Overcoming Inertia

August 1, 2016
 

How to Get Customers to Switch to Your Bank

Executive Summary

Acquiring new checking account customers is an important goal for retail banks. These new accounts are often the gateway to a more robust banking relationship. To lure customers away from their current banks, the retail banking industry has traditionally relied on incentives and promotional offers, including cash payments, reduced fees, higher interest rates, or rewards programs.

But when it comes to actually making the switch, inertia rules. Many customers won't switch ... even when they want to. The effort required is just too high, especially when direct deposit, automatic withdrawals and online banking are involved.

Catalyst sought to learn what these customers were thinking, feeling and doing during this process, with the goal of generating actionable insights that could ultimately improve acquisition. Was it possible to improve acquisition by creating a better customer experience that reduced switching barriers?

Through online focus groups, we examined the experiences of people who had recently switched banks or were considering a switch because we wanted to understand the challenges they faced. We mapped the customer journey at all stages of the process. We recorded customers' thoughts and feelings at every stage to identify the greatest pain points and find opportunities to turn those problems into solutions.

Key Findings

  1. Customers felt a high level of anxiety after the switch had been made. They were concerned about money mix-ups between the two banks during this period of transition. Banks that could ease these concerns for new customers earned high praise and customer loyalty, which in turn became word-of-mouth advocacy. Many customers won't switch... even when they want to. The effort required is just too high.
  2. Customers felt unappreciated. In some cases, they felt angry or frustrated with the way their old bank had treated them. More common, however, was the feeling of being ignored. When targeted with promotions from other banks, they saw no incentive to remain with their current bank.
  3. Firsthand recommendations were critical. If friends and family were pleased with a financial institution, customers were more likely to choose that bank to do business with.
  4. Too often banks focused on the steps necessary to open a new account and ignored the steps necessary to actually switch the account. Research participants made it clear that they wanted a bank to help them through the switching process.
  5. Banks that helped customers close their old account(s) were much more highly rated.
  6. Feedback was positive for these three potential switching concepts:
    • An online program with step-by-step instructions, a simple checklist and customer service support
    • A switch concierge who would walk them through each step, answer questions and help with the legwork
    • Technology that could automatically move accounts, auto payments and direct deposits
  7. Customers were receptive to the concept of a "smooth switching guarantee."

To receive the full research report, which includes additional findings, specific examples of ways banks can improve the switching process and a plan for success, contact Mike Osborn:

(585) 453.8331 or email: mosborn@catalystinc.com.

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