The crisis in the financial sector shows no signs of abating, with only 14 percent of European consumers believing things are likely to improve in the next 12 months. This lack of confidence extends to consumers relationships with their banks with only 37 percent of European consumers saying they are likely to stay with their current bank, and a mere 27 percent admitting they would recommend their current bank to someone else. Another 43 percent would go as far as to dissuade someone from becoming a customer. This data underscores the need for banks to draw closer to their customers in terms of communicating the institution's financial health as well as demonstrating an understanding of customer needs and expectations.
The survey goes on to establish a benchmark for tracking the strength of the relationship between banks and customers. The 'Banking Relationship Score' (BRS) is a multi-dimensional measurement that combines three stated and emotional factors: trust in one's current bank; likelihood to continue with one's current bank; and likelihood to recommend one's current bank to others. BRS scores fall into one of three ranges developed by Vantedge Group based on analysis and benchmarking across a variety of industries: Strong Relationship = a score of 75 or higher; Neutral Relationship = a score of 60 to 74; and At-Risk Relationship = a score below 60.
The overall Banking Relationship Score for European financial institutions came in at 27.7, compared to 55.3 in the U.S. This score is well into the 'at risk' zone and almost 50 points below the target range of 75 or above which designates strong relationships.
"The severity of the downturn for financial institutions has clearly eroded key components of the banking relationship, while increasing the importance of emotional drivers like trust," said Read Ziegler, President and CEO of Vantedge Group. "By weighing the trust factor against the stated likelihood of consumers to stay with as well as recommend their bank, we can get a fresh new perspective on the health of the bank-customer relationship on a national level."
"Banking relationships are clearly at a crossroads," said Mark Moore, Vice President of Marketing for S1 Enterprise. "But the more important question is what banks can do to combat these trends and rebuild relationships with their customers, both on the consumer and corporate sides of the business. The way in which banks interact with their customers matters today more than ever."
The results highlight the growing importance of banks building back trust and confidence through a greater focus on customer intimacy across all banking channels (online, mobile, branch/teller and call center). For example, when asked their preference for interacting with their banks, a majority of consumer respondents (41 percent) said 'in person at the branch', followed by a more even split between a combination of in person and online (28 percent) and online only (23 percent).
The survey results suggest specific steps that the banks can take to build stronger customer relationships. These include tailoring communications, services and the overall banking experience to individual customer segments across all delivery channels. This means banks will need to better harness data and analytics for deeper insight in order to provide advice about how customers can better manage their financial lives. "The research suggests banks should strive to create a culture of customer advocacy, one that promotes proactive service, honesty and greater transparency into a bank's financial health," added Moore.
Other top findings from the survey include:
* Overall, only 14 percent of European consumers indicated they were feeling positive about an economic recovery within the next 12 months.
* Only 37 percent of European consumers say they're likely to stay with their current bank, and a mere 27 percent would actually recommend their current bank to someone else. Another 43 percent say they'd be more likely to dissuade someone from becoming a customer.
* When broken down by demographic factors, the Bank Relationship Score model revealed that young, affluent males with less than three accounts with their primary bank represent the customer group at greatest risk for defecting.
* The survey of corporate banking customers found 'Trust' to be the number one factor in building valuable banking relationships (70 percent of corporate respondents). As the financial landscape continues to shift, 50 percent of corporate respondents noted that they intend to keep their banking relationships limited to a small group of less than five institutions (the smallest option available on the survey questionnaire).
* Only 41 percent of large corporations indicated they would be likely to recommend their financial institution to a friend or colleague, and only 46 percent noted that they are likely to continue a relationship with their bank.
Titled 'Banking Relationships: An Era of Change,' this survey was conducted by third-party research firm, Vantedge Group LLC, on behalf of S1 Enterprise, a division of S1 Corporation (Nasdaq: SONE) and a leading global provider of flexible, bank-centric solutions and payment services.
* Source: Compete October 2008 online survey of 1,663 consumers; number one factor that led consumers to choose their bank was 'Convenient location or ATM' (52.6 percent).