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How Financial Service Providers Can Retain the Trust Advantage in Uncertain Times 

January 11, 2024

Wealth management firms and traditional banks now face the same challenge. Existing customer satisfaction is holding steady, yet new customer acquisition has been slowing since the pandemic as the number of young people willing to switch to Big Tech financial services continues to rise. To stem the tide, financial service providers must find ways to cater to what consumers need in these uncertain times. Surveys show that the real source of customer acquisition isn’t better rates or incentives, but something much more fundamental. That’s where financial firms will need to do a better job if they want to win in an increasingly competitive industry landscape.  

What Actually Matters to Customers 

Though national banks have historically benefitted from a high level of consumer trust (50%), recent surveys show that large tech companies are rapidly closing that gap (41%) and the ‘trust advantage’ the banks have been enjoying may soon disappear, especially with younger consumers. According to the same studies, young consumers are much more willing to use less traditional forms of banking, such as online-only banks, also referred to as neobanks.  

This trend was also revealed in J.D, Power’s latest National Banking Satisfaction Study, where there was a 6-percentage point increase over last year in secondary deposit accounts with online-only financial service providers. One reason cited was higher deposit interest rates. However, are better rates the only reason customers are exploring other options? Not entirely.  

In one survey, over 40% said they would consider switching banks if they received better rates or sign-up bonuses. However, the overwhelming majority said that customer service, accessibility and convenience were the top reasons for choosing their bank.  

In fact, ease of use and convenience are often the main reasons younger consumers switch to large technology companies, who excel at digital experiences, offering 24/7 financial services through mobile apps where people can easily manage and move their money.  

So, how can more traditional providers hold on to their current trust advantage? They need to adapt to the needs of today’s consumers by providing a more personalized and customer-centric experience. 

Digital Convenience with a Personal Touch 

Digital channels are such a key component of the modern banking experience, they’re becoming a service differentiator. You can see this by how quickly technology providers have gained market share in the financial services industry.  

Over two thirds of customers are now willing to use digital channels to manage their money, and a third are open to using generative AI for investment advice and financial planning. The same research shows that 30-35% of banking customers would even prefer to open a new account digitally.  

However, the problem lies not with consumer willingness, but with the delivery they receive. Though a third of banking customers would be willing to use digital channels to serve a basic request, such as opening a new account, less than 30% of banks globally have introduced new digital acquisition journeys into their website or mobile app. Furthermore, half of wealth managers say it’s a challenge for their firm to provide a more sophisticated digital experience.   

This is a missed opportunity to alleviate high call volumes and shorten wait times by steering those who prefer self-service to digital channels where automation and AI can resolve basic requests, something which we can design into your existing workflows and call management systems.  

Yet, there is also the trap that many fall into - focusing too much on one delivery method over another. Digital-first shouldn’t mean digital only. It’s important not to lose sight of the power of the personal touch. While digital customer service interactions have doubled since 2017, it’s ironic that the highest satisfaction gains in J.D. Power’s latest Direct Bank Customer Satisfaction Study, have been in phone-based service that is provided by live representatives. Chat and email interactions, in fact, saw a 1-4-point decline. 

Financial service providers need to remember what gives them their competitive advantage in the first place – their “human first”, personalized approach. They need to excel at digital, but not to the detriment of their voice support. The ideal balance can involve a mix of both, so customers can select what works best for them. The focus then becomes how to route customers to the channels and departments they need in the most efficient, seamless manner. 

Advice in Difficult Times 

One of J.D. Power’s other surveys, the Retail Banking Satisfaction Study, also revealed a stark reality for many Americans. According to the report, the number of customers with primary bank balances of $10,000 or more has declined 16 percentage points in the past year, while customers categorized as financially “unhealthy” has increased 9 points.  

This means that more Americans are struggling to save, or to simply hold onto the savings that they’ve already accrued. This shift, according to J.D. Power, is testing consumer loyalty as people look for banks, or alternative financial services providers, that offer better interest rates or savings programs. Their experts warn that in precarious financial times like these, people need guidance, especially younger customers with limited financial knowledge. This places pressure on banks to deliver more personalized service and advice. 

