Customer loyalty, a missed opportunity for primarily digital banks

Jehan Sherjan, Insights Director at Business Advisory SRM Europe, explains why customer retention – or more specifically, failure to build a loyal consumer base – is a missed opportunity for digital banks.

In March 2020, when the world was overthrown by the torpedo that was the Covid-19, there was a lot of talk about the “return to normality”. Almost 18 months later, it is almost universally accepted that many aspects of our way of life will never return to exactly what they were before. Among these changes is the way we interact with our bank or our building society.

Hours of operation on Main Street were reduced during closings and for the hundreds of thousands of citizens protecting themselves at home, physically visiting their local branch was just not an option. The opportunity to increase the use of digital banking services was clear. Indeed, estimates now place the percentage of UK consumers using digital banking services at 73%.

Based on this growth, it can be fair to assume that customer loyalty would have increased the most among purely digital banks in the UK. Our data, which is part of SRM Europe’s customer loyalty research, however, suggests otherwise.

While traditional banks occupy half of the bottom ten players, as one might suppose, only Starling Bank and Monzo as pure digital players are in the top ten. Indeed, Starling Bank has proven to be the most outstanding performer and now stands almost neck and neck with second place nationwide, behind top performing brand, First Direct, which took first place. for six of the past eight years.

Our research covers 28 of the UK’s leading retail banks and mortgage lenders and has been conducted since 2012. It covers a range of customer metrics with the aim of uncovering the factors that influence customer loyalty. The 2021 report covers three key metrics that examine how valued the customer feels; how the brand maintained expected service levels throughout the pandemic; and the timely and relevant communication of information between the brand and its customers.

The benchmark confirms First Direct as the brand with the strongest overall performance in all areas. While Starling and Monzo were in the top ten, Atom was 11th and Revolut, 17th, did particularly poorly compared to its digital peers.

Starling Bank has convincingly assumed its role in the front runners, with easy-to-use and feature-rich digital channels, a sense of relationship with its customers and strong performance in the event of a pandemic. However, inconsistent performance in service experience and aspects of pandemic performance negatively impacted Revolut and, to a lesser extent, Monzo.

In addition to the pandemic experience, research from SRM Europe is also examining factors such as experience, digital, emotions, social relationships and relationships that influence customer loyalty levels to the bank they use. .

And the conclusions are clear. Critically, while the digital experience and related features are vital metrics for success, they alone are not enough to build customer loyalty. Simply, consistent delivery across all key metrics is vital to securing and maintaining customer loyalty. Excellence in one area, even if it is the digital experience at a time when it has been very much needed and even celebrated, simply will not be enough.

What this tells us is that to maintain and increase loyalty, successful retail banking brands must focus on the customer beyond strong digital and transactional foundations. Where digital players have invested time and effort to develop the attributes of a relationship with their customers, they experience strong customer loyalty – in much the same way as other successful players (notably construction companies and specialized banks) for whom the relational element has always been so important, continue to invest in building a solid digital offer.

Joseph P. Harris