According to leading Net Promoter Score® Software-as-a-Service provider CustomerGauge, the banking industry still has a long way to go in the Customer Satisfaction department. A relatively new industry commonly known as FinTech (Financial Technology companies) is giving the banking industry a real run for the money.
Leaders in the FinTech industry offer both broadly appealing and niche-oriented services to consumers by leveraging emerging technology. Forbes cites that FinTech companies raised $3.5 billion in the first six months of this year and provides the following information on the ten most valuable, private-venture-backed, US-based players:
|1||Stripe||$ 9.2 B||Allows merchants to accept online and mobile payments|
|2||SoFi||$ 4.3 B||Offers student loan refinancing and other services to Millennials|
|3||GreenSky||$ 3.6 B||Provides on-the-spot financing for home-improvement projects via contractors|
|4||Credit Karma||$ 3.5 B||Offers free credit scores and recommendations for credit cards and loans|
|5||Oscar||$ 2.7 B||Makes it simpler to buy and use health insurance under Obamacare|
|6||Avant||$ 2.0 B||Makes quick online loans to consumers with lower credit scores|
|7||Zenefits||$ 2.0 B||Sells a cloud-based human resources platform for businesses|
|8||Prosper||$ 1.9 B||Connects borrowers and investors for unsecured personal loans|
|9||AvidXchange||$ 1.4 B||Automates invoicing and bill payments for businesses|
|10||Robinhood||$ 1.3 B||Offers free trades of stocks and ETFs via mobile app|
How could these companies, and others like them, grow so large, so quickly, in such well-established and competitive markets? By combining the forces of technology and… wait for it… excellent customer experiences.
In 2016, Ernst & Young concluded that customers were more likely to make decisions to open or close accounts based on customer experiences than on rates, fees, or locations. E&Y also revealed that “40% of customers…have used non-bank providers for financial services in the last 12 months” and “20% of customers who have not yet used non-bank providers plan to in the near future.”
It’s clearly no coincidence that half of the top ten FinTech companies offer services competitive to traditional banks. Customer loyalty is an area of vulnerability for many banks.
One of the most widely accepted measures of customer loyalty is the Net Promoter Score® (NPS). Bain & Company has shown that companies achieving long-term profitable growth have Net Promoter Scores twice as high as their average competitor, and industry leaders grow more than two times as fast as their average competitors.
To calculate Net Promoter Scores, a representative sample of customers is asked “On a scale ranging from 0 to 10, where “0” means “Not at All Likely” and “10” means “Extremely Likely”, how likely is it that you would recommend [this company] to a [colleague, family member, or friend]? The total percentage of respondents who answered between 0 and 6 is subtracted from the total percentage of respondents who answered 9 or 10. Responses of 7 or 8 are ignored.
As those of you who are quick with math have already calculated, Net Promoter Scores can range from negative 100 to 100. And high scores (over 60) are mathematically challenging.
Last week, CustomerGauge listed the top five banks’ most recent Net Promoter Scores this way:
|2||First Republic Bank||72|
While the CustomerGauge article goes on to explain why they believe high-scoring banks have done so well, we would draw your attention to the fact that the fifth-highest-reporting bank scored only 15 – implying that many banks would be happy to receive a positive score.
Given the fact that customers are far more likely to remember (and tell others about) their negative experiences than their positive ones, it should be no surprise that banks still struggle to earn high Net Promoter Scores. After all, from the customer’s point of view, banks are holding on to their money and their credit. When customers want their access to money, they want it immediately. And when they want credit, they often want more than the bank will allow and at a lower rate than the bank can profitably offer.
Previous studies have shown that banks’ average Net Promoter Scores tend to be below many other industries and well below the average Net Promoter Scores of MarketPoint clients. We believe banks would do well to learn how companies in other industries have improved the customer experience, raised their Net Promoter Scores, and increased their chances for profitable growth.
MarketPoint has been helping customers in a wide array of industries measure satisfaction and improve loyalty for over 17 years. Call us. We can help.