Asia-Pacific Banking & FinanceVolume 05 • Number 04 • May 2013International economist Dr Robert Johnsonon navigating the g...
Continued frompage 1quadruplets. The only obviousdifferences have been when NAB wasout with its breaking up campaign andWe...
THE PATH TOINDUSTRIALSTRENGTHANALYTICSsatisfaction is a one-off measure: areyour needs met, yes or no? Whereascustomer exp...
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Drivers of bank brand trust and customer experience.


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Feature article on bank brand trust and customer experience published in the Asia-Pacific-Banking & Finance magazine. Featuring global research by mext consulting and Capgemini.
The article by Bernard Kellerman questions whether looking at customer satisfaction is enough. Citing research by Capgemini and mext into customer experience and trust and its connection to choice and loyalty. It further looks into customer trust in the bank brands as a key driver the Net Promoter Score (advocacy) and satisfaction. It bases its observations on the global studies into the effect of brand trust on customer behaviour by mext and its global partners in Asia, North America, Australia and Europe. The research shows that trust is the root cause of KPIs like the NPS and customer satisfaction – but also r a driver of the positive experience. In fact, the experience needs to confirm what the customer wants to trust for.
The feature is based on extensive interviews by Bernard Kellerman with HuTrust® developer and mext Australia Managing Director, Stefan Grafe.

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Drivers of bank brand trust and customer experience.

  1. 1. Asia-Pacific Banking & FinanceVolume 05 • Number 04 • May 2013International economist Dr Robert Johnsonon navigating the global economy.Locking in funding for decades soundsgreat in theory, but can prove problematic.Why telematics in motor insurance couldchange the underwriting process.Talal Yassine, founder of Australias firstSharia-compliant superannuation fund.SATISFIED, NOT POSITIVEBanks have historically had difficulty distinguishing their products from one another, and in recent years the problemhas only intensified, according to several recent industry reports, as Bernard Kellerman explains.WHILE BANKS MARKETING campaignswould have the world believe otherwise,in mature markets customers are notdelighted and not engaged by theirbanks. This is especially true where thesector is structured along the lines ofhaving several very large dominantbanks and a number of smaller competi-tors and other financial service providerssuch as building societies.Worldwide, commoditisation isdiluting the customer experience, asthe look and feel of basic bankingproducts has remained largely the same,with "very little innovation forged interms of linking products or developingthem outside their traditional silos,"noted the authors of a report co-sponsored by global consulting firmCapgemini and financial industrynetworking organisation, Efma.Attempts to differentiate on pricehave been curtailed in recent years, too,due to regulatory and cost pressures thatare keeping rates universally low, theauthors of the World Retail BankingReport observed.Further, while countries such asAustralia and Canada have weatheredthe financial storms in far better shapethan most of their OECD peers, andwhile customers in both these marketsreport being both more satisfied andhaving a better customer experience thanthey did in 2011, polling of bank custom-ers by the likes of Roy Morgan Researchshow that very few people are giving anyone bank a large slice of their business(see page 4).The question as why not a singlebank - even among the Big Four, withtheir "full service" offerings - hasmanaged to create a range of productsthat matches its customers needs is atruly open one.Efficiency, profits v personality, warmthAccording to some of Capgeminiscommentary, the global banking sectoris in some ways a victim of its ownsuccess in keeping customers out ofbranches, and off the line from callcentres."Banks are increasingly encouragingcustomers to use the lower-cost internetand mobile channels [and] the result hasbeen a banking experience that is moreremote and less personalised than it hasever been," the Capgemini report noted.Thus, the push to reward profits overpersonality has meant that while thebranch offers the best opportunity tobring warmth to the bankingexperience, many customers arebeginning to prefer the ease andefficiency of remote channels.On the other hand, if a particularbank can delight its customers bydelivering exactly what they want viathe increasingly large range ofdistribution channels available, saidCapgemini, it has a better chance ofstanding out from the crowd.Looking to leaveOther top line findings from theCapgemini report were that, despitehaving more positive experiences thisyear than in 2012, less than half of themany thousands of banking customerspolled worldwide said they are likely tostay with their banks.Globally, nearly 10 per cent ofcustomers say they are likely to switchbanks in the next six months, while morethan 