Net Promoter Score (NPS).

Introduction

Introducing the ForeSee Experience Index (FXI): Banking Report. ForeSee’s proven measurement methodology quantifies key CX drivers in order to accurately predict which elements of the experience will drive desired behaviors. In this report, you’ll learn:

Map of the MarketCredit unions and local banks outperform large, national banks in terms of CX.

READ MORE

The Click-and-Mortar Customer JourneyBranches still matter. A lot. But digital touchpoints are important for retention and loyalty.

READ MORE

Breaking Up Is Hard to DoMost banks rely too much on captive loyalty to retain customers.

READ MORE

Fintech is the FutureNew technologies are a growing threat, but smart banks can adapt and learn from fintech successes.

READ MORE

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84

82

85

Map of the Market: Credit Unions Dominate

76%

more likely to buy additional

services

63%

more likely to continue their relationship

with the bank

86% 58%

more likely to recommend the

bank (NPS)

more likely to trust the bank

Mobile apps and branches get high marks from customers; credit union customers are the happiest across all channels.

FXI SCORES ON A 100-POINT SCALENET PROMOTER SCORE® ON A SCALE OF -100 TO +100

C U S T O M E R S L I K E A P E R S O N A L T O U C HCustomers rank credit unions above regional and national banks.

W H Y C X M A T T E R SBank and credit union customers who have a great CX are:

T O P P R I O R I T I E S F O R I M P R O V E M E N T

ForeSee’s methodology quantifies key drivers of

satisfaction in order to accurately predict which elements

of CX will have the biggest impact on future behaviors.AVERAGE

DESKTOP WEB MOBILE

WEB

MOBILE APP

BRANCHES

CONTACT CENTER

CHAT

F X I S C O R E

N P S S C O R E

CREDIT UNIONS

REGIONAL BANKS

NATIONAL BANKS

CREDIT UNIONS

REGIONAL BANKS

NATIONAL BANKS

82

45

85

87

85

8079

86

60

82

45

80

35 A focus on these elements will have the biggest impact on overall CX. Individual banks have may have varying priorities.

NATIONAL BANKS

CREDIT UNIONS

REGIONAL BANKS

8889

8786

81

8382

84

8786

FEESCONFIDENCE

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B R A N C H E S A N D D I G I T A L C H A N N E L S B O T H H A V E A R O L E

Leverage VOC Across the Entire Customer Journey

Invest in a consistent metric. Measure the experience across

every touchpoint. A common metric, such as satisfaction or NPS,

will give executives the holistic view.

Manage your assets. Be rigorous and disciplined in updating

customer journey maps, which need regular attention.

Ensure great returns with an executive sponsor. Building

great omnichannel CX requires purposeful leadership that can and will

articulate a vision.

Diversify! Build a cross-functional team. Get the right stakeholders in the

room from the outset and on an ongoing basis, including: marketing, digital,

mobile, branches, operations, call center, and—very importantly—IT.

Benchmark your metrics. Over time, across channels and

touchpoints, and against competitors and best-in-class – benchmarks

provide much needed context.

Our research shows that banks provide fairly high CX scores in individual

channels and touchpoints. However, burdened by strict industry

regulations and prone to slow internal processes, many banks struggle

to provide consistent and excellent CX across the customer journey and

through the customer lifecycle. It’s no surprise: The 2017 Digital Banking

Report found that two-thirds of retail banks lack a formal CX strategy.

And according to the Financial Brand, 72% of financial institutions

indicated that they would be increasing their investment in CX initiatives

in 2017, but only 28% said their program yielded a positive impact.

For some banks, reducing branch footprint is part of the strategy as

branch visits decline and branches increasingly become cost centers. Our

research shows that customers still want that face-to-face interaction,

and they rely on a variety of channels and touchpoints as they research,

purchase services, and conduct transactions.

The onus is on retail banks to deliver omnichannel efficiency while

balancing the needs of key customer segments. Measuring CX is the first

step towards managing it. Getting measurement right is critical.

The Click-and-Mortar Customer Journey

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D I G I T A L C O N T R I B U T I O N

Customer experiences in web and mobile play a critical role in their

customer journey. If you don't accurately measure and understand

digital's contribution to your business today, you might be

underestimating, or worse, underfunding your digital efforts.

