Despite rapid channel proliferation (and expense growth), most transactions still happen in the branch—even when other channels can serve customer needs better. As cost pressures build, encouraging better use of non-branch channels will become a business mandate. But many customers will not readily embrace this change. Some may actively protest. However, as our recent channel preference analysis reveals, three barriers stand in the way of migrating transactions and relationships to multichannel models.

1) Inexperience: Customers have not been effectively educated on their options. As the above graphic shows, over 30% of customers have no experience performing basic banking tasks outside the branch. Increasing education and experience is the quickest and least expensive path to migration and more efficient use of channels. As one of our recent case studies shows, customer education through the branch is central to driving activity and transactions online.

2) Inequality: The quality of online offerings still lags the branch: Many banks are focused on simply replicating and accelerating branch capabilities through non-branch channels. Instead, banks need to focus on creating compelling experiences based on the unique strengths of the web.  Until remote channels can deliver more compelling emotional resonance with customers, banks will not see sustained growth in that direction.

3) Indifference: In some cases, personal preference will trump qualitative assessment (or, my grandmother will never bank online): Personal preference is a good news-bad news situation for banks. The bad news is that some customers, no matter how high the quality of non-branch channels or how extensive the education around their capabilities, will never leave the branch. Further bad news is that these customers are likely not to be very profitable. The good news: in our survey, this group constitutes only about 10% of respondents.

For more on the results of our channel preference survey and how customers are making channel decisions, members can download our recent study, “Channel Strategy: Replacing Consistency with Quality.”

Each quarter, CFC surveys nearly 20,000 consumers around the globe on their financial sentiments, product satisfaction, confidence in financial institutions, and overall engagement with their finances. All of our Q4 regional and country level profiles are now released and on our homepage for members to view. While many regions surveyed are still suffering from slowing economies, debt burdens, and other challenges, there are several areas where we have found positive financial sentiment:

• China shows strong growth. Chinese consumers express warmer feelings about personal finances - 10% more positive than the global average. Chinese consumer confidence is up seven percentage points from the previous quarter and overall product satisfaction has improved.
• High net worth individuals show a rise in positive indicators. This segment is 5% more positive about their personal finances compared to last quarter and while confidence still remains low, more than 40% of HNW consumers were engaged in proactive financial management activities in the fourth quarter.
• Mass affluent consumers show positive trends. They are maintaining positive feelings about their personal finances despite ongoing economic malaise. However, the mass affluent in Europe have not avoided the debt crisis, and show rapidly declining sentiments and confidence in financial service providers.
• Younger segments have more confidence in financial service providers than older segments. While this is at least partly reflective of the relative simplicity of younger lives (no mortgage, little debt, little experience), it also shows that despite economic hardship everywhere, most young people remain optimistic about their relationships with their banks.

Browse our country and regional profiles under the data section of our homepage. Access the global report here.

In their aim to give customers the convenience to transact and purchase where they wish, banks have successfully expanded functional capabilities to additional channels.  Indeed most customers see little difference between the branch and online channels for key banking tasks, and many customers have migrated away from the branch.

But this migration has happened without replacing the emotional connection that existed in a branch-centric world, causing customers to lose engagement.  As a recent CFC customer experience survey shows:

• Only 42% of web and mobile customers report that staff can offer capable and knowledgeable help (compared to 61% of branch customers)
• Only 36% of web and mobile customers believe that advice and guidance on product purchases is strong (compared to 50% of branch customers)
• Only 37% of web and mobile customers state that their bank shows willingness to accept feedback and resolve issues (compared to 49% of branch customers)

The most troubling finding? Customers drawn to remote channels come from the most attractive segments—young, educated, high income individuals who proactively manage their finances.

CFC’s current work focuses on how to manage customer relationships outside the branch–from understanding customer channel preferences, to designing powerful remote experiences, to building products that capture attention and increase activity.

On March 21, 2011, we will host an Executive Roundtable in Los Angeles, California focused on helping our members build compelling non-branch experiences. For more information on this meeting, please contact cfcresearch@executiveboard.com.

As we highlighted in our blog last week, non-bank competitors are entering the financial services market and are challenging banks to rethink the ways in which they interact and engage with their customers through remote channels. Part of what these “disruptive innovators” do so well is position themselves as industry outsiders through creative marketing and consumer-friendly language. Seeking to distance themselves from the negative press that faces the banking industry, disruptive innovators attempt to strike an emotional chord with customers.