40 per cent are not sure if they willstay with their bank in the next sixmonths."The quality of overall service is theprimary factor that drives customers toleave their bank," according to thereport."Positive customer experiences arestrongly correlated with the trustcustomers place in their banks and withthe customers belief that their bankshave a good understanding of theirneeds."Customer satisfaction levels oftenoverestimate customers likelihood tostay with their bank, whereas positiveexperiences are more closely correlatedwith retention."Trust is somewhat coveredResearch is suggesting that trust is by farthe biggest component and influence onhow banks retail customers interactwith their financial services provider.According to Stefan Grafe, theAustralian managing partner for Mext, aspecialist customer and consumerengagement consultancy, trust is thesingle biggest influence on whether abank executives key performanceindicators (KPIs) will be met in any givenyear - so for any banker to suggest theyhave the issue of customer trust"somewhat covered"- as he was oncetold - is looking for trouble."Banks make the mistake of notlooking at trust properly. They dontunderstand that their KPIs are influenced70 to 80 per cent by trust, and they donthave a handle on that," he said.And because of this, their efforts toramp up the numbers for any of theirKPIs will be inefficient. And here Grafeconceded that there will always be"some discrepancy" between what bankssay and what they do. Clearly talking hisown book, Grafe said what matters is thepsychological reaction by customers, andhis firm measures this, based on asystem of complementary pairings.On his scale, ticking any number up tofour on a scale of 10 indicates a positivedistrust, while five or six means theyretrust neutral or sitting on the fence. "Itsnot necessarily a good thing, its still alack of trust," Grafe said.A score of seven is slightly positiveand eight or nine are highly favourable- and notably, no customers in Australiagave these ratings to their banks.Looking at the comparison (see chart,page 4), the correlation and relativitymeasures for the major banks and theregional bank Bendigo and Adelaide arequite similar for all three major metrics,and the measures for customersatisfaction from Mext are very much inline with those published by othercompetitors such as Roy MorganResearch (see breakout, page 4)."The biggest difference is in banksnot understanding what they need to betrusted for," Grafe said."Typically they look at netpromoter scores (NPS) and customersatisfaction, and they look to then varyoperationally to drive that up or down abit [using phrases like] weve got tolisten, weve got to be customer oriented,weve got to have ATMs everywhere,weve got to be accessible, etcetera,etcetera."Grafe, while not dismissing themetric, also suggested that NPS was"very dry", in terms of data. "Whatdrives this score, though, is about 70per cent explained by trust. Similarly,for reputation, none of our banks willhave a deliberate and sound strategy forbuilding trust," he said.If you look at the strengths andweaknesses of all the four major banksand each of their facets, they basicallylook like identicalContinued on page 4
  2. 2. Continued frompage 1quadruplets. The only obviousdifferences have been when NAB wasout with its breaking up campaign andWestpac was out with theirsustainability, but they were unable tocapitalise on these advantages.And we know the banks have bigproblems differentiating themselves [fromeach other]. What the trust driveranalysis shows though, is that they arevery significant differences in whatcustomers would want to trust one bankfor against the other. But there is ampleopportunity to differentiate because, forexample, for CBA trust in development isreally important, whereas for the NAB,its trust in stability.So these factors can be used by thebanks to differentiate themselves and geta competitive advantage.Comparison with Germany"In Europe, all the commercial banksare pretty much in deep trouble," notedGrafe in piece of pure understatement. Healso asserted that many advancedeconomies had a banking hierarchyroughly similar to Australia, in that therewere three or four big banks and anumber of community based banks - andhis native Germany was no different."What we see in Germany is muchthe same picture we saw with the BigFour and Bendigo Bank here at the endof the GFC -trust had evaporated."Currently the community-basedbanks-Sparkasse andGenossenschaftsbank - therefore rank abit higher in trust than do thecommercial banks."Grafe added that, in his view,German customers were not any betterinformed than Australian customers,which made for a valid comparisonbetween consumers of banking servicesin the two countries."What we feel is very significant,when you look at Commerzbank, whichis really down on its knees and DeutscheBank, which have really been in a lot ofscandals and other issues at the moment,their trust is still only 0.5 or 0.7 lowerthan the Australian banks."So, what were asking is that,considering we are in one the strongesteconomies in the world, with stronglyperforming banks; customers are toldevery