Is There a Future in Loyalty?

Banking customer loyalty appears to be on the decline. The Ernst & Young 2012 Global Banking Survey found that the proportion of customers planning to change banks had grown by 70% in just one year, and more customers than ever had accounts with multiple banks. And the company’s 2013-14 Global Banking Outlook indicates that these trends are persisting.

Why then, at the very moment when customer loyalty is fading fast, are some banks setting out to build their futures around it?

In some cases, senior management is convinced that customer loyalty can not only be re-ignited, but is central to driving growth, profitability and return on risk-weighted assets (RoRWA). One reason is that Big Data analytics, decision management technology and intelligent omni-channel communications are creating new opportunities to serve customers in relevant, innovative ways. Another is that even in the limited areas where banks have implemented a customer-centric approach, performance improvements are impressive. And this approach is not only the smart thing to do; it’s the expected thing to do—not only by your customers, but regulators as well. Banks are recognizing that customer-centric strategies—implemented via centralized policies, analytics and decision management technologies—can hold the key to the consistent, fair treatment mandated by regulators in many markets worldwide.

Institutional commitments to customer centricity are also being driven by a thorough re-thinking of what loyalty is and how to go about earning it. Increasingly, bank executives realize that customer loyalty won’t be earned by a low rate or offer. Loyalty arises from goodwill amassed over time through one excellent customer experience after another.

So how do banks generate a succession of excellent customer experiences? It's a challenge we’re working to solve with our own banking clients, and the topic of our next Insights white paper, coming out in the next month. To make sure you get the white paper when it’s published, I encourage you to sign up at www.fico.com/insights (click on “sign up” at the upper left-hand side of the page) or stay tuned to this blog.