A prime example – and one of our featured innovators – is UK firm Wonga. Wonga is an online-only service that offers payday loans and short term cash loans. Wonga uses conversational anti-bank language to better connect with customers. A section of their website, “Jargon Buster,” breaks down financial terms into a simple glossary for users. Wonga promises customers that they won’t find any “abbreviated nonsense” on their site – unlike other companies that use small print, acronyms, and other jargon. They strive to be as transparent and simple as possible.

Banks should understand that the idea of security is being disrupted by these non-banks. Where the experience of security used to be around the presence of a physical branch, vault, and appearance of regulation, new entrants now attempt to use an industry outsider language and communications to connect emotionally around security.

Learn more about this example and the other ways in which disruptive innovators are shaping the customer experience by joining our webinar this week.

APAC members can register here.

Browse our Market Intelligence and Innovation Library to discover new and interesting banking products from around the globe.

Our recent agenda poll surveyed 105 members worldwide on their business objectives, most critical projects, and areas of greatest confidence and concern in reaching their goals. The results show a strong industry focus on innovation and delivering a consistent customer experience across all channels.

 Redesigning the product set and becoming more innovative topped the list for over 60% of respondents. These results prove a very important point: the retail banking industry is facing an unprecedented imperative to innovate. Banks cannot simply bet on charging for products that used to be free. Rather, they must re-imagine products and services that address customer needs, and charge appropriately. One of the keys to recouping revenue lies in product innovation.

 Consistency in customer experience across channels topped the list of members’ priorities in our agenda poll last year as well. It led us to ask the question: should all channels be all things to all customers? Or is the better investment to prioritize channel capabilities based on customer usage trends and specific channel strengths? Each new point of access and technology will always create costs, but few can guarantee new revenue. One thing is clear: as banks focus on maximizing channel capabilities, it becomes more important than ever to understand how customers make channel choices and to learn how to effectively educate them around channel services. Read our recent research brief on channel strategy to learn more.

 To learn more about these two priorities as well as the other challenges facing your peers across the next year, read the complete 2012 CFC Agenda Poll.

At a time when banks can least afford to lose key customers, a growing field of non-bank financial service providers is redefining customer experience. What threat do disruptive innovators pose to banks—and more importantly, what can banks learn from new models?

In CFC’s recent customer channel preferences survey, a stark trend emerges: as customers move toward non-branch channels, engagement declines. Tech-focused customers perceive their bank as less able to provide product guidance, hard to communicate with, lacking knowledgeable staff, and not sufficiently concerned about customer well-being. In short, many banks are not connecting emotionally with tech-based customers.

Through tech-based offerings, new entrants into financial services are targeting disengaged customers by re-imagining core areas of customer experience. For an in-depth look at the following emerging models, please join our webinar next week (for U.S. and Europe) and February 1 (for Asia Pacific):

1) Superior transactional experience of highly-focused products. Banks focus on transactional products as the foundation of customer relationships—they are the bridge to share of wallet. Innovators like Simple, or Perkstreet, focus on pure play models, devoting their energy to superior experience on a highly-focused product.

2) Self-directed guidance. Bank credibility relies on in-house expertise and the ability to provide personal advice on complex products. Understanding that most tech-focused customers prefer self-service, innovators are creating sleek, easy to use platforms that combine product guidance for complex products—like long-term investments—with customer control.

3) Lifestyle as acquisition driver. Branch density has long been the main strategy for gaining new customers, but for tech-focused customers, financial lifestyle is an emerging draw. Innovators are betting that the “debanked segment”—customers who are unsatisfied with traditional banking relationships and want an alternative—will be attracted by transparent, easy to use, tech-only models that fit into their day to day activities.

4) The interchange of customer information. Payment instruments are designed for ease—whether a debit card or mobile wallet, banks treat ease of the payment itself as core to the customer experience (and thrive on the revenue they provide). Innovators, however, are trading on information, and betting that being able to provide important information to the customer about account balances or coupons just before a purchase, or recommended products just after a purchase, will create a powerful integration with the customer’s life.