day how well our banks areperforming - it does not seem to beregistering."Our banks basically have beendismal at harnessing that momentumthey got from all the great publicity andgovernment support," Grafe said.Dorus van den Bizenbos, fromCapgemini Australia, was involved withanother recently completed detailedexamination of what customers of globalbanks have been asking for."This kind of comparison shows thattrust by consumers of their banks is at anall time low," he said.The latest Capgemini WorldBanking Report, drawing on informationcollected at the end of 2012, shows thatgeneral satisfaction levels among bankcustomers are much higher than thelevels of positive customer experiencereported. That is, in every countryanalysed, there were far more satisfiedcustomers than there were customershaving a positive experience with theirbanks.In Italy, for example, banks wereapproaching the global average of 65 percent in satisfaction among theircustomers, but rated a positive customerexperience of only about 25 per cent.These findings indicate that banksshould proceed with caution when itcomes to measuring customersatisfaction.Clearly, high customer satisfactionlevels are easier to achieve than highlevels of positive customer experience,warn the reports authors, who added "itis only through the ability to wowcustomers through positive experiencesthat banks can expect to generate highlevels of loyalty".Banks in a handful of countriesmeasurably improved their levels of bothgeneral satisfaction and positivecustomer experience between 2011 and2012. These include banks from Canada,the US, and Australia, as well as theEuropean nations of Norway, Germany,and Turkey.Banks in other countries, includingIndia, Italy, and Switzerland, increasedoverall satisfaction, but had virtually noimpact on positive customer experience.Source: 2012 Australian Bank HuTrust Report, Mext ConsultingGlobal vs Australia, CanadaCapgeminis van den Bizenbos,referring to his firms World BankingReport, pointed out that only 15 percent of customers, worldwide, havetrust and confidence in the bankingindustry."On the other side of the spectrumthere are 31 per cent of customerswho have little or no trust in thebanking industry," he said."Looking at this [metric] from anAustralia-specific perspective, we seethat the people here who do have trustin the banking industry is higher thanthe [worldwide] average, at around 20per cent; whereas the number withlimited or not trust in the banks islower than the global average, at 18.5per cent."The reason for the differencebetween the global and local averagesthat Australia hasnt been hit as hardby the GFC, and the same applies toCanada - often cited as the mostcomparable country to Australia on arange of measures. In this case, saidvan den Bizenbos,SHARE OF WALLETCUSTOMERS SHARE THE WEALTHThe customers of the major financial institutions show very little loyalty when it comes to where they hold their deposits, with only justover half (average 53 per cent) of their deposit dollars being held with any one institution.This means that CommBank holds 60 percent of the total funds on deposit by itscustomers (defined as those having abanking relationship, such as cards, loansor accounts), with the other 40 per centbeing held at other financial institutions.This result, nevertheless, places CBAwell ahead of its nearest Big Fourcompetitor, the National Australia Bank (55per cent), followed by the ANZ (52per cent), and Westpac (48 per cent). Thelowest figure was for ING with a 40 per centdeposit wallet share.Can do betterThe scope for financial institutions toincrease deposits from existingcustomers is close to 100 per cent butvery little progress has been made todate for a number of reasons, assertedRoy Morgan."Generally there is insufficientincentive or benefit for customers toconsolidate and so they just select thebest or most convenient account at thetime of making a decision," saidNorman Morris, industrycommunications director at RoyMorgan Research."In the case of the higher balancecustomers, the concept of risk orputting all their eggs in one basket isalso likely to play a part, particularlyfollowing the GFC."He also suggested that one majorreason for the strong performance ofowned bank, and therefore somecustomers perceive it as being moresecure."Likewise, St George, as the largestregional bank in Australia, has aheritage that leads to it capturing alarge proportion of its customersdeposits. These results may supportWestpacs multi-brand strategy with astronger performance by its subsidiarybrands St. George (55 per cent) andBankSA (60 per cent) than for the mainbrand Westpac (48 per cent)," saidMorris."Its likely that ING Direct with itsinternet-only business model is notviewed as being able to cater to thebreadth of its customers depositneeds.On Roy Morgans numbers, otherinstitutions that do not capture largeproportions of their customers depositdollars are Rabobank (45 per cent) andMacquarie Bank (37 per cent).This article first appeared on AB+FOnline.the Canadians had been working on theproblem of customer experience moreeffectively and started earlier."In Canada there has been quite afocus