Banking is personal and emotional. Major consumer surveys confirm that many banks and credit unions lose loyalty when they treat their customers as mere “accounts” rather than individuals with emotional needs. If a customer does not feel that their bank values their business or does not support them when they are in need, they may decide to switch to a bank that offers a better customer experience.
By providing empathy and greater value, banks can transcend trust and build a true emotional connection with their customers. Here’s how.
The Impact of Emotions on Customer Loyalty in Banking
Nowadays, loyalty is no longer determined solely by products and rates, but by the emotional bond that banks establish with their customers. To maximize these relationships, financial institutions must understand the reasons why customers use their services and address their most common sources of frustration, which may influence them to switch banks.
If a bank fails to meet a customer’s expectations in terms of services or support, they may decide to switch to another bank that they feel will better meet their needs.
According to a study of 5,000 global banking customers conducted by the financial services data specialist Personetics, 93% reported being impacted by cost-of-living increases. Additionally, 63% reported that their banks did not provide money management advice in the past three months, leading some customers to consider switching to other financial institutions.
J.D. Power, a data analytics and consumer intelligence firm, found in its 2022 Retail Banking Satisfaction survey that 44% of US banks provide support to customers during financial difficulties. 63% of US customers stated they would switch banks if not supported, while 78% would remain if they received support.
Lack of Empathy
As consumers’ financial distress increases, so does the need for empathy. It’s not unexpected that numerous banks still depend on their physical branches to provide empathetic banking services to their clients. A large majority of banks consider the branch as the most efficient means of assisting financially struggling customers to overcome their difficulties.
The challenge, as all banks recognize, is that branch-based service is not scalable. Conversely, digital channels offer the advantage of scalability but also entail the danger of becoming commoditized and losing the human connection at a time when customers require empathy the most.
Real-time analysis of customer transactions offers numerous chances for proactive behavior during critical times, enabling the bank to show its empathy and understanding of the precise situation the customer is going through and to offer them immediate support to tackle it, even outside the bank’s digital channels.
Lack of Perceived Value
High transaction and service fees are one of the biggest reasons why customers switch banks. These fees can quickly add up and become a burden for customers. In addition, many customers feel that the price or perceived value of banking services is not worth the cost. This dissatisfaction comes from a combination of confusion about what they are paying for and frustration with their payment process.
Banks need to demonstrate that their services are worth the fees they charge. The answer is not simply lowering fees, but rather enhancing transparency and reliability, as well as improving how the value of their offerings and services is communicated to clients.
No Perks for Long-Time Clients
Many banks offer attractive perks and promotions to new customers, but these incentives are often not extended to long-time clients. This can make customers feel unappreciated and lead them to switch banks in search of a better experience.
Loyal customers who have been with the same bank for many years expect the same sort of loyalty from their bank. However, financial institutions generally prioritize building relationships with customers based on rationality rather than emotions, as seen in customer surveys and data, where customers are classified simply as “satisfied” or “dissatisfied”.
Many banks overlook the fact that satisfaction does not equate to loyalty. Loyalty must be earned and achieving customer satisfaction is only the first step. The ultimate goal should be to form an emotional connection with customers.
Lack of Social Responsibility
Banking customers are becoming increasingly conscious of the impact of their financial decisions on society and the environment. This is leading many to look for banks that align with their values and demonstrate a commitment to social responsibility.
A lack of empathy or concern for the community can negatively impact customers’ perceptions of a bank and drive them to switch to another institution. As a result, banks that prioritize corporate social responsibility and take an active role in addressing social and environmental issues are more likely to attract and retain customers. This includes initiatives such as support for local communities, environmentally friendly practices, fair labor practices, and charitable giving.
By demonstrating a commitment to Corporate Social Responsibility, banks can build trust with their customers and show that they are not only focused on profits but also on making a positive impact on society.
From a Transactional Relationship to a Lifetime Commitment
In conclusion, banks must establish an emotional connection with their customers to bridge the gap between a transactional relationship and a lifetime commitment.
With the implementation of Latinia real-time decisioning solutions beyond the digital banking channels, financial institutions can identify and forecast instances where their clients may encounter challenges and take initiative to offer real-time solutions. This transforms the perception of the bank into a lifetime partner that helps them reach their financial goals.