With challenger banks and fintechs gaining increasing traction in the finance world, retaining customers is set to become a major hurdle for retail banks.
Competition for attention is at an all-time high, and without a comprehensive and carefully thought out method for keeping people onboard, incumbent banks don't stand a chance.
We've all heard of traditional customer retention techniques like loyalty programs and cross-selling, but in this day and age, you have to do a lot more than offer coupons and freebies to hold someone's attention.
The real key to acquiring and keeping customers lies in offering true value to them by knowing them deeply and giving them what they want, when they want.
At Strategy Desk, we've worked with dozens of financial institutions across the globe who have fought to maintain strong customer relationships.
And despite the undeniable rise of app-based banks like Monzo and Starling, some incumbent banks have actually managed to rise above the disruptors.
Here are 10 effective and somewhat surprising ways that retails banks are able to retain their customers for the long-haul.
Personalisation is arguably the most important aspect of the entire customer lifecycle, from customer acquisition to retention and long-term engagement.
As an organisation looking to accelerate performance and maximise growth, retail banks naturally want to provide their customers with offerings they can't possibly refuse.
The only way to do that is to understand their wants, needs and behaviours, which are, of course, completely different depending on the individual person.
Using and analysing data is one of the most effective and efficient ways to gather crucial information about customers, ensuring their experience is unique to them.
With the use of big data, companies are able to acquire deep consumer insight, which in turn allows them to personalise their customer interactions at every stage of their lifecycle.
Just look at services like Netflix and Spotify, which both offer smart recommendations in a bid to keep people using their product.
Consequently, both these companies have a low churn rate, with Netflix the only video streaming service to have a positive customer retention.
Netflix's renewal rate in the U.S. is also impressive at 93%, while competitors Amazon Prime and Hulu are at 75% and 64% respectively.
Part of this success is no doubt thanks to Netflix's cleverly picked recommendations, which are refreshed every 24 hours so that users are constantly discovering new content.
In the financial sphere, Monzo is taking personalisation to the next level by using customers' data and spending habits to advise them on how to find the best deals and save money.
And Atom Bank offers a personalised experience by letting users customise their app with their own unique logos and colour schemes.
Whatever techniques you use, personalisation is one tried and tested way to keep customers onboard.
While personalisation can most definitely be a source for good, it also has the potential to ignite fear and concern around privacy.
After so many recent data breaches among big names like Marriott and Facebook, it's no wonder some customers won't easily part with their data.
Luckily, this is where established banks have the upper hand against challengers. One of the main reasons people haven't switched en masse from their main bank to a digital-only one is because of issues around trust.
Consumers' level of trust in banks dropped after the financial crisis, but it eventually bounced back and, according to some sources, is currently higher than their trust in big tech firms.
The best way for banks to maintain this trust and facilitate data-gathering without losing customers is by promoting a culture of honesty and transparency throughout the organisation.
When gathering data, it's essential to be clear about how it's being used and emphasise the fact that it's for the customer's benefit.
It's also important for banks to be honest about fees that customers might incur.
Honest and open communication is a good way to earn – and, even better, keep – customers' trust, which is a highly valuable asset indeed.
But in order for it to really work as a customer retention strategy, transparency needs to be a principal that runs through the entirety of the company – from the top town.
Research from American Banker found that the reputation scores of banks were six points higher among customers who were familiar with the CEO, compared with customers who were unfamiliar with the CEO.
So rather than hiding behind clothes doors, senior leaders can help maintain their customer base by being present, visible, and vocal.
One of the main reasons many incumbent banks are worried about falling behind in the customer retention game is because they are slow to make use of the latest technologies.
That means incorporating things like mobile apps, digital payments and chatbots into their products.
Every aspect of the modern consumer's life exists online and on their phones – from music, movies and the news to exercise, socialising, and reading.
Why wouldn't they expect their bank to live online as well?
Because challengers are agile, have startup mentalities, and aren't bound by regulations, many have been able to jump ahead and make use of tech quickly and cleverly.
But incumbent banks, due to various reasons, tend to be a bit slower on the uptake.
In order to meet customer demands and keep up with challengers, banks are currently investing heavily in digital technology.
