ENGAGE 2023: Customer Engagement in Banking

Economic, Geopolitical Factors Affecting The Current Banking Climate

Last year’s inaugural research¹ was conducted while we were still collectively figuring out how to navigate the pandemic’s impact on business and consumers. When we spoke with bank and credit union professionals in August of 2021², most were focused on changing health and vaccination guidelines, grappling with the effects of the Great Resignation on their workforce and scrambling to understand how to best serve customers.

It was a challenging time for all as COVID-19 continued to play a leading role in much of our lives. After a year of rapid digital transformation and accelerating consumer expectations, skepticism was also on the rise. Banks and credit unions faced severe employee retention challenges, and workplaces struggled to make a hybrid model successful. The housing market boomed characterized by incredibly high demand, low inventory, and low-interest rates, placing strain on mortgage lending and refinancings departments.

Revisiting the market in August 2022 we found much has evolved. COVID is still a reality, but it is no longer center stage. On the geopolitical front, global events such as the War in Ukraine, civil unrest in Iran, as well as domestic events (midterm elections, increasing political polarization and more frequent extreme weather) have significantly impacted global financial markets.

The bottom line? The economy is top of mind. Inflation, rising interest rates, a cooling housing market, and the possibilities of recession are all significantly influencing the behavior of banks and credit unions — and the consumers they serve.

Recession Worries Impacting Banking Consumers and Professionals

We asked both banking consumers and banking professionals how they are thinking about the current economic climate, and most said they are worried the U.S. economy is in – or soon to be in – a recession. (Figure 1)

At the time of the survey (August 2022) nearly all banking professional respondents (91%) and a large majority of consumers (84%) said they think the U.S. economy is either currently in a recession or will be in one soon. Banks and credit unions were even more likely to believe the country is already in recession (57% vs. 46% for consumers).

Almost 9 in 10 respondents in both groups were also at least “a little worried” about a recession’s impact. That said, fewer stated they were “very worried” about the impact to their customer relationships (13% of banks and credit unions) or personal financial situation (36% of consumers). Further exploration into how a recession would alter their actions indicates a stronger sense of urgency, as we’ll share later in the report.

In the Event of a Recession, Relationship Banking Will Be More Important than Ever

It is perhaps no surprise that an economic downturn would have a ripple effect on banking behaviors and plans. In a recession, 75% of consumers told us they plan to scale back their planned financial activities. (Figure 2)

Consumers Want More Financial Guidance in a Recession

Consumers also say that, in challenging economic times, they expect their primary financial institution to provide additional support beyond the obvious products and services offered. In addition to expecting lower fees, competitive rates, and late payment forgiveness, consumers indicate they would also expect recession strategy planning (34%) and even 1-to-1 financial planning (16%). (Figure 3)

According to J.D. Power’s 2022 U.S. Retail Banking Study, customers value and are more loyal to banks that deliver a meaningful customer experience and make the effort to support them in challenging economic times. In that report, 63% of customers said that if this kind of support is delivered by their financial institution, they “definitely will not switch banks, and 78% say they definitely will reuse their bank.” Financial institutions, according to J.D. Power, must use engaging methods to provide the support customers need most — especially when the economy is sour. This involves “a personalized mix of financial advice, hands-on help with problem resolution and guidance on how to grow their money.”³

Rivel, a data-driven management consulting firm, predicts that while a recession may slow overall banking activity in terms of new deposits and loan demand, consumers will still need key accounts and seek the flexibility that a bank or credit union can offer them, most likely from their current primary financial institution.⁴

Prioritizing Human Assistance in a Digital World

Human financial expertise is an important part of the mix when it comes to delivering a meaningful customer experience – particularly in challenging times like today. But getting the right balance of human-assisted support in place exactly when it is needed can be challenging in an environment that is increasingly more digital and self-serve.

Research by Citizens Bank suggests that despite the recent rapid adoption of digital banking tools, “human expertise (whether in-person or virtual) remains essential for consumers when it comes to getting financial advice and for more complex transactions.”⁵

The 2021 Citizens Bank Banking Experience Survey found that though “69% of consumers prefer banking online some or all of the time and 64% agree that technology will completely change banking as they know it, a similar number (65%) agree that they prefer human expertise when receiving financial advice.” This may feel like consumers are sending mixed messages, but in fact, what we see it signaling is simply a more nuanced and responsive approach to how consumers want to interact with banks — and how they expect to be supported.

