Banks must renew focus on digital financial services to keep their customers loyal

Consumer trust in their banks has not been shaken by negative headlines or an influx of new and non-traditional entrants to the banking sector – 60 per cent of Britons trust banks more than other institutions to provide financial services, ranking above retailers (2%), supermarkets (3%), and mobile operators (just 1%), according to a survey conducted online by YouGov and commissioned by Intelligent Environments.

Banks cannot afford to become complacent about customer trust

For the majority of Britons, this loyalty is not driven by laziness or apathy. While a quarter (24%) will admit that they stay with their bank because it is too much trouble to switch, 51 per cent of Britons with a current account say that an effective digital banking service (online or mobile banking) is a key factor driving their bank loyalty.

The study for Intelligent Environments indicates that banks still enjoy resilient customer trust, though this will erode if they fail to keep pace with customers’ digital demands.

Retailers steal the digital services limelight for young customers

Digital banking is clearly a lynchpin of customer loyalty, and no more so than in the 18-24 age group.

In this age range, 20 per cent of current account customers who had experienced frustrations with digital banking in the past year were disappointed that current banking services are not sufficiently tailored to their individual needs.

Another key frustration for 18 per cent of these 18-24 year olds is the lack of consistency between digital and telephone banking services and the branch. 20 per cent of all current account holders aged 18-24 perceived supermarkets to offer a particularly well ‘integrated’ service across all channels, suggesting that the retail sector (a non-traditional entrant to the banking sector) may be best placed to attract attention from ‘Generation Y’ bankers.

David Webber, MD of Intelligent Environments, said: "The Intelligent Environments research demonstrates that while customer loyalty to traditional banks remains strong, digital financial services delivery will be key to customer retention. This sentiment amongst the important ’emerging banking generation’ of younger current account holders will propel banks to focus on their digital offerings if they are to compete with new entrants to the market, such as retailers, who traditionally have a much stronger focus on their online offering and service."

Branch presence still important despite focus on digital services

Despite the uptake in online and digital financial services, the Intelligent Environments research reveals that customers still take comfort in having access to a ‘real world’ branch. Although over half (55%) of current account holders use their local branch less than once a month, 40 per cent statedthat ‘branch availability’ was a factor in determining their bank loyalty. This may prove to be a barrier for non-traditional challenger banks, many of whom operate an ‘online only’ model with no high-street presence.

Although the implicit customer trust in a bricks-and-mortar branch is still a key factor in determining brand loyalty, it is likely that this will shift slowly over time as customers become more confident that they can trust digital channels. In the meantime, resilient customer trust will allow banks the opportunity to focus on their digital offerings before customer heads are turned by non-traditional market entrants.