According to a survey by Accenture, 77% of banking executives expect over half of customer interactions will be substantially handled by virtual assistants in five years' time.
Investing in digitalisation is vital if established banks want to hold onto their customers and continue to acquire new ones.
In the advent of the internet, everyone has all the information in the world at the tips of their fingers, which means organisations are more vulnerable to scrutiny than ever before.
Consequently, it's absolutely essential to design and build a brand that truly does good, so as to elicit positive feelings from the people who use it.
The best way to go about this is to stop thinking of banking as purely transactional, and start seeing it for what it really is: a long-term relationship.
No doubt you've noticed more and more customers seeking out brands that have a definitive cause and ethos, even if it means paying a slightly higher price for their products.
Newsflash: This is not a passing trend. Organisations in every field, including retail banks, need to demonstrate corporate citizenship and social responsibility in order to be heard above the noise.
Of course, this can't be simply superficial; an organisation's values must be felt internally as well as demonstrated externally.
That means intricately weaving your ethos into the company culture, so that everyone from interns to C-Suite execs are on the same page.
Building a great brand and reputation is not a short term game; it has to be part of your overall strategy.
It takes time and effort, but it's worth every penny for what you get in return.
A study by the Corporate Executive Board found that of consumers who said they have a brand relationship, most (64%) cited ‘shared values' as the primary reason.
Time to put those company values front and centre.
So we've talked about offering personalisation and getting digital, but these things alone won't retain customers if the processes they need to do are long, complicated and clunky.
To keep people onboard, organisations need to make systems across all their channels as simple and streamlined as possible.
One of the major advantages of services like Amazon One-Click and Spotify's recommendations is just how effortless they are to use.
One-Click cuts out the tiresome need for customers to type in their payment and billing info over and over, something which, shockingly, many companies still require users to do.
If retail banks want to stand up to challengers, they need to seriously simplify underlying processes including signing up, contacting customer service, and making payments.
That means making it easier for customers to make choices at every stage in their lifecycle.
One bank that has made an effort to streamline processes is Santander. In the UK market, Santander simplified its current account product suite from 100 products to fewer than 10.
As a result of that and other streamlining efforts, Santander has seen an increase in customer loyalty over the past five years.
On the other hand, it's important not to go overboard with simplification techniques, as you may risk losing your customers.
Which brings us to #6…
Integrating digital technology is crucial to all businesses in the modern age, but it's also extremely important to balance out digitalisation with a genuine human touch.
Practising empathy – which means truly listening to customers and putting yourself in their shoes – will put you at a competitive advantage against digital banks that rely too heavily on AI and automation.
In other words, retail banks should absolutely use the latest technological innovations where it makes sense, but don't overdo it.
At the end of the day, customers are human beings, and there's nothing more valuable than providing them with real human-to-human contact.
Indeed, market researchers Vanson Bourne found that 91% of consumers agree there should always be a way to contact a real person.
First Direct is a good example of a bank that decided to value humanity over digitalisation, and benefited from that choice.
Zoe Burns-Shore, the bank's Head of Brand and Marketing, told Marketing Week that they asked their customers outright if they'd like First Direct to be digital only.
The response was that people prefer to have a human helping them with complex financial issues like mortgages, and so First Direct decided to listen to their audience and went against the digital-only trend.
That's not to say they haven't taken full advantage of digitalisation's capacity to streamline processes and improve customer experience.
‘Around 75% of all our transactions are now made digitally so it's a huge opportunity,' said Zoe.
‘But we also have a great services proposition and that's a real asset against the new players.'
Metro Bank, which constantly ranks high for customer satisfaction, has lots of perks that demonstrate they think about customers' real needs, and not just the bottom line.
For instance, their branches are open seven days a week, from 8am until 8pm, and they are all kitted out with toilets, baby-changing facilities and dog bowls.
Even though it likely costs extra money to provide these services, Metro Bank has prioritised customer experience over cutting costs, and it's a decision that has done them well.
Employees there are also rewarded based on customer satisfaction rather than sales, which means retaining customers is a core part of their business strategy.
On a similar note, banks need to listen to their customers and actively seek feedback so as to constantly take advantage of opportunities for improvement.
