Johannesburg – Loyalty has a price. If banks don’t play along, it’s good-bye.
Clients are increasingly taking control of their banking services and are less committed to a single bank. If they are to remain loyal, they want to be rewarded, according to an Ernst & Young (E&Y) study.
The audit firm questioned more than 28 000 bank clients in 35 countries and last week published its findings in the Global Consumer Banking Survey 2012 – The Customer Takes Control report.
In South Africa 39% of the clients said they had already switched banks, compared with 34% a year ago. Of these, 70% said high bank charges had been the main reason. Another 13% are intending to switch, compared with 10% a year ago.
Colin Daley, associate director of advisory services at E&Y, says an increasing number of clients use more than one bank to meet their financial needs.
E&Y says banks worldwide are experiencing challenges from all quarters, putting pressure on their profit margins and encouraging them to focus more on their clients.
“Unfortunately for banks, they are all too aware that many more clients are losing confidence in the industry than those remaining faithful.”
The number of South Africans who are clients of more than one bank has risen from 55% to 61%.
After China, South Africans have the greatest affinity for banks that reward their loyalty with either improved service (65%) or lower bank charges (76%).
According to E&Y, loyalty programmes are critical to a client’s choice of bank. For the banks, greater loyalty from their wealthier clients potentially carries more weight than the cost of financial rewards.
In South Africa the number of clients joining such programmes has doubled over the past year. Banks without such programmes lag the rest by far, says Daley.
Client advocacy is going from strength to strength and clients are listening more to other clients than to banks or financial advisers, he says.
This is a major factor in South Africa, where 76% put greater value on banking information from friends, family members or colleagues. This is considerably higher than the global average of 71%.
A total 45% of South Africans use social media to comment on banks – this is higher than the global average of 34%. For that reason, says Daley, it is critical for banks to develop a social media strategy.
While 22% of bank clients across the globe say that changes to bank charges and fee structures would make them happier, 63% of South Africans say that greater clarity and more communication regarding banking charges are required to satisfy them.
Daley says banks will have to adjust to the fact that clients are taking, and want to take, greater control; the banks will have to accept the shift in the power balance.
Clients should, for example, receive more flexible options and banks should help shape their experiences by encouraging more self-help services and developing adaptable loyalty programmes.
Banks will also have to design their business models around client requirements and become more client-focused, says Daley.
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