Most Banking Customers Aren't Looking for a Relationship According to BAI Study

Whether it’s cynicism from service quality breakdowns or the desire to “play the field” with banking options, nearly 7 in 10 banking customers say that having a relationship with their banking institution is low on their priority list, according to a study that was presented at the 28th Annual BAI Retail Delivery Conference and Expo on November 17 in Orlando, Fla.

In collaboration with Accenture, SAP, De La Rue and NewGround, BAI, a leading financial services professional organization, canvassed more than 3,700 banking customers as part of The Frontline Experience study on their views of relationship banking, and found that 70 percent are uninterested or even skeptical of relationship banking.

“This is a wake up call for banking organizations who list relationship banking or service quality as their primary customer value proposition,” said Deborah L. Bianucci, President & CEO, BAI. “In BAI’s 2004 Frontline Factor study, 90% of banks surveyed listed this as a goal. But, while banks tend to view relationships in the number of accounts a person has with the bank, a consumer views relationship banking in terms of trust and confidence that the institution is acting in the customer’s best interest.”

Trusting a bank as a financial advisor is the pinnacle of the consumer- bank relationship, said Bianucci, but it is virtually impossible to gain trust without improving a bank’s performance on the front lines.

“Banks have to get it right the first time with customers — flawless execution during personal interactions in branches and contact centers — for people to graduate to the next level of relationship with a bank,” advised Paul McAdam, Senior Managing Director, BAI Research. “But when service breakdowns occur they diminish confidence and the level of trust that consumers have with their bank.”

Indifference and Cynicism from Consumers
The study determined that a hierarchy of steps needs to be fulfilled for the customer to advance to new levels of trust with their bank, from a transaction-based relationship, to a service-based relationship, to the pinnacle of trust: 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. “Consumers who base their banking decisions on service and product offerings hold their banks to a high standard, not only for the best product offerings, but exceptional frontline service.”

“Service Seekers” and “Product-Seeking Sophisticates” are two customer segments identified by the study that have low interest in developing a relationship with a bank. But, as these two segments comprise nearly half of the adult population and have significant assets to invest, it’s critical for banks to identify ways to attract these groups.

For the Service Seekers (29 percent of respondents), 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 (19 percent of respondents) are highly skeptical of their banks and prefer to distribute their investments across best-of-breed providers. They tend to be middle-aged, predominantly male, with a high deposit balances and investable assets. 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 key to attracting these customers.

Three other customer segments emerged from the study: Relationship Enthusiasts (22%), Confident Relationship Enthusiasts (9%) and Uninvolved Skeptics (21%).

Quarter of Employees Feel They’re Ill-Prepared
While the five customer segments that surfaced from the nationally representative study have different criteria for a positive relationship with their bank, their common denominator is competent, personable and trustworthy interactions with knowledgeable frontline staff. Yet fully a quarter of frontline employees interviewed say they felt they were not prepared to handle the demands of relationship banking.

“As part of the study, we also analyzed more than 16,000 surveys from bank employees across the country, and a significant number felt they needed more training and support for this part of the job,” said McAdam. “However, by satisfying this need, financial services organizations can increase employee satisfaction and improve their customers’ experience.”

The study’s findings were discussed in a general session on Thursday, November 17th, 2005 by Benjamin P. Jenkins, III, President of the General Bank, Wachovia Corporation; Connie Beck, Executive Vice President of Personal Financial Services and Small Business Banking, Comerica Inc.; Daniel Masiello, Field Vice President, Ameriprise Financial; Gary Tucker, Senior Vice President, J.D. Power and Associates; and Paul McAdam, Senior Managing Director of BAI Research as part of the 28th Annual BAI Retail Delivery Conference and Expo.

BAI would like to acknowledge the support of Accenture, SAP, De La Rue and NewGround in this research study.