5 Steps to Measure Digital Contribution

1. Capture email addresses using CX survey backed by a proven model.

2. Send digital visitors a short email survey asking what they did next.

3. Analyze what CX factors drive digital visitors who don’t convert,

or who convert with a competitor.

4. Report on digital’s contribution to the customer journey.

5. Prioritize strategic and tactical improvements with certainty.

The Click-and-Mortar Customer JourneyB R A N C H E S S T I L L M A T T E R . A L O T. If your bank’s online functionality was ideal, would you still want a branch?

H O W C U S T O M E R S R A N K B A N K I N G C H A N N E L SMobile apps score the highest in terms of CX, but branch CX outperforms desktop and mobile web.

19%weekly

Frequency of branch visits

40%monthly

62%last three months

49%SAY YES

85

DESKTOP WEB MOBILE

WEB

84

MOBILE APP

87BRANCH

86CONTACT CENTER

83CHAT

81

2/3 of website visitors leave digital experiences for another channel. Do you know why?

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The Customer Controls the Journey: Understand Their PathThe journey of a retail banking customer is complex and usually involves multiple touchpoints. Overall, nearly ⅔ (61%) of customers start their

journey in a digital channel (desktop and mobile web) when opening a new account. However, more than half (58%) who start their journey digitally

end up in a branch. It’s also useful to examine the customer journey by generation. In our research, as you might expect, Baby Boomers are more

likely to start and end their journey in a branch when opening a new account, while Millennials and Generation Z tend to prefer digital experiences.

31%

NATIONAL BANKSSTARTS IN ENDS IN

43%

44%

55%

88%

35%

25%19%13%

16%

41%WEB

WEB

23%MOBILE

MOBILE

CONTACT CENTER

4% CONTACT CENTER

BRANCH

31%BRANCH

CREDIT UNIONSSTARTS IN ENDS IN

59%

10%23%

58%

14%26%

63%

31%

91%

37%WEB

22%MOBILE

CONTACT CENTER

6%

WEB

MOBILE

CONTACT CENTER

BRANCH

BRANCH

35%

25%

REGIONAL BANKSSTARTS IN ENDS IN

WEB

36%WEB

MOBILE

18%MOBILE

CONTACT CENTER

CONTACT CENTER

5%

BRANCH

BRANCH

40%

67%

10%14%

59%

73%

94%

22%

of people who start their

journey in web end in branch

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B A N K S R I S K 2 1 % C U S T O M E R D E F E C T I O N I F S W I T C H I N G W E R E E A S I E R

Banking is where the telecommunications

industry was 20 years ago. Before “number

portability” was mandated back in 2003, many

cell phone users felt trapped by their wireless

carrier, because switching meant giving up

the phone number known to all their friends,

family, and business associates. Bank customers

today can relate; switching banks often doesn’t

seem worth the hassle or the potentially severe

consequences of missed payments on important

things like college tuition, electricity bills, or

even Netflix. Efforts to do the same for banking,

with the Freedom and Mobility in Consumer

Banking Act in 2013, failed but imagine the

competitive landgrab for banking customers

IF or WHEN switching banks is as easy as

switching cell carriers. In fact, our study shows

that 21% would switch banks today if it were as

easy as switching cell providers.

Banks can do better at earning customer loyalty

and not just banking on the captive loyalty they

enjoy today. ForeSee research reveals that while

CX is not a top reason customers select a bank,

a great online CX is a crucial retention tool, and

ranks as one of the top reasons people stay with

a bank. If banks improve their CX, they’ll spend

less time competing over and over again for the

same customers when they need new products.

Because right now that’s exactly what is

happening. How else could you square that 24%

of people wouldn’t consider their current bank

or credit union when looking for new products

or services!

Banks and credit unions are in the unique

position of being able to connect meaningfully

with their customers because they are a big part

of many of life's most memorable moments

from buying a first car, to building a dream

house, to opening a child's first savings account.

It makes sense to embrace these opportunities

to connect, and it becomes even more important

if switching banks ever becomes as easy as

switching cell phone providers.