Some of this means rethinking what support is. In some channels, support means enabling customers to serve themselves more efficiently. In other channels, support means the ability to access human assistance.

Optimized Channels Give Customers What They Want

Good customer engagement means providing ample access and support across all channels and letting customers choose what works for them at any given moment.

One way to think about this is as “opti-channel” versus “omnichannel.” An opti-channel model optimizes how information is presented and provided by channel; as opposed to providing all the information – in exactly the same format – across all channels.

Optimize how you service your customers, across all the different channels.

This model allows consumers to navigate their own experience and opt into channels that will best meet their needs and preferences. And for the financial institution, it necessitates they optimize all channels in order to cater to and serve the various ways different types of customers chose to engage.

Be mindful of the times
In times when rates are not competitive, ZAG Interactive – a website design and development company – predicts that consumers will need to look to other brand attributes to determine who they do business with. ZAG suggests that banks and credit unions consider and promote what other value they offer to their customers.

Be mindful of the times. If there is less disposable income to be had, ensure marketing materials such as customer communications and promotional messaging are sensitive to the current economic climate.

Three consumer trends that validate the importance of relationships:

• Fewer consumers are sticking to a single primary financial institution (PFI)
  According to data from Rivel, only 65% of consumers prefer to use one bank, down from 79% three years ago. Consumers are not only diversifying their banks but also their accounts. According to Rivel, 57% of banking consumers are looking to add at least one new account in the next year, and 31% are looking to add two or more. If banks and credit unions want to keep those accounts consolidated with their institution, they will need to ensure that customers believe the benefits of expanding their portfolio with their current bank before they look elsewhere.⁶
• Consumers are relocating
  COVID brought about a work-from-anywhere revolution that broke down geographic barriers. We saw significant migrations of people out of urban centers into the suburbs — with potentially significant impacts on banking. Rivel reports that as more consumers move away from their home branches, allowing them to bank fee-free will be important. We also see generational trends in terms of movement. According to Rivel, the #1 reason Gen Z consumers may give for leaving their current banking institution is a move to a new area.⁷
• Consumers want to be met where they are — and that’s not (only) online
  As the pandemic continues to wane, there is less of an urgent need for isolation. Consumers are feeling more comfortable returning to public and physical settings and are therefore less reliant on digital-only solutions. Our technology partners predict that:
  • Reliance on digital-only solutions will continue to retract slightly. However, brands will still need to ensure consumers can find what they need digitally, including how to get help from an actual human when needed. ZAG advises that “This balance of today’s technology with a human touch is what consumers want in their busy but increasingly more social lives.”
  • Consumers are not ready to move totally online for their banking experience. Rivel research shows that 72% of consumers would not consider an online-only bank. This is essentially the same percentage as two years ago during the height of the pandemic.⁸
  • Customers want answers to be provided where and when they look — that is, in every channel they use. This means prioritizing both human-assisted and digital channels adequately. For example, according to Rivel research, over 40% of Gen Z and millennial customers prefer to have questions answered online, without having to talk directly to a human rep, yet overall only 14% of banking customers prefer chatbots as primary means of communications.⁹

A Growing Focus on Customer Engagement 

Great relationships are built on trust. Creating trust is essential for financial institutions, and that trust starts with how customers interact with your institution. Customers need frictionless experiences that are easy, fast, consistent, convenient, and seamless.¹⁰

Customers have more ways than ever to interact with their financial institutions — which means leveraging technology can be a double-edged sword for FIs who must now ensure they are providing seamless consistent experiences across all these channels.

The brass ring here will be in sustaining a consistent pattern of positive experiences that build good customer engagement no matter where customers interact with the financial institution.

Why Customer Engagement Matters for Banks and Credit Unions

Active customer engagement is foundational for the trust that banks and credit unions need to build with customers. That’s because trust and quality relationships lead to more profitable business and customer retention. Without good customer engagement, levels of trust are lower, relationships are weaker and customer loyalty is at risk.

