Customer Behavior and Loyalty in Retail Banking

CUSTOMER BEHAVIOR AND LOYALTY IN RETAIL BANKING

Mobilizing for loyalty

THE FUTURE OF BANKING

Net Promoter Score® is a trademark of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.

Copyright © 2015 Bain & Company, Inc. All rights reserved.

Acknowledgments

This report was prepared by Gerard du Toit and Maureen Burns, partners in Bain’s Financial Services practice,

and a team led by Christy de Gooyer, a practice area director. Team members are Rahul Agarwal, Lakshya Agrawal,

Tarun Gupta, Vidhi Lohia and Pranav Singh. The authors thank Bain partners in each of the countries covered

in the report for their valuable input and John Campbell for his editorial support.

Key contacts in Bain’s Global Financial Services practice

Global: Edmund Lin in Singapore ([email protected])

Americas: Mike Baxter in New York ([email protected]) Maureen Burns in Boston ([email protected]) Gerard du Toit in Boston ([email protected])

Asia-Pacifi c: Peter Stumbles in Sydney ([email protected])

Europe, Middle Henrik Naujoks in Düsseldorf ([email protected])East and Africa:

Customer behavior and loyalty in retail banking | Bain & Company, Inc.

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Contents

Mobile fi rst . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 3

1. The rapid rise of mobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 9

2. Creating customer delight through mobile . . . . . . . . . . . . . . . . . . . . . . . . pg. 15

3. On the horizon, mobilizing sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 23

4. The branch will change or die . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 29

5. Movement on the loyalty leader boards . . . . . . . . . . . . . . . . . . . . . . . . pg. 35

Customers who use branches frequently are almost 3x more likely to switch banks

3X3X A branch visit in the US is 2.3x more likely to annoy than a mobile interaction

For every 100 mobile interactions, on average, there’s a decline of 16 interactions at the branch

Source: Bain & Company

The US still has almost 4x more routine branch interactions than the Netherlands

4X

More than half*of global consumers would miss their mobile phone more than their wallet

*And almost 80% in China and South Korea!

26% of customers already use mobile to research or purchase bank products—and even more so in Asia

2626%

Apps for routine transactions are one-third more likely to delight US customers than routine transactions in the branch

Frequent mobile users in the US are 40% less likely to switch banks

MOBILE RULESMOBILE RULES

TODAY’S BRANCH IS OBSOLETE


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Mobile fi rst

A global race is on to “mobilize” banking. Banks around the world have been working furiously to improve their

mobile applications and optimize their websites for customers’ smartphones and tablets. Yet the race has just

begun. Leading banks are still learning how to take a mobile-fi rst approach to reimagine customer experiences

in everything from buying a home to resolving an incident of fraud.

By migrating customers to digital channels, banks have begun to reap signifi cant cost savings as they drive bad

and avoidable interactions (generated by errors or better routed to lower-cost and more convenient digital channels)

out of the branch and call center. And the benefi ts extend well beyond cost. Mobile channels are far more likely

to delight and less likely to annoy than the branch or call center experiences, leading to increased loyalty with

higher customer retention, repeat purchases and referrals.

This shift entails new roles for the branch and frontline employees. Complex sales and service activities, for instance,

now usually start with the customer turning fi rst to digital, often mobile, channels. Customers increasingly expect to fol-

low up with bank staff through digital chat, video or other real-time options rather than having to visit a branch or sepa-

rately call a contact center. As a result, most branches no longer need their own product specialists, because pooled spe-

cialists can deliver better service with higher productivity. So not only is the branch’s role in routine transactions rapidly

diminishing, the future confi guration of sales and service in the branch network is not so clear.

Consumers continue to lead the mobile charge in most markets, spurred by the ease and convenience of mobile

through leaders in other categories, from Alibaba to Uber. As a quick indicator, consider that when Bain & Company’s

2015 global survey asked 114,696 consumers which they’d miss more for a day, their mobile phone or physical

wallet, more than half chose their phone, with the share reaching 79% in China. Mobile clearly has advanced

past the tipping point.

But the pace of progress in encouraging customers to migrate from branches to digital channels varies dramati-

cally from country to country and from bank to bank within countries. The Netherlands and South Korea may

provide a view of the future as they have the highest mobile adoption of countries surveyed, both in total and

for sales and service; Dutch respondents’ mobile usage has risen fourfold in two years while the branch plays a

minor role. Similarly, the inroads made by digital insurgent companies vary around the globe, with China demon-

strating the most comprehensive examples so far. So banks can learn from the global leaders that have advanced fur-

thest down the experience curve, not just from their competitors next door.