After a customer has made a purchase or signed up, it's important to follow up to make sure they had a positive experience.
After all, if an organisation doesn't understand how its customers feel when they're using its service, they have no hope of making it the best it can be.
According to WBR Insights, 44% of banks do not ask customers for qualitative feedback about their interactions with their companies.
What's more, almost half of banks don't monitor customer feedback and CX metrics to see how well customer experiences match the company's experience goals.
As we've already discussed, customers are human beings who, deep down, just want to be listened to – by another human being on the other end.
So retail banks need to gather feedback across all channels in order to regularly discover new ways to improve, and respond to their customers in a genuine, person-to-person manner.
The best way to elicit real feedback and address negative and positive reviews head-on is to interact with customers online and on social media.
A single tweet from an actual customer will tell you a whole lot more than ten generic survey responses.
Again, it's important to forgo canned corporate responses, which could jeopardise a customer's trust in your brand.
Instead, real company employees – perhaps even a relatively senior exec – should reply directly to customers in order to further build trust and demonstrate transparency.
Of course, it's not enough to wait for customers to give their two cents; truly successful organisations are those who are proactive about capturing feedback.
Once they've gathered customer feedback, they use it to make important decisions about the company, earning even more trust and loyalty.
Maintaining a strong customer relationship takes time and energy, and it also involves being there for your customers at every waking hour.
In essence, that means being available on every channel that they use, from mobile apps to social media, and responding to questions on everything from chatbots to emails.
This omnichannel approach is not only convenient for customers, but it also allows banks and financial institutions to reach their customers wherever they tend to hang out – which, obviously, unlocks more opportunities for profitability.
Of course, there's a fine line between communicating regularly with customers and badgering them.
The CEB study found that there's no correlation between the number of interactions with a customer and the likelihood that he or she will be ‘sticky'.
So rather than simply interacting with customers for the sake of interaction, banking execs should make sure each touchpoint provides real value to the customer.
Bottom line, banks need to stay top of mind for a good reason, not because they're annoying or intrusive.
What's a great way to keep customers onboard? Solve their problems before they even happen.
By using data, behaviour analysis and predictive analytics, retail banks do exactly that: stop their customers from switching banks by staying ahead of the game.
If a customer's product usage is slipping, for instance, this could logically indicate they are considering switching to another bank.
A bank can react to this event by sending a proactive customer support email offering them personalised deals or offers to encourage them to stay.
By leveraging a CRM database, banks can make educated product and service recommendations that their customers are likely to purchase.
The key is for the organisation's data scientists to understand and deploy a range of big data analytics techniques, using them to get real, actionable insights.
It may sound somewhat antiquated, but good old-fashioned loyalty rewards absolutely still work to retain banking customers.
After all, if there's no incentive to remain with a bank, it's all too easy to switch.
Loyalty should be rewarded from the moment a customer signs up and at regular intervals throughout their entire lifecycle.
You'd be surprised how effective a free product or special discount can be at retaining customers, as well as encouraging them to spread the word.
When customers not only believe in your brand but also feel valued whenever they interact with it, they are far more likely to become brand advocates, singing its praises to other potential customers.
That means better customer retention and acquisition, which equates to increased profits – a win-win!
Challenger banks are generally adept at using loyalty rewards to boost acquisition and retention, so established banks need to be innovative with their offerings.
An important thing to note is that flexibility is very important to consumers.
Collinson research found that 67% of consumers value the flexibility to choose the rewards and benefits that they are offered by their loyalty programme.
Yet again, it comes down to point #1: offering a personalised experience.
At the end of the day, the important takeaway from this is that every customer expects to be – and absolutely should be – treated like a human being at every touchpoint along their journey.
Not just that, but a unique, special human being with their own individual wants, needs and preferences.
Remember this, and your organisation will have a much better chance of retaining customers, acquiring new ones, and standing the test of time.
Fail to see customer retention as an essential part of your strategy, and you risk losing out in a big way to the challenger banks and fintechs on the rise.
Margot is our senior editor leading projects in SEO-focused content writing, social media strategies and optimising customer journeys. Prior to joining Strategy Desk, she was a Lifestyle Reporter for a major national newspaper.