By Robert B. Segal
The financial sector has increasingly moved online, as consumers get more and more comfortable using the convenience of the web to conduct transactions, perform product research and check account balances. For financial institutions, the internet saves money, helps build the brand and provides ongoing opportunities for cross-selling. An effective website can also assist banking organizations to increase market share and enhance customer loyalty.
According to a recent study by ForeSee Results and Forbes.com, customer satisfaction with online banking far surpasses other online financial services like credit cards and investment services. Using the methodology of the University of Michigan’s American Customer Satisfaction Index (ACSI), online banking scored 82 on ACSI’s 100-point scale. Credit card websites and investment websites both scored just 75.
In banking, the online channel (up 12 percent from 2003) significantly outperformed overall retail banking in terms of customer satisfaction, which scored 78 when measured by ACSI in 2007.
“Online banking is setting the bar for online financial services,” said Larry Freed, president and CEO of ForeSee Results and author of the study. “Improving customer satisfaction is an effective way to move customers to the most cost-efficient channel.”
Two of the key findings for banking websites included the following:
With a score of 82, banks have the highest online customer satisfaction in the financial services industry, with a rating that has improved significantly in the past five years. The satisfaction rating rivals the score of 83 for e-retail, which is the highest scoring category measured by ACSI. According to the survey results, banks have figured out how to provide value, convenience, information and transactional features on the web.
Highly satisfied online banking customers are much more likely to purchase additional services (31 percent), use the website as a primary channel (57 percent) and recommend their bank (54 percent) as well as their bank’s website (63 percent), which indicates the bottom-line value of pursuing higher levels of customer satisfaction. According to Freed, the data confirms the case for making customer satisfaction a top priority for banking institutions.
Banks have improved performance in several ways. They have made it easy for their customers to access the information they need and conduct transactions at the time and place of their choice. That success is demonstrated by the large numbers of customers that do their banking on the web, convinced of its convenience, value and security. A further by product is stronger customer relationships.
Higher levels of customer satisfaction, it is asserted in the study, bring many positive results to the organization:
Loyalty. Customers are significantly more likely to continue to use the bank’s services, rather than switch to the competition.
Share of Wallet. Customers are more likely to purchase additional services.
Word of Mouth. Customers have a high likelihood to tell family and friends about both the bank and the website. Word of mouth is an important and low-cost means of customer acquisition.
As institutions with effective websites look to offer additional services, they are in a strong competitive position. Even a slight increase in customer satisfaction can lead to improved loyalty, referrals and cost efficiencies.
Future behavior, as measured by the methodology of ACSI, is highly related to customer satisfaction. As an example, the ForeSee study found higher levels of retention. Highly satisfied online customers were 55 percent more satisfied with their bank and 33 percent more likely to continue to use their bank’s services. Those customers were 31 percent more likely to purchase additional products and 32 percent more likely to increase online bill payment.
For those looking to improve their internet presence, the “site experience” remains the highest priority. This includes the ease of finding information, the available tools and the overall organization. Enhancements to transactional capabilities and site performance are also important.
“Financial services firms should resist the temptation to cut investment in the online channel in times of tight money,” said Freed. “Our research suggests that, if anything, a commitment to improving satisfaction with the web channel can improve both overall loyalty and the bottom line by moving customers into the most cost-efficient service channel.”
Banking institutions are moving increasingly to the web as traditional definitions of community are changing. They are seeking new sources of revenues, the ability to expand geographically with building expensive brick and mortar, and to generate deposits without cannibalizing the existing base. They may find that current customers are happier as well.
Robert B. Segal is a chartered financial analyst and portfolio manager at Danvers, Mass.-based William Mantz Investment Advisors (www.jwmantz.com), an investment advisory firm serving more than two-dozen community banks, primarily on the East Coast. “At the Margins” is a regular feature in Banking New York focused on banking strategies and balance-sheet trends.