As more banking activities go mobile, a major challenge for bankers has been to identify the right priorities and

sequence of moves—right both for earning greater customer loyalty and for funding investments in digital channels

through cost reductions in the branch network. Bain’s latest consumer research and statistical analysis, summa-

rized below, points the way to the right priorities by shedding light on the relationship between specifi c channel

experiences and customer loyalty.

The new hub of personal fi nance

Our analysis shows that for the average bank, a high priority is to migrate routine activities out of the branch,

where they are more likely to annoy customers, into self-service digital channels, including mobile. That means improv-


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ing the mobile experience to the extent that it truly delights customers, making the experience fast, intuitive, con-

venient, and capable of handling the most common transactions and service requests. Moreover, given scarce resources,

it’s more valuable to focus on improving a mobile app than a website because, on average, customers use apps almost

twice as often as mobile web browsing for routine interactions, and apps are consistently more likely to delight.

Indeed, mobile has evolved from a separate channel to become the hub of personal fi nance. To succeed in banking,

therefore, demands new capabilities of bank organizations:

• Extraordinary design discipline, given the small screen, slow speed of accurate typing and impatience of users

(many will give up if a screen load takes more than a few seconds)

• Radical simplifi cation of products, processes and communications

• Personalization, powered by good data and analytics, so that only relevant information is displayed to the user

• Contact methods that allow for anytime, anywhere chat and video calls with fast authentication

• Much faster development cycles to keep up with the pace of new functionality and rising expectations

of consumers

• A new operating model that provides organizational agility, based on a commitment to breaking down barriers

that divide internal departments and a willingness to collaborate with third-party developers

Both the quality of the channel experience and the mix of channel volumes matter when creating a great experience

for customers. Among US banks, 70% of the difference in channel experience scores (defi ned as the channel’s

likelihood to delight minus its likelihood to annoy) between the average regional bank and top performer USAA

is due to quality of the experience as rated by consumers; the mix of channels accounts for the other 30%.

These factors also have a strong infl uence on a bank’s Net Promoter ScoreSM, Bain’s key metric for customer loyalty.

Our statistical analysis shows that the most signifi cant factors for a bank’s Net Promoter Score are annoyance

with the branch experience, the branch’s share of interactions, and delight in the mobile and online experiences.

Investing in mobile, in part to reduce branch transactions, clearly pays off in greater loyalty. Apps used for routine

transactions, for instance, are one-third more likely to delight US customers than similar transactions at the branch

and only half as likely to annoy (see Figure 1). Mobile beats phone and ATM channels as well; in fact, phone inter-

actions are most likely, on average, to cause annoyance.

The mobile payoff also shows up in consumers’ propensity to switch banks. In the US, customers who use a

bank’s mobile channel frequently are 40% less likely to switch to another bank as customers who use mobile

rarely. Conversely, customers who use branches frequently are almost three times more likely to switch banks

as customers who rarely use branches.

Reimagining the branch

Banks cannot rely exclusively on mobile, of course. Human interactions still offer a means to excel in customers’

eyes, and those customers who use both physical and digital channels still tend to be more loyal and more valuable


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Online routine Mobileapp routine

Sixinteractions

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ATM

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Mobilesales/service

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Increasing likelihood to delight

Reliable

Percentage of US respondents, 2015

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Notes: Responses on a scale from -5 to 5 for “to what extent did the interaction increase or decrease your likelihood to recommend your bank?”; likelihood to delight=percentage of respondents answering ≥4; likelihood to annoy=percentage of respondents answering ≤-1Source: Bain/Research Now US NPS survey, 2015

Branchroutine

Mobilebrowserroutine

Figure 1: Mobile is consistently more likely to delight than other channels

to their primary bank. Interactions with bank staff, a bank’s product value proposition (including rates and

fees), and the emotional connection (or lack thereof) to the brand all play important roles in loyalty. However, the

role of the branch and frontline staff is changing rapidly. Our consumer surveys and evidence from leading

bank initiatives all show that routine interactions work better and cost less when done digitally, without requir-

ing a customer to visit a branch or call a contact center. Many banks have started down this path. In Germany,

for example, banks have cut routine interactions at the branch by half over the past two years by migrating

those interactions online and to ATMs.

Employees still play essential roles in more complex sales, service and advice, but the way they interact with

customers is changing as well. They’re increasingly communicating not in a branch but via chat or video. Dutch

bank ABN Amro, for instance, has been advising on and processing mortgages via webcam so that customers don’t

have to physically hand over documents at a branch. As banks plug their frontline staff into the mobile hub, they

can raise sales and service productivity by reaching more customers and reducing paperwork.