Breaking Up Is Hard to Do

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L O Y A L , B U T N O T I N L O V E

of bank customers are loyal only because it's hard to switch Their satisfaction score is far lower (74) than average (82)

of bank customers would definitely consider their primary bank when in the market for new services

T H E Y O U N G A N D T H E R E S T L E S S

A C Q U I S I T I O N , L O Y A LT Y, A N D D E F E C T I O NDo you know what factors drive customer acquisition, retention, and defection?

1/4

38%

HOW TO GET AND KEEP CUSTOMERS

Acquisition

1. Convenience

2. Trust

3. Perception of stability/financial security

4. Availability of branches

Retention

1. Great online bank experience

2. Perception of stability/financial security

3. Fees and interest rates

4. Availability of branches

Defection

1. Availability of branches

2. Poor customer service

3. (Lack of) Trust

4. Fees and interest rates

1/5 of Gen Z have already switched banks at least once in their short lifetime

More than 1/4 of Gen Z banking customers would switch banks if it were easy

Both Gen Y & Z place a higher premium on ease and convenience than Gen X and Baby Boomers

If it were as easy to switch banks as it is to switch cell phones, would you do it? 21%

SAY YES

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F O U R T Y P E S O F C U S T O M E R L O Y A LT Y

1 Purchased Loyalty pays customers

to be loyal, and is a popular and

effective tactic for banks. Examples

include customer rewards programs,

memberships, coupons, and rebates.

Purchased loyalty can be easily stolen

if a competitor offers a better loyalty

program.

2 Restricted Loyalty is at play when

there’s no other game in town, often

true for utilities, cable companies,

etc., and less relevant for retail banks

especially in light of the emergence

of fintech companies. It only works

until industry regulations change and

competition increases but is one of the

most effective kinds of loyalty.

3 Convenience Loyalty can play a role in

driving earned loyalty. Whether it’s by

simplifying the processes for depositing

checks, to offering more ATMs or

branch locations than the competition,

convenience can play a significant

role in driving acquisition and loyalty.

However, when your competitor offers

a more convenient banking alternative,

falling back on earned, or true loyalty,

will remain your ultimate strategic

competitive advantage.

4 Earned Loyalty or “True Loyalty” is

the best kind. The only way to truly

earn loyalty is to provide a great

CX. Customer satisfaction drives

allegiance to a brand or product that

doesn’t depend on loyalty programs,

convenience, competition, or even price.

L O Y A LT Y M A T T E R S

Regional banks have the most to win and the

most to lose: their customers are more likely to

defect when they make mistakes, but also more

likely to be loyal when they provide a great CX.

Credit unions rely on consumer confidence for

loyalty more than other types of banks.

Large national banks have lower confidence

scores, but it also matters less for them

(it’s a lower priority for improvement).

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Fintech Is the FutureW H A T ’ S H A P P E N I N G ?

With fewer barriers to entry and loosening

regulatory burdens, new fintech companies

have emerged to meet the needs of digitally

demanding customers. They’re appealing

directly to this consumer for everything

from banking, to lending, personal finance,

payments, investing, home mortgage, and so

on. Fintech has not just created disruption and

competition, but also upped the ante for retail

banks to maximize cross-channel profitability.

The threat of disintermediation can’t be

overstated. According to PwC, 80% of financial

organizations believe their business is at

risk to innovators.

W H Y ?

The rise of the smartphone has irrevocably

changed consumer behavior across all industries,

and people now expect to handle their finances

and manage their money as easily as they shop

on Amazon or post a status update on Facebook.

Customers want to check accounts, change

investments, apply for a mortgage, or open a

new credit card from their phones. And while

many traditional banks are starting to offer

these services, most have not been able to do

so as easily, quickly, and efficiently as a host of

fintech startups.

W H AT D O E S I T M E A N TO YO U ?

Fintech is about removing friction from the

customer journey. Banks themselves have the

opportunity to offer many of these services,

and a captive audience of existing customers to

upsell and cross-sell. The ace in the hole is that

the banks have security and stability on their

side. Are you up for the challenge?

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F I N T E C H H O T L I S TQuick and mobile payments, budgeting, and financial advice/investment services are gaining in popularity.