This is a distinction that many banks and credit unions are still only beginning to fully contend with. In this survey, we asked banks and credit unions if they currently distinguish a difference between CX and CE. But only a third of institutions (33%) said they currently make this distinction. (Figure 4)

Clear Opportunity for Banks and Credit Unions that Prioritize Customer Engagement

Ultimately, this represents an opportunity for banks and credit unions who are measuring CE and paying attention to the quality of their customer engagement. Those banks and credit unions will be ahead of the curve when it comes to attracting and keeping customers over the long term.

Consumer Perspectives: Gaps in Channel Usage Present Opportunity to Strengthen Engagement 

The consumer portion of this research was new this year and provided us with important insights that complemented the perspective of banking professionals. For this research, we surveyed 451 U.S. banking customers, aged 18-65, who use online banking for their checking or savings accounts.

Overall, consumers’ perspective on their banking experiences is positive. However, there are gaps where consumer engagement could be much stronger, especially when it comes to the convergence of physical and digital services in the branch.

Overall, Satisfaction is High

First, the good news. More than two-thirds (78%) of consumers are satisfied with their current financial institution. In fact, 38% say they are very satisfied, where 16% reported feeling neutral and only 6% of consumers reported feeling somewhat or very dissatisfied with the level of support they receive from their primary bank. (Figure 6)

Engagement, However, is Lagging

Looking deeper, the news is less rosy. Only 54% of consumers agreed that their bank tries to engage with them to understand their needs (Figure 7), and even fewer (43%) say there is someone at their bank or credit union they always talk to when they need answers to financial questions. (Figure 8) Personal connection and human trust are still largely missing — which implies that consumer satisfaction may be resting on more shallow ground than most FIs would like.

Digital Channels Continue to Dominate the Volume of Interactions

As banks and credit unions seek to build this trust, where will they find their consumers? Our research shows that increasingly consumers will be using digital or hybrid channels. In the day-to-day, most customers are using digital banking — with 73% using mobile banking apps and 68% logging into online banking or visiting the website for their banking needs. Continuing the self-service trend, the next most utilized channel is an ATM or kiosk — which is used daily or weekly by 39% of consumers, and monthly by another 23%.

Less common channels used on a daily/weekly basis include drive-thru banking (18%), walk-in banking (11%), online or virtual chat (11%), in-person appointments (8%), and video banking (8%). (Figure 9)

Digital Channel Preferences Vary by Age Group

These numbers did vary somewhat by age cohort, with Generation Z being especially likely to prioritize a mobile app as their #1 feature (61%), while Baby Boomers showed the most interest in the website (28%) or going into a branch (24%) as their number one priority. However, when we looked at the top three ranked features by generation, all age groups showed high interest in some form of digital channel. (Figure 10)

What Does the Emphasis on Digital Mean for Branches?

Does this continued shift to digital mean the branch is dead? Not necessarily. What is hidden in those numbers is the complexity and importance of the kinds of interactions that take place in each channel. There has been an evolution away from branches, but it is mostly around common banking transactions. The bulk of app or web transactions, for example, tend to be things like balance inquiries and transfers between accounts. Conversely, the bulk of in-person appointments tend to be those which require more guidance or support — including high-value, human-assisted interactions like loan applications and financial wellness advice.

We know that when consumers are dealing with these big financial events or decisions, they are more likely to seek the channels that provide human interaction — and it is in these moments where the greatest opportunity for relationship building exists.

Banks and credit unions that provide a low friction way to engage those channels through technologies (like online appointment scheduling and video banking) will have the advantage.

The Power of Integrating Human Assisted and Digital Channels

We also know that at least some utilization of human-assisted channels can contribute to banking customer engagement and feelings of connection.

In fact, our research has found that customers who use human-assisted channels in addition to their web or app channels are much more likely to agree that their bank or credit union tries to engage with them to better understand and meet individual needs (63% vs 38% agreement). Those who use human-assisted channels were also much more likely to agree that there is someone at their bank or credit union that they always go to whenever they need advice or answers to financial questions (56% vs 21% agreement). (Figure 11)

Q: My bank or credit union tries to engage with me to better understand and meet my individual needs.