For more on these trends and an in depth look at the lessons banks can learn about customer experience from new models, please join our upcoming webinar.

How banks communicate pricing information is becoming an important area of differentiation. We are all familiar with the extensive footnotes and hyperlinks that traditionally accompany descriptions of rates and prices attached to transactional accounts. But through improved web technology—and importantly—through growing expectations from the consumer, how prices and rates are presented on the web is changing rapidly.

Given the current economic and political climates in most markets, it has never been a better time for banks to focus on being transparent in the spirit, not just the letter, of the law–to convey honest and direct pricing and account information for customers. The web is increasingly being used to make transparency a foothold for competitive advantage. Here are two examples from recent CFC work:

First, our profile of UBank—the online only subsidiary of NAB. One of the bank’s key insights is that customers who shop for bank accounts online are likely to do their own research around pricing—so why not help, and turn rate shopping into a service? To that end, UBank presents its rates and those of its competitors prominently—even where it doesn’t have the best offer—and updates it daily.

The second example is braver still. GTBank is Nigeria-base bank, but one of the largest in its market, and has cultivated one of the largest social media followings in financial services. To create stronger bonds with customers, the bank collects questions from customers, records video responses, and delivers them back via YouTube and Facebook—offering a unique and powerful customer experience.

The mass affluent account for more than 16% of households, more than 48% of global assets under management, and represent a key battleground for growth. But it is time for the industry to question its assumptions about the needs and behaviors of this important segment.

Understanding the mass affluent is about more than wealth. Our data shows that there is much variation in the mass affluent segment. Their wants, needs, and behaviors are variable, and the segment itself is a changing shape. One area where variation is particularly evident is around channel usage patterns. 

As the pie chart shows, mass affluent customers are evenly distributed across channels. We also know that channel usage is not accidental – it corresponds to specific financial outlooks, attitudes, and expectations. Banks should not presume that any single channel will serve the mass affluent effectively, or that the segment requires one channel over the other. Our data shows that how you engage with the mass affluent depends of which type of mass affluent sub-segment you want to court.

Channel usage is just one example of variation within this segment. We will explore other characteristics of the mass affluent and discuss the 6 profiles of the mass affluent financial experience at our upcoming conference.

Join us for our annual financial services conference Resolve in Uncertainty.

Learn more about the Mass Affluent Mindset by reading our recent research brief.

Access our research brief, “Channel Strategy: Replacing Consistency with Quality” to understand customer channel usage patterns and profiles

Each quarter, CFC surveys nearly 20,000 consumers around the globe on their financial sentiments, product satisfaction,  confidence in financial institutions, and overall engagement with their finances.

Our Q4 2011 survey shows continuing declines in consumer financial sentiment in most markets. Feelings about personal finances, confidence and providers, and product and service satisfaction all show global declines. Under the surface the data, however, a few bright spots emerge for segments and markets:

1. Asia Pacific continues its positive trends, as consumers in India, China, and Indonesia all express strong optimism about their financial outlooks.

2. Mass affluent consumers are maintaining positive feelings about their personal finances despite ongoing economic malaise. However, the mass affluent in Europe have not avoided the debt crisis, and show rapidly declining sentiments and confidence in financial service providers.

3. In every market, younger segments have more confidence in financial service providers than older segments. While this is at least partly reflective of the relative simplicity of younger lives (no mortgage, little debt, little experience), it also shows that despite economic hardship everywhere, most young people remain optimistic about their relationships with their banks.

Download our complete Q4 2011 global view of consumer financial outlooks.

Market level views are also available:

Asia-Pacific

Europe

Latin America

North America

As the retail banking industry copes with reduced core banking margins, unprecedented low loan demand, negative consumer sentiments, and abundant technology growth, banks see their profits deteriorating. Retail banks are under pressure to simultaneously boost productivity while reducing sales expense in order to restore business health.

Last week, we conducted a webinar that aimed to help our membership address the challenge of cost within the branch infrastructure through an investigation of branch sales staff productivity and how it can reduce sales expenses and boost the return on the sales investment.

Access our webinar materials and listen to the event replay in order to:  

1. Identify the sales activities that are “wasted” effort;
2. Size the opportunity for cost reduction within the branch sales environment;
3. Direct scarce coaching resources to the activities that are most valuable.