on innovation, technologyinvestment and really understandingwhat the customer really wants," he said."If you focus what on the customersreally want, satisfaction will increase."According to van den Bizenbos,what really matters to bank customersare:• quality of service• fees• interest rates• ease of use"The top item is really thepredominant one, and drives customersatisfaction and the customerexperience," van den Bizenbos said.He added that the definingcharacteristics between these twomeasures are that "customerDespite "share of wallet" being a keymetric in bank marketing it hasdeclined marginally (down from 55per cent) over the last four years,according to a recent Roy MorganResearch Consumer Finance Survey,based on 50,000 interviews annually.Over the 12 months to Feb 2013, theCommonwealth Bank had the highestshare of their customers depositwallet with 60 per cent.Source: Roy Morgan Research
  3. 3. THE PATH TOINDUSTRIALSTRENGTHANALYTICSsatisfaction is a one-off measure: areyour needs met, yes or no? Whereascustomer experience involves taking amuch longer running view on what reallymatters to the customer".The challenge is always to comparethese variables in the right context, hewarned, and observed that Australia iscatching up on its technologyinvestments, like many of their peers."So, there a lot of banks going throughthe re-platforming of their corebanking upgrades to launch the moreflexible nimble services; and new mobileservices. Look at Europe and the US,where similar projects in the past haveenabled that growth and change tohappen," said van den Bizenbos.TransparencyIf the financial services sector is sostrong, and becoming stronger, why isthere a low level of trust in the bankingindustry among its customers?"The GFC didnt help, where peoplelost a lot of money if their bank accountswerent fully insured," is the take vanden Bizenbos has on this apparentconundrum."There was also the sales driven andbonus culture prevalent in the US andEurope. But the final part is the lack oftransparency - there are internal coststructures in all sorts of financial productsthat make retail customers wary."What financial services firms coulddo in the short to medium term [to raisetheir customer satisfaction levels] is toprovide more transparency about theirproducts about their cost structures andabout their fee structures; and theiroperations and their processes,everything that matters to the customer,"said van den Bizenbos.Then, warming to a topic that headmitted was "top of mind" for him, vanden Bizenbos recalled that in theNetherlands, working for one of theglobal banks two years ago, he washelping to introduce activity-basedcosting. The regulator had told the banknot to give one product for free and tryto make up the costs by charging morefor other services."It is not transparent to say acurrent account is free and then chargesomeone in an undisclosed manner fortheir investment portfolio - for examplethe cost of managing $lm in assetsunder management for a wealthy clientbears no relationship to an investmentportfolio of $50,000, yet firms arecharging the same percentage. You needto look at different fee structures anddifferent ways of combining that. Itsreally a back to basics approach," vanden Bizenbos said, and noted: "Im notgoing to comment on any specific cases,but the [various class actions on bankfees] are all about proactively informingcustomers about what the differentcriteria and conditions are aboutdifferent fees."In 2011 Capgemini did measure anincrease in trust and confidence in USand Europe - not by a large amount, butmaybe 10 per cent - mainly driven by thefact that many of these banks had beentaken over by their respectivegovernments which cleared out the bonuscultures and capped the incomes of thebank leaders.He suggested this was part of thereason for a reversal in the slide down thetrust scales seen in 2011, but the questionof how effective the raft of regulationproves to be is yet to be assessed. AB+ Fnnovation remains top-of-mind formany financial institutions as theyseek to remain competitive in a lowergrowth environment. Yet in focusingon innovation, many remain ill-equippedto make better decisions in a world ofincreasing constraints and regulatory limi-tations. So how have leading organisationsaddressed the challenge of making betterbusiness decisions?Leading organisations recognise thateffective decision making is an amalgam ofthe right people, processes, information andtechnology. They are placing more relianceon analytic models to support executives andline managers and help them make betterdecisions, and this is both positive and to beencouraged.Analytical models are at the heart ofmany critical business decisions whetherfinding new opportunities, managing uncer-tainty, assessing and scoring new or exist-ing customers or pricing risk. As such, thenumber of models used to support real-timedecision making can be expected to increasevery considerably.With analytic models being used in thisway, they should be treated as the high-valueassets that they are. Their creation shouldcome from robust and industrial-strengthprocesses and be managed for optimal per-formance