F I N T E C H I N H I G H D E M A N DPeople want more fintech in their lives:

F I N T E C H I S G E N E R A T I O N A LWe asked who would use some kind of fintech services if offered by their primary bank. Here’s who said yes:

20%

Traditionalists (born before 1946)

29%

Baby Boomers (1946-1964)

Baby Boomers

50%

Gen X (1965-1976)

Gen X

70%

Millennials (1977-1995)

Millennials

76%

Gen Z (1996 and later)

Gen Z52%

30%27%

28%

21%

19% 19%

6%

10%

46%

32%

19%

of people would use fintech services through their bank if they were offered.

53%ON AVERAGE

PAYMENTS BUDGETING ADVICE

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ConclusionThe challenges facing retail banks are non-trivial.

Yet, the opportunities are significant and those

banks and credit unions that focus on delivering

on CX will have a strategic competitive advantage

in the marketplace. Highly satisfied customers are

more brand conscious and less sensitive to prices,

fees, and rates. In tough economic times they will

be the last ones to leave, and when the economy

rebounds they will be the first to return.

Much like banking customers are on a journey,

retail banks are on their own parallel journey

to retain and grow the customer base, increase

lifetime value, and win in a new era of the

empowered omnichannel customer. The stairway

shows the journey every bank and credit union

must complete to compete and win in this era

of immense competition and impressive

customer empowerment.

STEP 1MEASURE CX — EVERYWHERE

STEP 2ENRICH SEGMENTATION

STEP 3 IDENTIFY THE NEXT BEST ACTION

STEP 4 OPTIMIZE THE JOURNEY

STEP 5 GROW EARNED LOYALTY

“We don’t know how to measure and discern between loyal customers versus retained customers.”

“We don’t know how to optimize upsell opportunities across channels and products to customer segments.”

“We don’t know when to target the next best upsell, to whom, and through which channels.”

“We don’t have enough data on customer attitudes for key segments and where they are on their lifecycles.”

“We don’t have a consistent and proven way to measure CX across the omnichannel journey.”

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About the Author

Jason Conrad, Vice President, oversees

ForeSee’s retail banking business and is

a long-time advocate for delivering great

experiences. He is the author of numerous

articles about CX in the financial services

industry and speaks frequently about CX

analytics and best practices. Jason is a

member of the Digital Analytics Association

(DAA) and the Customer Experience

Professionals Association (CXPA) and is

a recipient of the coveted ForeSee Builder

Award. He is an alumni of California State

University, Northridge.

About the Research Analysts

Financial Services Team Lead Angela DiNicola works extensively with a team of analysts

who deliver actionable insights to finance

companies hoping to improve their CX across

all channels. She earned her B.A. in Marketing

and her M.S. in Marketing Research from

Michigan State University.

Andrew Hyclak is a Client Analyst who helps

companies in the financial services sector

understand their CX through solid survey design

and meaningful analysis. He graduated from the

University of Toledo with a Master of Business

and Administration in Marketing.

Karly Szczepkowski is an analyst who

has worked with some of ForeSee’s largest

clients to help them understand how they

can engage with their visitors to improve

loyalty, recommendations, and regular usage.

She also manages all of ForeSee’s more

than 600 benchmark categories. Karly was

previously an analyst at Wayne State University

in Detroit, MI. She graduated from Wayne

State University with a Master in Information

Science and from the University of Michigan

with a Bachelor in Engineering.

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About the FXI: Banking Report

The ForeSee Experience Index (FXI): Banking Report is the first study of its kind to assess

customer experience (CX) with national banks, regional banks, and credit unions. More than

4,000 banking customers were surveyed in July 2017. Using its proven model, ForeSee is able to

quantify customer satisfaction with a variety of banks and touchpoints, prioritizing for clients

the changes that will have the greatest business impact. ForeSee works with eight of the top 10

banks and half of the top 50 retail banks in the world.

About ForeSee

ForeSee pioneered customer experience intelligence in 2001 and has become a recognized leader

in Voice of Customer (VOC) solutions. The award-winning ForeSee CX Suite helps more than

2,000 companies worldwide transform their VOC programs into a strategic business discipline

that delivers economic impact. Only ForeSee offers a rigorous scientific approach to customer

experience measurement, access to an unmatched 200 million benchmarked experiences, and

actionable insights from a team of 200 expert analysts that give certainty to CX improvements.

ForeSee is headquartered in Ann Arbor, MI, and has offices in New York; Washington, DC;

St. Louis; Cleveland; San Francisco; Vancouver; and London.

For more information, visit www.foresee.com