Bank security and competence prompts customer loyalty
2010-08-31
For financial institutions searching for ways to prevent customer attrition, one study has a solution - make customers feel more secure.

Banks can increase customer loyalty by communicating to their customers that they are safe and competent institutions - and that they know what they are doing with a customer's hard earned-dollars, a study from the Kanbay Research Institute found.

With the hit in public perception FIs took due to the Great Recession, it is no surprise that customers are holding banks to a higher standard than other businesses and institutions.

"Even though banks may feel like creating an ambiance that's very retail-like, the desire for banking customers is still focused around staff competence, knowing that your money is going to be safe whether you're online or going to a branch," said Amy Levitt, a vice president at Kanbay.

However, this does not mean that banks should avoid such retail strategies as self-service, electronic transactions and kiosks. Rather, these technologies should be paired with personal interactions and hands-on service that allows customers to see first-hand who is watching over their savings and investment accounts.

Improving communication in these interactions is another way FIs can improve their standing with the public. A recent blog post in the Wall Street Journal argued that by simplifying language, banks can further increase loyalty and trust.

With the rise in negative media, customers are becoming increasingly confused about what a bank does and how it makes money. Banks, internet-banking entrepreneur Joshua Reich told the WSJ, "keep [customers] confused by adding very complicated products, very complicated terms and conditions, very complicated user interfaces that really don't make sense for a lot of people."

Unless customers have a background in finance or banking, the language of FIs can be very confusing, spurring mistrust of banks rather than loyalty. Customers, Reich continues, know what they should be doing with their money, but right now they "are scared of doing the right thing because it's so hard that they’ve lost a lot of trust in the banks."

FIs are implementing a variety of methods to regain customer loyalty, though. Banks including Bank of America and U.S. Bancorp are testing smartphone payment options, while Citi has worked to develop an iPhone App that rewards customers for swiping their bank cards by donating to the charity of their choice.

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