throughout their entire lifecycle.Business analytics and technology teams needa repeatable and efficient process and a reli-able architecture for creating, testing anddeploying predictive analytic models intoproduction systems.Managing complexityIn recognising analytic models as essentialcorporate assets, leading organisations seekto create the best models possible. However,few fully manage all the complexities of theinteractive and iterative model life cycle. Thisis a multi-faceted task for large institu-tions as they manage through the keystages of problem identification, analyticaldata preparation, data exploration, modeldevelopment, model validation and testing,deployment and assessment monitoring.In an effective analytical environ-ment, data is created and accessed in thecorrect structure. Models are then rapidlybuilt, tested and deployed into a productionenvironment to generate trusted output.Their performance is constantlymonitored and underperforming modelsare quickly replaced.Analytics means more than creatinga powerfully predictive model. It is aboutmanaging each of these lifecycle stagesholistically across the entire portfolio ofmodels. This is no easy task when analystsare developing multiple and competingmodels which are at various stages ofdevelopment and customisation for differentproducts and business units.An analytical life cycle is iterative andinteractive in nature and models are continu-ally revised and updated during testing andas new results and data become available.People from business and technology streamswith differing backgrounds and capabilitiesare involved at various stages and successrequires more than relying solely on the tech-nology element.For the best results, organisations mustlook at the processes and have people with theright skills in place and working collabora-tively in their designated roles.The analytics model factoryThe growing complexity and magnitude ofthe task - of managing potentially hundredsor even thousands of models in flux - putsorganisations at the cusp of an informationrevolution. The old and inefficient "handcrafted" approach must evolve to a moreeffective "factory" approach.A predictive analytics factory formalisesongoing processes for analytic data prepara-tion, model building, management and deploy-ment - with particular attention to managing.As demand for predictive models rises,a structured approach enables an enterpriseview of the organisations portfolio of models.A formal model management frameworkenables analysts to register, validate, deploy,monitor and retrain analytical models in theshortest possible time. A predictive analyticsfactory makes it far easier to document modelsand collaborate across internal and externalteams. With a mechanism for feeding resultsback into the process for continuous improve-ment, it becomes clear which models continueadding value and which need to be retired.By bringing cohesion to a fragmentedprocess, a predictive analytics factory enablesmore strategic thinking about models andhow you can treat them as corporate assets.Analytics projects and talent can evolve fromthe current technical focus into a strongerfocus on business drivers and the understand-ing of problems in business terms. By startingwith a decision in mind, the business andanalytics teams are encouraged to think abouthow to operationalise the model, integrateit into businesses processes, and determinewhen it has outlived its original purpose.With a formal model management frame-work, the "best" models get into productionfaster to start serving the business sooner. Theorganisation can generate more models, andmore sophisticated models, with a large vari-ety of analytic methods, with fewer resources.Analytical models are continually monitoredand refined, so they remain up-to-date andaccurate. The process is also more transpar-ent, making it easy to explain analytics-baseddecisions to regulators and business leaders.Reliable processes, positive outcomesAs more and more organisations are discov-ering, a predictive analytics factory approachdelivers a host of benefits covering efficientdevelopment, faster deployment, faster scor-ing, active monitoring and management, andreduced risk. Such benefits are already beingrealised by leading organisations that have beenable to reduce model development and promo-tion cycles from three months to just days,decrease data preparation times by 40 per centand improve analyst productivity by 50 per cent.These are impressive gains and very muchaligned to the productivity agenda.Predictive models use your data to tell youabout the likelihood of future events. Sincenobody knows exactly whats going to happen inthe future, managing predictive models is aboutmanaging the uncertainty of future outcomes.Thats important enough to deserve rigorousprocess controls - a predictive analytics factoryapproach to analytical lifecycle management.For those seeking to become more innovativeby harnessing their data assets for competitiveadvantage, such an industrialised approach isfundamental to commercialising new ideas.§.sasC O - P U B L I S H E D A R T I C L E IN A S S O C I A T I O N WITHITHEPOWERTO KNOW.