This is underlined by a survey from intelliflo that shows that 59% of Americans want financial advice, but don’t know where to get it. Unfortunately, financial institutions aren’t filling the gap, as only 21% of banking customers say they’ve received advice or guidance in the past year. This again is a huge, missed opportunity, as studies show that those who receive guidance from their primary institution in the past 12 months are almost twice as likely to open a new account. 

How can financial services providers deliver this kind of personalized advice? To do this often requires extensive financial knowledge, as well as personal reviews and assessments that only experienced financial advisors can conduct. Of course, sourcing those specific skills can be time consuming and exhaustive. This is where CX partners like itel can help you hire specifically for these roles by tapping into their wide pools of onshore candidates with financial service experience and specific licensing or certifications.   

They can also help you to use these skilled advisors more efficiently by routing more mundane tasks, or those that don’t require extensive financial services knowledge, through regular customer care channels. We can even help you build AI-enabled apps, chatbots, or knowledge libraries that can help answer basic customer inquiries. This then frees your more skilled and tenured advisors, so they can focus on giving personalized advice and sell right-fit investment solutions that will help customers achieve their financial goals.  

Empathy in the Face of Hardship 

This brings us to the unfortunate circumstance of those who are not just confused or worried about their finances, but those that are in fact, struggling. According to the U.S. Census Bureau, nearly half of Americans struggle to make ends meet each month, a rise of over 30% from last year’s survey. Two thirds of Americans are either cutting costs or putting off major expenses to offset the rising cost of living, and the average savings accrued by U.S. households each month has declined from the pandemic high of 33% to only 4.1% of disposable income.  

The bitter side to this is that if stubborn macroeconomic conditions continue to stress American households, student loan, credit card, and mortgage delinquencies will inevitably rise.  

According to recent data released by the Fed, the 30-day delinquency rate on outstanding credit card balances has already risen to almost 3%, pushing rates to the highest levels seen since the first quarter of 2012. Still a far cry from the 5-7% highs seen during the 2008 recession, yet concerning, as this represents the eighth straight quarter of increases while American household debt balances grew by $228 billion across all credit types.  

As people fall further behind in payments, this may soon mean a volume of delinquencies that cannot be handled by smaller inhouse debt recovery teams, which in itself is a reason to consider outsourcing to BPOs that provide 3rd party collections services. 

By teaming up with outsourcers like itel, who have the expertise and resources to dedicate 100% of their efforts to debt recovery, it can save you time that could be reserved for growing new revenue streams.  

More importantly, our agents are trained to listen with empathy and to resolve difficult debt recovery situations using advanced negotiating skills and by understanding and uncovering underlying issues that stand in the way of payments. Our philosophy is to work with customers collaboratively to resolve any defaults as soon as possible, while adhering to professional standards and compliance requirements. 

The Takeaway 

Banks and wealth management firms face an uphill challenge as difficult economic times test the loyalty and trust advantage that they have enjoyed for years. New entrants, such as technology companies, risk eroding their customer base and we can already see this from lower customer acquisition rates and declining revenue streams.  

The way to stay relevant in such times, and to ensure loyalty, is to adapt to the constantly changing needs of customers, and to offer even more personalized service even as financial services providers seek to cut costs.  

The way to gain this flexibility without literally breaking the bank, may require some outside partnerships with outsourcers who can leverage their size and resources to take on the more mundane customer care tasks, while supplementing specialized departments, such as financial planning and debt recovery teams, offering new avenues for efficiency and automation when needed.  

The important thing to remember is that money is a very personal matter. It cuts to the very core of who we are, what we value and what we can achieve. Our financial health affects our overall wellbeing and during times of confusion and stress, those providers that can offer a human-centric, personalized approach to service, coupled with empathy, will undoubtedly gain the respect and loyalty of younger generations as well as those at all stages of life.   

Want to learn more about how we can support financial services providers, so you retain the trust advantage? Click here.

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