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Industry News Retail banks seeing long term reduced customer loyalty and profitability 2010-07-19 A survey of global retail banking executives by Accenture finds that the majority of retail banks have seen reduced profitability and customer loyalty in banking since the financial crisis began. In total, 57 percent of financial institutions surveyed said they had seen reduced profits from their existing customers. Forty-six percent of those respondents said that they had seen drops of 5 to 15 percent since the economic crisis, while 11 percent reported even worse numbers. An even greater number of banks had seen various indicators of reduced customer loyalty. Fifty-nine percent reported reduced loyalty, while 63 percent of respondents said that consumers were more price-sensitive, and were more likely to shop around in search of a better deal. In addition, executives did not believe that the shift in consumer behavior was likely to change. Sixty-eight percent said they expected the shift to continue long-term. "Our research shows a fundamental power shift between the banks and their customers since the financial crisis began," said Noel Gordon, global managing director of Accenture’s banking industry practice and co-author of the research. "Consumers have emerged more confident in making financial decisions for themselves, more skeptical of their bank brands, more price-conscious and more willing to move away from institutions that provide poor service." In an attempt to address these issues, banks have focused on a number of areas. A vast majority of financial institutions - 87 percent - said they were trying to increase cross-selling opportunities with their existing customers, while some were aggressively looking for new customers and others were increasing prices on their products to get more profits from existing customers. But researchers said that FIs would need to adopt more radical strategies to maintain profitability in the post-crisis economy. "For the banks, traditional profit-recovery strategies – rate and fee increases, conventional cross-selling and organic growth – will not readily fix the problem because broader customer expectations and service demands have risen in the wake of the financial crisis,” Gordon said. As a whole, banks were also less confident in their capabilities to keep up with increased customer demands. While 82 percent said that they desired increased customer analytics to help them attain and retain customers, only 39 percent felt confident of their capabilities in that area. There were similar gaps in executives' confidence in personalized offerings and well-integrated service channels. The new data shows a continuing trend of reduced customer loyalty. Research earlier this year from BAI and Finacle found that customer loyalty had shown significant drops across the banking spectrum, with large, regional and community banks all showing reduced customer loyalty. 
Two More Words on Client Retention
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