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Retail Banking is Vulnerable to Customer Defection

Nov 7, 2018 | Blog, Retail

Retail Banks – Customer Defection

A recent report from the consulting company CG42 highlights the vulnerability to retail banking of customer defection. It provides real cause for concern and mirrors a previous study from Bain and Company who found the defection rate to be 27%. The headline here was:

When Bain & Company surveyed 83,000 consumers in 22 countries between July and November 2014, we found that more than one-third of them bought a banking product from their primary bank’s competitors during the past year. Among the 17,600 respondents in the U.S., the defection rate was lower, but still a substantial 27%.

The June 2018 from CG42 used over 4,000  responses in its survey and features all the major retail banks. Specifically included are Bank of America, Citibank, Chase, Capital One, BB&T, SunTrust, U.S. Bank, and Wells Fargo.

The report’s conclusion is bleak – in fact:

The Stakes Have Never Been Higher

By stakes, they proceed to highlight the specifics in terms of the financial risk.

If existing customer frustrations are not addressed, the top ten retail banks calculate to lose over $16 billion of revenue in the next 12 months: In particular, this number projects over 10% of all their retail customers will defect.

Retail Bank Losses

Customer Defection Causes

The study highlighted current customer frustrations that are causing them to consider defection. In more detail, this means the customer is going to reduce their investments and consider alternatives such as online banking or moving to a competitor. In more detail, their list of annoyances include:

  • The bank engaging in dishonest, unethical or illegal practices
  • Being nickeled and dimed with incidental charges
  • Not offering competitive rates and/or pricing
  • Having personal or account information compromised/put at risk
  • Being hit with overdraft charges
  • Experiencing bad service
The latter should not be surprising. In fact, we recently shared that the gap between customer experience and expectation in retail banks is over 20%. This means the banks are just not matching the expectations of its customers. For more detail, see the chart below.
Retail Customer Experience Expectation Gap

How to Fix Customer Defection

More progressive retail banks are now enabling feedback by both customers and visitors at any point in the customer journey. When the feedback is at the point of experience anywhere along the journey, the opportunity to take corrective action is delivered. This means that the bank can rectify a problem while the customer is still at the bank. Consequently, staff can fix the issue, improve operations and recover the customer before they defect. Or worse, defect and go online to complain.
This level of retail banking customer defection is not sustainable but can be helped by real-time customer feedback. Feedback methods should the customer’s own cell phone or an on-location tablet. Even the humble email can be a prompt for post-transaction feedback on the activity or the staff serving them.
Stop the retail banking desertion by using real-time customer feedback.


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