Customer retention strategies for banks

While gaining new customers is essential for continued growth, the opposite side of the equation shouldn’t be ignored. In general, the financial sector has a retention rate of around 75%, which, while not poor, does show potential for improvement.The fact is, there’s no real reason that banks should experience high levels of customer churn. A Forrester report found that 87% of banking customers who feel valued will stay with their bank. On the other end of the spectrum, PWC found that 46% of customers would leave a financial services or banking brand due to a bad product or service. On top of that, 32% claimed that they would leave simply if the experience wasn’t consistent enough.

In the past year, 75% of financial organizations prioritized digital banking transformation.

Retail banks’ ability to retain customers is firmly in their control, but what steps should they take to bolster their chances?

Back to basics – the customer service experience

No matter what strategies or tactics that banks employ, if the customer experience doesn’t align with modern customer expectations, they are going to struggle to retain loyal customers. A PwC report found that 90% of customers believe that the experience they receive is just as important as the financial products or services, with 82% willing to share personal data for a better experience.

Properly leveraging new tools

But it’s not just enough to want to deliver a better service, the execution must live up to expectations. In Forrester’s 2024 predictions, they warn that the use of Generative AI needs to be rooted in a firm reality of what current customers need.

Generative AI content that hasn’t been properly customized may “degrade purchase experience for 70% of buyers.” The report further predicts that 70% of business buyers will vocally complain about the material shared, demonstrating that the tools of digital transformation alone are not enough to guarantee positive outcomes. Instead, Forrester claims that B2Bs need to root any new AI tools in real buyer and customer persona interviews, using transcripts to guide the content.

The importance of training

What this comes down to is a matter of AI training. Chatbots, particularly GenAI-powered ones, can achieve incredible results out of the box – but it must undergo consistent training to achieve the results that customer feedback shows.

For example, our own findings show that the Unblu chatbot can successfully handle around 45% of incoming inquiries out of the box. However, with training, this can be raised to 70%–80%. The good news is that Generative AI capabilities can assist human agents with training, offering suggested questions and intents that the agent can approve or deny, drastically speeding up the training process.

Embrace personalization (while boosting efficiency)

Efficiency and personalization go hand-in-hand with the customer experience, representing the behind-the-scenes efforts that produce the positive customer effect. However, they deserve to be talked about separately because they directly impact essential KPIs – namely increasing conversions and customer retention rates.

Modern concepts of personalization

PwC’s report cited above talks about personalization as an engagement strategy, placing emphasis on businesses (or retail banks in this case) being proactive and with an outcome focus.

Personalization in this context has come a long way. Long gone are the days when personalization meant simply including personal details like first names in outgoing communications. Today’s brand of hyper-personalization is rooted in data to give individual product offerings. What’s more, traditional banks are still struggling to deliver this when competing with neo-banks and DeFi players, with big tech companies making their presence in the market known.

The role of efficiency

The PwC report notes that “only some (if any) banks can currently provide such offerings” when referring to hyper-personalization. But really the problem goes much deeper and can be traced back to efficiency – both customer-facing and organizational.

The report gives an example of fragmented and product-siloed business lines, where customers from the Middle East are offered banking products they already own because of a lack of internal cohesion.

Data alone isn’t enough to increase customer conversions if it isn’t built upon a system of efficiency. Organizational efficiency can be a top-level strategic issue, such as avoiding the type of siloing mentioned before. However, increasing agent-efficiency by reducing or automating non-core administrative tasks provides tactical benefits as well.

Increasing agent efficiency produces a number of results. Firstly, it improves agent satisfaction as they spend less time on tasks that are often seen as boring or tedious. Beyond this, it allows them to dedicate more time to building customer relationships, increasing customer trust and impacting retention in banking.

Omnichannel as an industry standard

This idea of giving agents more time to spend with their customers is at the heart of customer loyalty and retention. With more time, they are better able to personalize their service and provide a better experience.

This is only possible to achieve, however, if banks offer an omnichannel experience that allows bank customers to communicate on the touchpoint of their choice – and empowers agents to deliver the necessary service to drive an emotional connection.

Let’s look at omnichannel banking from two different perspectives: low-touch deflection or automation and high-touch support.

Low-touch deflection or automation

At Unblu, we are strong believers in the role of Conversational AI as a means of boosting efficiency and empowering the individual customer. Conversational AI refers to the mix between automated chatbots – which are more powerful than ever before – and human agents who are available on Live Chat channels.

As mentioned, properly trained chatbots can handle up to 80% of incoming requests, drastically lowering the number of customer issues that agents need to deal with. For slightly more complex cases, the Live Chat channel that’s present on the bank’s website, can allow the agent to deal with multiple issues at once. This results in swifter resolution for simple-to-medium level customer journeys.

The KPI for low-touch support

In terms of customer loyalty and retention, the main KPI to focus on here is a high First Contact Resolution and low Average Handle Time (AHT). No simple inquiry – such as not understanding how to work the app, a problem making a transaction, a change of address, etc. – should require multiple touchpoints to resolve. A high FCR and low AHT is a good marker of success and satisfaction in these cases.

High-touch support

More complex issues, such as exploring mortgages, loans, or other products, require agents to be available to listen, explain, and guide customers with more challenging problems in a personal manner. In this context, tools such as Co-Browsing are key factors in success.

Take, for example, the problem that the Swiss bank Credit Agricole had where they needed to maintain service excellence during an e-banking environment migration. Understanding that phone lines were limited as a channel, they invested in Co-Browsing. This resulted in a 4.7/5 customer satisfaction rating, which was particularly important through such large changes.

The KPI for high-touch support

For more complex customer support situations, the KPIs of AHT and FCR are less significant than with low-touch support. They should still be monitored – Credit Agricole achieved 80% better than expected AHT during their migration thanks to Co-Browsing.

However, above all we’re looking for quality of interactions and an effortless experience. For product conversions, the customer base needs to feel heard and a longer AHT can help produce feelings of trust. Agents can also take advantage of Co-Browsing sessions to educate customers and reduce recurring issues.

Overall, however, the KPI that is important here is customer satisfaction, as it is a marker of success and a useful indicator of retention.

Would you like to increase long-term customer retention?

Customer satisfaction and retention is a multifaceted issue in the financial services sector. But one thing is clear – banks must deliver an omnichannel service with strong digital experiences that boosts efficiency, automates smaller issues, and allows for high-quality face-to-face customer interactions.

By implementing effective strategies for digital services, banks can achieve positive feedback, reduce the churn rate, and develop long-term relationships. Banking services hinge on regular communication and having the right digital tools to ensure a seamless experience throughout all digital journeys is the best customer retention strategy.

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Customer retention strategies for banks – what works?