The writing is on the wall: Customers increasingly view having to use branches and call centers as an incon-

venience for many transactions. We estimate that 50% to 70% of call volumes at a typical bank are bad or avoid-

able. So although omnichannel customers still give higher loyalty scores than digital-only or branch-only customers,

the branch as currently confi gured will not survive. At all cost, banks should avoid policies (such as ceilings on

remote deposits) that force customers to go to a branch and stand in line.


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Some banks, including mBank in Poland, Hana Bank in South Korea and NatWest in the UK, have made excep-

tional progress in mobile and point the way for others. Since launching its app in 2011, mBank has kept innovating

the mobile experience. For example, users can access basic fi nancial information without needing to log in,

obtain one-click loans with 30-second approval and disbursement, and make peer-to-peer money transfers using

their smartphone’s contact list. These banks have discovered that mobile adoption in conjunction with advanced

ATM functionality that can eliminate cash handling from branches offer the best opportunity in decades for

cost take-outs.

Once banks have established solid apps for routine transactions, the next big mobile opportunity is to improve

product sales capabilities. Already, 26% of respondents globally use mobile channels to research or purchase

banking products, and that behavior is even more pronounced in Asia. In China and India, 52% and 43% of respon-

dents, respectively, do their product research through mobile. In China and the UK, 20% and 18%, respectively,

actually buy through mobile. Banks that lead in mobile purchases as a share of all purchases include Barclays in

the UK, China Minsheng Bank, and Commonwealth Bank of Australia (CBA).

Consumer pull, bank push

The pace of mobile innovation varies substantially around the world. In some countries, such as South Korea

and China, consumer enthusiasm for mobile has led to stunningly rapid adoption; roughly half of all bank inter-

actions in South Korea happen through mobile devices. Elsewhere, such as in Japan and Germany, consumer

adoption of mobile commerce has been much slower, and banks have been slow to push the pace of change. This

raises a classic chicken-and-egg question: Does consumer pull or bank push infl uence mobile adoption?

Evidence suggests that banks have a signifi cant ability to push consumers along, and the differences in mobile

adoption depend on how aggressively banks compete with each other on mobile innovation rather than on the

structure of their markets.

Consider the different trajectories of Australia and Canada, which have similar market structures, income distri-

butions, smartphone adoption and regulatory regimes. Australia has roughly 50% greater mobile banking usage

and two-thirds the branch usage as Canada. The explanation for this disparity lies in early moves by CBA to pursue

mobile innovations and thereby distinguish itself with customers. That prompted other big banks in Australia

to invest in mobile in order to maintain their share. By contrast, no big bank in Canada made an early bid to out-

invest in mobile, and innovation and customer adoption have lagged, leaving banks there to play global catch-up.

And catch up they must. In product after product, consumers have proven more willing than suppliers anticipated

to transact via mobile or online. Just as the share of customers who would pursue online fl ight check-in soared

past the airlines’ notional maximum, the adoption rate of mobile banking will signifi cantly exceed what many

banks are planning for today. And if one bank won’t make it easy enough to do so, another one will.

China leads the disruption

With customers’ expectations for the mobile experience rising, bankers will be forced to measure their offerings

against competitors around the world, not just within their home country. The biggest threat comes not from

banks but from insurgent companies devising better ways to deliver banking services through mobile. Much of

the industry’s attention has focused on companies based in Silicon Valley, including LendingTree, Betterment


Page 7

and Apple Pay. Yet these Western insurgents have not yet managed to achieve large scale or the coveted network

effect in their banking and payments offerings. Chinese insurgents such as Alipay and WeChat, meanwhile, have

leapfrogged the West and offer a compelling example of what Silicon Valley has been threatening to do at scale.

In China, for instance, some 600 million users active on Tencent Holdings’ WeChat messaging app can pay

merchants and utilities, send money to friends, deposit investments into money market accounts, book travel

tickets, borrow money, and carry out other daily fi nancial transactions with just a touch or two. WeChat shows

how payments, commerce and social media can converge. More than half of users open the app at least 10

times a day, and purchase volume to date has been 11 billion yuan ($1.7 billion) through WeChat Wallet. On the

most recent Chinese Lunar New Year’s Eve, WeChat users sent 1 billion virtual red envelopes, inspired by the

Chinese holiday tradition of gifting cash-stuffed red envelopes— hongbao in Chinese — to friends and family

(see Figure 2).

The scariest part for bankers: While WeChat’s wallet functionality currently operates only in mainland China,

WeChat now has more than 100 million users abroad. Other messaging platforms such as WhatsApp, which

has 900 million active users and was acquired in 2014 by Facebook, also aspire to add similar broad wallet func-

tionality, further pressuring banks.