Q: There is someone at my bank or credit union that I always go to whenever I need advice or answers to financial questions.

The Winning Formula: Balancing Digital and Human Assistance.

What does all of this mean for your bank or credit union? The majority of today’s banking interactions are taking place digitally. As a result, most consumers lack that personal relationship with their primary financial institution that could help to build trust and loyalty. But just because a channel is digital doesn’t mean it can’t have that human touch. There is a real opportunity for banks to differentiate themselves and build customer engagement by providing access to human assistance through their digital channels — such as live chat for basic questions, and video banking, and online appointments for more personalized experience and consultative support.

We know that when consumers are dealing with big financial events or decisions, they are more likely to seek the channels that provide human interaction — and it is in these moments where the greatest opportunity for relationship building exists.

Bank and Credit Union Perspectives: Staffing, Digital Adoption Affect Customer Engagement

When it came to our survey of mid-tier banks and credit unions we wanted to explore the trends and perceptions of customer engagement in the financial services industry and also understand what has changed in their perceptions and practices since this time last year. For this research, we surveyed 114 employees of U.S. retail banks or credit unions with at least five locations, in the role of COO, CEO, VP, Director, or Manager.

The pivot to digital is permanent but focus is growing on branch and contact center

A shift to digital banking utilization and provision of services was already well underway prior to the pandemic, but banking was lagging behind many other industries. When the industry pivoted to online and mobile services during the pandemic, it was clear to everyone that the shift would likely be permanent for many consumers. This year’s data bears that out.

That said, self-service digital has not completely eclipsed in-person branch or call center activity. When we asked banks and credit unions where their top priorities were in 2023, 43% said their focus was on digital. Nearly one in three (29%) said branches were a priority, and 28% said their contact centers were the place they were looking to, first. (Figure 13) This shows that while digital is important, it is not at all the only focus.

In fact, when compared to last year¹⁴, digital is still just as important but now the branch and contact center have become much bigger priorities than last year.

Customer Engagement Priorities for Digital Channels

What kinds of digital channel priorities will banks and credit unions be focused on? Now that many institutions have done the work of putting digital infrastructure in place, their most common focus will be on adoption and support. More than half (53%) of those surveyed counted adoption among their top priorities, and 51% included the provision of resources and support in those digital channels. Another 48% will be looking to improve their mobile apps, specifically. (Figure 14)

Similarly, digital improvements top the list of priorities as they determine CE investments for 2023. One in three (30%) respondents said their bank or credit union is planning an investment into digital improvements in order to deliver on customer/member engagement in 2023. Importantly, investments into relationship banking and financial wellness, and physical branch investments such as ATMs/ITMs are increasingly important. (Figure 15)

Staffing and training continues to take center stage

Another major theme of this year’s data was staffing. A focus on staffing is certainly not unique to the banking industry — most industries are seeing a talent squeeze that is bringing attention not only to hiring and retention, but also to training and development.

In banking, there is also a clear connection between staffing and customer engagement that is top of mind. More than half of the banks and credit unions surveyed told us that in order to deliver strong customer engagement, the #1 thing their institutions were in need of was staff. This was more than double the next (related) item they said they needed — time (20%) — and more than triple their desire for executive support (14%). This represents a 66% year-over-year growth from when we asked this question in 2021.¹⁵ (Figure 16)

Customer Engagement Priorities for the Contact Center

When we asked banks and credit unions what they would be focusing on at the call center, staffing was a big theme — either in terms of productivity and the improvement of service levels (58%) or in terms of training and staff development (50%) or simply hanging on to staffers (48%). (Figure 17)

Customer Engagement Priorities for the Branch

At the physical branch level, staffing is also far and away the most common area FIs are focusing — with 68% of banking professionals surveyed saying they will be prioritizing training and staff development, and 44% saying they will be working to ensure appropriate staffing levels. (Figure 18)

Preparing for 2023: Key Observations and Recommendations

Key Observations for 2023:

That said, today’s mid-sized financial institutions are all facing the same broader market conditions. The rise of digital, increasingly competitive financial and employee markets and changing consumer expectations impact all. When we step back and look at the results of this research – there were three key themes that appeared.

