With new players, consumers can bank on sector shake-up

It will be a big year for South African banks in 2018. Three new players have received banking licences and are preparing to launch – and there are whispers of others.

Change in the banking sector has been a long time coming and customers are hungry for a better banking experience. For years, the same issues have aggrieved customers: high fees, long queues and unpleasant service experiences are the biggest pain points.

But switching banks is a hassle, which leaves many disgruntled customers putting up with it rather than having the inconvenience of moving elsewhere. It’s not like there has been a long list of alternatives to choose from.

Capitec has been a breath of fresh air — in fact, it is now SA’s second-biggest bank after Standard Bank – but it’s not a solution for everyone. It is unrealistic to expect that one bank can be all things to all people. If you need a comprehensive banking solution with integrated wealth management, for example, Capitec’s offering may be too limited.

So which bank do you switch to when it feels like there are no better options?

Most of us have accepted poor customer experience as “normal” for the banking industry, something we feel powerless to change. But sentiment towards banks in other countries shows it doesn’t have to be this way.

The Net Promoter Score is an index ranging from -100 to 100 that measures how willing customers would be to recommend a company’s products or services to others. This is widely used to gauge customers’ overall opinions towards a company.

In the US, the average Net Promoter Score for banks is 26 (with the highest score at 56 and the lowest at -8).

By comparison, SA’s banking sector scored a paltry -10 on average.

Three of SA’s biggest banking brands are highly unlikely to be recommended by their customers: Nedbank (-25), Standard Bank (-26), and Absa (-28). These scores are according to the 2017 Brandseye Banking Sentiment index.

Research shows that consumers are more likely to remember negative experiences than positive ones — and they are also more likely to tell others about it.

The three new banks, on the other hand, will be starting with a clean slate.

What most South African banks have not yet realised is that their customers’ experiences genuinely matter.

To demonstrate this, I developed a new customer experience metric called the Net Experience Effect.

To obtain a brand’s Net Experience Effect score we analyse its Net Promoter Score for non-customers compared with customers. Noncustomers’ Net Promoter Score will be based on their impression of the brand, developed over time through feedback from friends and family, advertisements and what they have seen in the media news.

The Net Promoter Score scores for customers are based on those same factors, as well as their actual experiences and interactions with the brand over time.

By comparing the two, we see whether the brand has been able to build loyalty by delivering positive customer experiences.

Absa, Standard Bank and Nedbank are at present failing on all customer experience elements, and it’s going to catch up with them sooner than they realise. The only way they may turn around their fates will be to radically improve the way they treat customers, so they aren’t continually sending upset customers into online and offline conversations about their brand.

THE NEW BANKS WILL … UNDERSTAND THAT CUSTOMER EXPERIENCE IS THEIR MOST IMPORTANT DIFFERENTIATOR

The essential elements of customer experience that influence long-term customer retention in all industries, including banking, are: ease of product and touchpoint use, resolution of issues, delivering on brand promises and perceived value offered.

Collaborating with opinion mining company Brandseye, we evaluated the sentiment of social media mentions pertaining to the five major retail banking brands, against the key elements of customer experience. Absa, Standard Bank, Nedbank and even FNB fared poorly.

Consumer sentiment was negative towards nearly all aspects of their customer experience, with issues such as long branch queues, agents’ inability to resolve simple queries, misleading advertising and buggy apps among the pain points.

As newcomers enter the market, all banks will need to focus on getting the basics right. This is the age of the customer and it’s becoming unacceptable to charge high fees if a brand cannot deliver on its promise.

The new banks will be building their offerings to capitalise on the entrenched failings in our current banking system and they will understand that customer experience is their most important differentiator. This is good news for consumers — and a wake-up call to the banks that are lagging behind.