Consumers Want Products, Services, But No Relationship
The driving force behind many financial institutions' retail strategy is building relationships with customers or members. But a new study has found that nearly 70% of consumers have no interest in a relationship with their financial services provider.
The "Frontline Experience Study" from the Bank Administration Institute, released last week, surveyed 3,700 consumers and found that 69% described themselves as either uninterested or even "skeptical" of any "relationship" with their financial services provider.
The findings were released at the same time other BAI research indicates that 90% of banks have identified "building relationships" as one of their goals.
Moreover, 40% of banks listed relationship banking as the top proposition they are trying to communicate to the market.
BAI's analysis found that while banks view relationships as the number of accounts a person has with a bank, consumers viewed relationships in terms of trust and confidence and acting in the consumer's best interest.
Any service breakdowns at all, said Paul McAdam, BAI's senior managing director of research, erode that level of confidence and trust. McAdam said it was troubling that 40% of all consumers indicated they do not trust their bank. Twenty-nine percent said they were indifferent to the proposition of a relationship with their bank.
"One key takeaway is that 31% are receptive, meaning they will respond to overtures for advice and counsel and more likely to have a multi-product relationship," said McAdam. "The 29% whom we are calling indifferent means they are not likely to respond favorably or unfavorably. They're basically neutral. There's some opportunity with them. In particular, we found that loyalty and rewards programs can work here, but it's going to be some work to cross the bridge."
Out of the 69% who said they were not interested in a relationship, McAdam stressed that it doesn't mean they are dissatisfied with the service they are getting. "In fact, they're generally very satisfied," he said.
For customers (or members) to advance to new levels of trust with their financial institution, McAdam said the research has identified a "hierarchy of steps" that need to be fulfilled to move the customer/member from a transaction-based relationship to a service-based relationship to, the pinnacle, a trust and advice-based relationship.
"If you get things wrong at the front line, you'll never have a chance to become an advisor for your customers," said McAdam.
At the bottom of the hierarchy BAI has identified is safety (knowledge that money, assets and personal information are safeguarded. The second stage is accuracy, followed by stage three, professionalism (interactions are handled in a credible and friendly manner). Stage four is fairness (treated fairly and promises are kept).
The top of the hierarchy, stage five, is "authenticity," that the financial institution's actions are in the best interest of the customer/member.
Customer segments that BAI has identified as "service seekers" and "product-seeking sophisticates" have low interest in developing a relationship, although they comprise nearly half of the adult populatation that has significant assets to invest, said McAdam, who added it's nonetheless critical to attract these segments.
BAI said that with service-seekers (29%), the "key to the puzzle is accessibility and perception of service quality at their branch.
They tend to be the younger, but higher-than-average deposit balances. This group is willing to trade pricing options for attention and service. The research also revealed that loyalty and rewards-based programs are an attractive option for banks to improve the relationship receptivity of service seekers."
The Product-Seeking Sophisticates represent 19% of respondents to BAI's survey and are a group "highly skeptical" of their banks and prefer to distribute their investments.
"They tend to be middle-aged, predominantly male, with high deposit balances and investible assets," said BAI.
"Product-Seeking Sophisticates are very involved with their investments and don't believe their banks are up to the task or knowledgeable about the investments best for their situation. To attract this group banks have an uphill challenge to earn trust at lower tiers before earning respect for their credibility and competency. Online tools and savvy financial advisers are the key to attracting these customers."
BAI defines other segments as Relationship Enthusiasts (22%), Confident Relationship Enthusiasts (9%) and Uninvolved Skeptics (21%).