Why your bank should prepare for account switching

Retail banks are viewed by customers as lagging behind other industries, such as retailers or telecom providers, in their levels of customer service.

Barrie Neill is the senior consultant for SAS UK’s banking practice. His responsibility is to understand the client’s perspective to ensure that what is proposed by SAS achieves the customer’s business objectives and delivers sustainable value. Neill brings a wealth of retail banking expertise from over 25 years of working within the industry.

Prior to SAS, Neill worked at Barclays, where he held several roles ranging from branch manager to helping Barclays set and drive strategy in the UK and overseas operations. Neill has also worked for Misys Retail Banking and Temenos, and represented Temenos on the Banking Industry Architecture Network (BIAN).

 

Retail banks are viewed by customers as lagging behind other industries, such as retailers or telecom providers, in their levels of customer service.

Now high street banks have to face up to the Vickers report and its recommendation for making account switching easier and reducing the time it takes from 31 days to seven. If banks are to avoid major customer churn they must take giant and rapid steps to improve customer service. Barrie Neill, retail banking consultant at SAS UK & Ireland, looks at why banks should focus on improving services in 2013.

The recommendations from the Independent Commission on Banking, also known as the Vickers report, that consumers should be able to change their current account provider more easily has thrown up a challenge to high street banks that they have not previously faced.

Historically customer churn between current account providers has been very low; however with the new legislation due in September 2013 this is all about to change. Where consumers may have previously been apathetic towards changing their current account provider, research by SAS, conducted by YouGov, suggests that there are a huge number of current account holders that will look to change their provider when the legislation is brought in.

According to the SAS study, even though 38% of those polled have never switched their main current account provider, 29% of consumers with current accounts indicated that they are more likely to switch provider when the new legislation comes in. When this is scaled against the number of current account holders in the UK, it equates to some 14 million account holders who are considering switching as soon as it is made easier.

With 66% of those surveyed of the opinion that banks are failing to improve customer services, banks must consider what they can do to avoid losing out as a result of this massive migration of consumers between current account providers.

At the same time as researching consumer attitudes towards the ability of banks to serve customers, SAS also commissioned Henley Business School and Ovum to investigate the banks’ ability to manage their own data for customer service.

Retail banks’ business models have been typically focussed on selling the maximum number of products possible, rather than data and analytics to actually understand their customers and offer specific and relevant products. The result is customers feel isolated from their bank and less likely to purchase products.

If banks were to harness big data then they could develop specific marketing offers for their customers, increasing the likelihood of more products and services being purchased. This is only achievable if banks develop a true single customer view through use of big data analytics.

The research also identified that banks, by their own admission, have not focussed on improving customer service in recent years as they feel burdened by new regulations. According to the banks interviewed by Ovum, this is the immediate priority and is absorbing management attention and project resources, despite an internal desire to deliver on customer promises.

In a similar vein, the research from the Henley Business School revealed that banks do possess the drive internally to widen the use of customer data into other areas, and that many banks do use this data to support product development. Yet many lack the necessary core IT infrastructure to support both operational and analytical needs.

Many banks stated the focus of IT spend is in meeting regulator’s requirements post the 2008 crisis. As such many banks are not achieving the single view of the customer, with unsatisfactory customer service now being the main consequence.

If in September 2013, when account switching is legislated to be much easier than today, there is significant movement among consumers then we expect some serious winners and losers in the shake-out. The winner will inevitably be the bank that is perceived to be providing the best customer service.

A simple way for banks to improve their service is to start reaching out to customers with the products and services they are in need of, rather than just approaching them with the blanket marketing techniques of yesteryear.

Using big data analytics to extract value and insights from the huge amount of data they have is the catalyst to improving customer service, and ultimately setting the path to success in September 2013 and beyond.

All research conducted can be downloaded from here http://www.sas.com/reg/gen/uk/banking-big-data