James Daley

By James Daley

Measuring quality in banking has always been a difficult challenge. While customer surveys provide useful context around which providers are delivering the highest levels of satisfaction amongst their customers, three-quarters of people in the UK have never switched their bank – so have no frame of reference when giving their verdict.

And while customer surveys are clearly effective at determining whether customers feel their needs are being met, the opacity of pricing in banking, and complexity of products, can make it difficult for customers to be sure they are getting good value from their bank.

Our new report sets out to build upon the significant volume of existing work which has looked at quality in the banking space – with the ambition of creating a framework for excellent customer service. It follows the recent Competition & Markets Authority requirements for larger banks to publish customer survey results on their websites – and in their branches if they have them – and looks to consider how else customers can understand excellence in banking.

While customers may not always be the best judge of whether their bank is better than another, their views on what matters to them are a very important part of understanding what good looks like in banking. To that end, the report uses new quantitative research to understand what elements of banking consumers lend most importance to, and how they perceive that changing in the future.

Defining excellence

In Chapter 1, we lay out the context, summarising some of the extensive research and regulatory papers that have focused on the banking sector in recent years, with a particular focus on the Competition & Markets Authority’s 2016 report remedies.

Thereafter, we begin to unpack some of the quantitative work which was carried out to underpin this report. Working with insight agency Opinium, we surveyed a nationally representative sample of 3,000 UK customers, to understand how customers use their bank, and what they perceive to matter most to them in terms of customer service.

In Chapter 2, we focus on the current state of UK banking, revealing in spite of consumers’ mixed views on the banking market as a whole, the majority of consumers are currently satisfied with their bank.

Nevertheless, satisfaction with a provider does not necessarily translate into a willingness to recommend them.

Interestingly, our analysis reveals that while satisfaction naturally influences a customer’s likelihood to recommend their bank, other factors are also vitally important.

For example, those customers who feel most confident at managing their money are much more likely to be promoters of their bank than those who are not. Those who interact with their bank the most are also likely to be the most satisfied – particularly those who use branches on a regular basis. The same is true in reverse, in both these examples.

But while most customers are broadly satisfied with their bank – and this remains the reason most people haven’t switched – a significant minority claim they haven’t switched because of the hassle, or a fear something will go wrong.

Surprisingly, the average consumer would require an incentive with a value of almost £500 before they would consider switching their bank

  • and this did not vary significantly based on their income. Even among the least happy customers, the incentive would need to be over £370

  • twice what is being offered by any bank in the market today.

In Chapter 3, we move onto analyse our data to provide a framework for excellence in banking customer service. There remain great opportunities to harness the power of technology to improve perceptions and the experience of banking for UK consumers. Our research looks to uncover where those possibilities are greatest.

The six factors that determine satisfaction

Our research identified six factors which were found to significantly determine satisfaction in banking:

1. My bank is safe & transparent.

While knowing their money and personal data are safe are understandably key factors in ensuring customers are happy, people also value feeling their bank is upfront and straightforward with them – and it makes complex processes as simple as possible.

2. My bank doesn’t waste my time.

The absence of errors from a bank is also a fundamental hygiene factor in terms of customer service. Customers want their services to work as expected and don’t want the inconvenience of human or technical errors being made by the bank. Customers also don’t want to be left waiting – whether on the phone, in branch or when expecting a response to a complaint.

3. My bank is helpful, solves my problems and has friendly staff.

Customers want problems to solved quickly and efficiently – all the more so if the bank has caused the problem. Customers also like to speak to a human being when things go wrong.

4. My bank makes its services easy to use and understand.

Convenience is a key factor to most consumers when it comes to banking. Many people like to be able to interact with their bank on a regular basis, and speed and convenience for regular banking tasks is a key component of customer satisfaction.

5. My bank has good products and communicates well.

Having good products is something consumers also draw out as important when it comes to their current account provider. However, this sits alongside clear communication. So while customers want good interest rates, and other more tangible product features - such as gifts, cashback and rewards – it’s equally important they receive relevant updates and engagement which help them make better decisions.

6. My bank offers access to branches.

Access to branches remains important for the majority of customers. Even if they don’t use branches very often, around 85% of people still use them for paying in cash and cheques and don’t see their branch use diminishing much in future years. In fact, customers would like to have more branch access for services such as taking out a mortgage.

These six factors significantly determine satisfaction in banking. While the importance of each factor varies in its importance to individuals, banks need to hit all six of these to excel in the opinions of their customer base as a whole. While a growing number of customers may be comfortable with branchless banking, access to branches remains important to the majority.

What this means for providers

While customers may be well placed to judge their bank on some of these factors – such as whether staff are friendly or good at solving problems – it may be harder for them to accurately assess whether a bank offers good value products, or whether it is safe and transparent.

The Competition & Market Authority’s move to require banks to publish customer advocacy scores is a good start in helping people look beyond price in banking, but there may be other factors where more objective measures could help customers make more informed decisions.

The FCA’s service quality metrics look to close some of this gap, with banks now also being required to publish data such as the number of major operational and security incidents within a six month period, and how long it takes to open an account and issue a new debit card. But our research shows there may be areas that could be added to in future, which would support consumers in understanding banks’ performance in other areas that are important to them.

There is obviously a risk that a demand for the publication of ever more data serves only to overwhelm consumers. But the target for such data sets should not just be consumers themselves, it should be aggregators who can translate the information into meaningful ratings for customers.

When choosing a bank account provider, consumers should be able to make informed decisions about who offers good quality services – and this is all the more important given the likely length of that relationship.

The fact that consumers require such a high level of incentive to consider switching speaks to the fact that they see switching as difficult, and do not see the differences in quality being worth the effort.

Yet the research shows that there are considerable differences across the sector – and if these can be better surfaced, there is an opportunity to create a race to the top on quality and service, harnessing the power of technology to deliver better outcomes for customers.

This article is an edited version of the Executive Summary of the report.