Financial services tracking report 2013

Executive Summary

As consumers start to tentatively re-enter the market for financial services, there is a growing risk of a knowledge gap emerging. Consumers say that regular advertising is not important to them (suggesting they remain partially “blind” to the messages providers are putting into the market) and increasingly say they can’t find unbiased advice (almost certainly due to a decline in the number of independent financial advisers). But their digital habit of looking online for information has opened up a path for brands - consumers are more likely to go directly to a provider’s website than to their local bank branch.

If banks are to stabilise their customer and asset base, they need to increase multiple product holding. Currently, this is stuck at around two products per customer - and these are typically current and savings accounts, rather than more profitable insurance-based products or investment vehicles.

The most positive indicator for banks is that customer satisfication scores are generally strongly positive and for some brands convert into powerful levels of recommendation. On the back of this engagement among customers, banks and building societies can look to sell-through added-value products, such as packaged current accounts which provide a bundle of services in return for a fee and new generation offers, like gadget insurance and VIP Lounge access. With pressure on free banking, these will need to be made more attractive to customers, however, since the vast majority expects to continue to bank without paying for the privilege.

“Runaway” products still typify this marketplace - that is, customers of a bank are more likely to look elsewhere for other products, especially mortgages and all the related services (such as life insurance, pensions, house contents and buildings insurance). Building on the existing banking relationship should be a way forward for this sector, provided banks can rebuild trust - there are signs of this starting to happen.

There are also some signs of green shoots of recovery, with consumers starting to say they are willing to consider buying non-core products in the next 12 months. These are potential quick wins for banks, although they face strong competition from online providers and comparison websites.

Account switching is still a minority activity, reflecting engrained habits. As online access overtakes visiting a bank branch, this does create a chance for new entrants and challengers to get a foothold in “starter” products (current and savings accounts).

If switching rates are low, it is because customers appear satisfied with their banks overall. While good news in terms of retention, caution is required about assuming customers are becoming advocates. Converting satisfaction into a recommendation demands a very high level of customer satisfaction (a score of eight out of ten or more) to really fly, however.. Word of mouth alone will not make this happen - product delivery and customer service, combined with competitive pricing, remain the cornerstones of this sector. Read the infographic here.

Financial services tracking report 2013