This new survey comes out with the strongest indication yet (from a research perspective) that online banking influences customer loyalty and bank revenue.
The second dimension of the study, which analyzes customer commitment, gives the industry a more complete picture of a customer's revenue potential to the bank. Customer satisfaction is a major aspect influencing customer commitment to the bank, in addition to brand image and a customer's propensity toward loyalty.
Of particular note is the willingness to recommend to others. This is generally a strong indicator of loyalty.
The study finds a strong positive relationship between customer commitmentlevels and the number of revenue-generating banking products a customerutilizes, as well as the number of times a customer recommends the bank toothers. Customers with commitment levels in the top 25 percent use an averageof 3.3 banking services, compared to 2.5 for those in the bottom 25 percent.Fifty-five percent of highly committed customers also have loans with theirprimary bank and make 6.6 recommendations of the bank to others. Among thosewith low commitment, just 31 percent have loans with the bank, and theyaverage fewer than one recommendation. Overall, the retail banking industryenjoys a commitment level of 28 percent, compared to 13 percent, on average,in other industries measured by J.D. Power and Associates.
But the meat of this for me, is here with a clear reminder that its all about differentiation. In this future world, Banks can rely on having a local branch to ensure that customers will flock to them, and this is largely what many Banks think. But that reality is slipping, and probably already gone. The reasonably smart banks, eg Wells, and BofA are moving ahead of that thinking already, although we still see them slipping into that thought still, with free chequing.
The study also finds that while bank products are viewed as a commodity tomany customers, products that once helped attract new customers, such as freechecking, are now widely offered and expected from customers. Currently90 percent of banking customers indicate having free checking, and 94 percentof banks offer free online banking and free debit cards. "As it becomes increasingly difficult for banks to differentiatethemselves from their competitors, they constantly have to find opportunitiesto be innovative in attracting the attention of potential customers," saidTaylor. "Online products and services represent a clear opportunity for banksto differentiate themselves to potential customers."
Finally, a reminder on the connection between satisfaction and loyalty.
"We find that banks with strong brand image can have highly committed customers, despite lower satisfaction scores, and vice versa," said Taylor."But overall, customer satisfaction and commitment are closely entwined.Satisfaction is what banks can control, while brand image and commitment isdeveloped over time. Banks that understand and analyze this relationship are better equipped to develop strategies to attract and retain customers."
Relevance to Bankwatch:
There is a demonstrable link between how customers feel about online banking, and their FI. Quantifiable evidence is hard to source at this point, but indications from such research certainly strongly suggest the link.
Bankwatch 