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Customer experience in banking: A high-return digital investment

Research shows that companies working on creating a customer-centric culture are 60% more profitable than those not focused on it.


Long before the days of digital platforms, financial institutions knew service defined a depositor’s perception of their brand. The banking industry uses high levels of customer service to win new relationships, keep them long-term and grow the number of products utilized by depositors.

As banks and credit unions seek to extend their service to digital interactions at scale, they are focusing on how depositors are treated online, on an app or over email. Most institutions know they want to continue providing a great experience in digital interactions with members or customers. They want to know how to design a culture of service at scale for delivery over digital platforms.

Leaders can use a wide range of benefits to articulate results that merit investment in CX.

For starters, institutions already know the benefits of preventing attrition. A 2% improvement in customer retention has the same financial benefit as cutting costs by 10%. Acquiring new customers also can cost as much as five times more than keeping existing customers, according to Call Miner’s Churn Index Report.

Preventing attrition, though, is only half the battle—and provides significantly lower returns compared to a mindset of keeping depositors. Research by Deloitte and Touche, for example, found companies that focus on customer-centric culture were 60% more profitable than those not focused on it.

Recent reports show more banking organizations are focusing on customer experience. CX leaders earn twice as many recommendations and twice as much wallet share those who fall behind. Addressing competitive challenges, expanding relationships, reducing churn and eliminating expense are all benefits of improved CX.

Develop an experience gauge

Metrics are a crucial part of improving anything. Metrics also aid with organizational buy-in because they allow teams to communicate results, set new direction if needed and build momentum on successes.

Start by defining what a positive customer experience looks like. A “customer effort score” is  40% better at predicting loyalty than customer satisfaction. Position short surveys throughout various processes to gauge customer effort.

Another metric to consider is product penetration. Trends across customers or members, such as a frequent decline in product penetration when rates decrease, are a place to focus. For example, more than 80% of people who refinanced a mortgage in Q4 2020 went to a new lender, according to data gathered by Total Expert. When an institution identifies a regular downward trend in product penetration, it can respond by increasing borrower awareness of their options and the impact of their financial decisions.

How to get interdepartmental buy-in

Improvements need leadership from the top, but the most effective approaches are not always top-down. Individual departments can often volunteer ideas for initiatives that best contribute to improved CX. The resulting plan, though a patchwork, can prove more productive in experience payoffs across the organization.

When one institution did this for its lending process, that process changed dramatically:

  • The digital team implemented DocuSign.
  • IT optimized the secure email portal for easier document transfer.
  • Loan officers eliminated duplicate information requests.
  • Marketing created an outreach campaign for people who abandoned an application.

The institution improved CX because it directed efforts at projects that improved customer interactions with that brand in practical ways.

Since business models change from institution to institution, the formula used to set a budget for CX improvements isn’t one-size-fits-all.

Customer acquisition cost and attrition rates provide a clearer sense of revenue gains that can pay for experience investments. Financial institutions should also assemble the information needed to calculate customer lifetime value. In its simplest form, CLTV is the average revenue generated by products and services, multiplied by the average purchase frequency, then divided by average customer lifespan.

Since CX is about also doing better at serving customers, it is more of a journey than a destination. Once institutions take steps like these, they will create fans who generate more customers for an institution. The result can transform an organization’s future, molding it into a brand loved by its depositors and borrowers.

J.J. Slygh is a customer experience consultant at Total Expert.

Learn more about where lending opportunities lie in the BAI Executive Report “Where banks fit in the new world of lending.”