Staffing: FIs must solve challenges in hiring, retention, and training

• Banks and credit unions see staffing as a critical resource for building strong customer engagement and identify it as their #1 resource need. Staffing was a top issue for contact centers — including improving service levels, training and development, and retention.
  
  Staffing is also informing priorities for branches— including training and development, planning staffing levels, and driving 1:1 personal relationships with customers.

Opti-channel: FIs must support members in their channels of choice

• As customers increasingly invest in digital channels, and FIs are strapped for staff, a critical part of winning and keeping customers will be supporting their ability to choose their own channels and still have a consistent experience.
  
  Some customer and transaction needs will be solved easily through self-service. According to Rivel data, 62% of consumers want to do common transactions with web or mobile banking. Others will require human support. That same Rivel data shows that 57% of consumers prefer human assistance for more important transactions.¹⁶
  
  In between those two options, FIs will need to create solid, frictionless hand-offs and transitions that provide continuity in the customer experience and inspire long-term engagement.

Digital Adoption: FIs must build adoption and digital support for long-term technology success

• Digital is still a top priority for FIs, but the focus is shifting from implementation to driving adoption and providing resources and support across key channels — whether website, mobile app, ITM, chat, video, appointment scheduling, lobby management and more.
  
  With today’s advanced technology, it’s easy to feel like AI can solve any problem. However, banking customers are humans, and will always require a human touch — especially for their most high-value or critical transactions. Digital alone cannot solve the challenges. Banking needs a human component.
  
  As adoption soared during the pandemic, FIs discovered the hard way that even the best digital is not a silver bullet that can solve all problems, alone. According to Rivel data, 72% of consumers would not consider a digital-only bank.¹⁷ Consumers’ needs and desires will vary and people will still need your help. This will involve: finding the right digital balance, across adoption, research, support & service.

Four Recommendations for 2023 Planning 

The staffing challenges that continue to persist for banks and credit unions will not be resolved overnight; they are likely to carry over as a key challenge in 2023. Banks and credit unions must find ways to empower both their customers and employees to be more efficient. Essentially — to do more with less. This means reducing the high-volume calls, driving more digital adoption, and quickly connecting customers who need personalized support or service to the right resource, at the right time, in the channel of their choice.

Here are four ways banks and credit unions can help navigate an uncertain market, meet their growth goals, keep up with ever-changing consumer needs, and mitigate the current staffing challenges:

1. Surround customers with access to information

• Consider an opti-channel approach that gives customers access to support, product, and service information across your website and mobile applications on their own terms. Be sure you have the resources in place to meet customers where they are and provide the support they are most comfortable with.
  
  Want to learn more about surrounding customers with access to information and enabling them to self-serve? Check out this blog post for three ways >

2. Route customers to the right channel

• Connect customers quickly to the right channel when human assistance is needed. Helping customers transition easily from digital to human-assisted support will be critical to building their engagement and winning loyalty. Be sure you leverage tools such as live chat for common questions, and video banking and appointment scheduling when more personalized support and service is needed.
  
  Appointment scheduling is the perfect way to connect customers to the right person regardless of the channel. Learn how appointment scheduling can benefit your organization >

3. Empower staff to be digital advocates

• Most digitally savvy customers are already using your digital tools, so your focus will be on building adoption among digital laggards. Your staff is the key to building awareness of digital tools, as well as improving confidence and adoption. Give employees the resources they need to introduce and support your digital tools. This will lift some of the support burden from your staff, while driving more digital adoption.
  
  Gaining adoption of digital banking tools is a challenge for many financial institutions. Learn how to use your staff to increase digital banking adoption >

4. Provide employees with easy access to information

• One of the top employee challenges observed in the field is difficulty locating and utilizing the day-to-day information they need to do their jobs. Ensure your institution sets employees up for success by providing them with access to accurate, up-to-date, and consistent knowledge which they can access seamlessly at any given point in their workflow.
  
  Want to learn more about providing employees with easy access to information and enabling them to self-serve? Check out this blog post for two ways >