The chapters that follow explore the 2015 survey data on the rise of mobile usage and its propensity to delight

or annoy, the next horizon in mobile sales, customers’ channel behavior, and global loyalty trends. The data and

insights can help banks accelerate their transition to a leaner, more balanced model in which each channel is

designed for both effi ciency and delight—and to mount a strong response to the digital insurgents.

600 million monthly users, 55% of whom open the app at least 10 times a day

QuickPay: QR-based point-of-sale system accepted by most merchants and any WeChat user with a camera on their device

Wealth: Transfer funds to a money market currently yielding 3.5%

Specials from China’s second-largest online shopping platform, JD.com

Public transport: Buy tickets

Go Dutch: Split a bill with friends

Mobile top-up: Send money to any prepaid mobile device

Fashion shopping online

Pay credit card bills

Local merchant offers with Groupon-like discounts

Red Envelope: On Chinese New Year, users sent 1 billion virtual red envelopes with cash gifts to family and friends

Weilidai allows users to borrow up to 200,000 yuan ($31,000) in minutes

Source: Bain & Company analysis

Transfer: Send money to anyone on WeChat

Didi Dache: China’s Uber-like taxi and limo ordering app

Movie tickets, utility payments, order and pay for a taxi, online shopping

Figure 2: WeChat integrates banking with social media

• Customers of all stripes rely heavily on their smart-phones in daily life, with younger customers being the most dependent on mobility. Customers in most countries and age groups continue to use mobile devices more frequently for their banking trans-actions and online computer channels less. In fact, mobile interactions now exceed online interac-tions in 10 of 16 countries measured. The biggest mobile/online shifts since 2013 occurred in the Netherlands, South Korea and China.

• Customers have increased the volume of their mobile interactions as well, with the largest increase coming in the Netherlands.

• Most banks are responding to their customers’ demand for mobile access through apps as well as websites with responsive design. While app usage is more common than the browser every-where, usage frequency does vary. Consumers in the Netherlands and South Korea show the highest usage while Japan and Germany lag.

• Higher mobile usage generally correlates with less branch usage. But it’s not a one-to-one relation-ship. Although routine interactions through mobile channels have increased dramatically over the past two years, routine branch interactions declined much more slowly as it takes time and effort to change customer habits. For every 100 mobile inter-actions, on average, there’s a decline of only about 16 interactions at the branch. Australia, the Nether-lands and South Korea could point the way for banks elsewhere in teaching customers to use mobile and other self-service channels such as advanced ATMs.

• Within any country, there’s signifi cant dispersion among individual banks in their mobile/branch usage ratio. Moving bad and avoidable volumes out of the branch doesn’t simply happen once an app launches; banks need to teach custom-ers to take advantage of the app’s benefits at every opportunity.

1.The rapid rise of mobile


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10

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55%

10 15 20 25 30 35 40 45 50 55%

Mobile interactions as a percentage of total interactions, 2013 and 2015

South Korea NetherlandsMobile exceeds online

Online exceeds mobileUS

AustraliaChina

Singapore

HongKong

Mexico

India

UK

France

CanadaPoland

Germany

Spain

Online interactions as a percentage of total interactions

Japan

Sources: Bain/Research Now NPS surveys, 2013 and 2015; Bain/GMI NPS surveys, 2013

2013 2015

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Percentage of people who would miss their phone more than their wallet, 2015

AverageUnder age 25

Age 55 or more

Source: Bain/Research Now NPS surveys, 2015

Figure 4: Mobile is displacing online in banking

Figure 3: Most consumers in most countries would miss their phone more than their wallet


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Average number of routine interactions per respondent in last quarter, 2015

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Smartphone app Tablet app Mobile browser


0

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2012 2013 2014 2015

Mobile interactions per respondent in last quarter, 2012–2015

Global weighted averageChinaUS

Note: Data not available for Netherlands and South Korea for 2014, thus chart interpolates between 2013 and 2015.Sources: Bain/Research Now NPS surveys, 2012–2015; Bain/GMI NPS surveys, 2012 and 2013; Euromonitor

Figure 6: Consumers use apps more than mobile browsers

Figure 5: Mobile usage continues its rapid rise in most countries


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0

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Canada

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Average number of mobile interactions per respondent in last quarter, 2015

Average number of branch interactions per respondent in last quarter, 2015

Dutch Bank French Bank Australian Bank Canadian Bank

Polish Bank British Bank Spanish Bank US Bank


0

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Average number of routine branch interactions per respondent in last quarter, 2013 and 2015

Average number of routine mobile interactions per respondent in last quarter, 2013 and 2015

India

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China

CanadaSingapore

Hong Kong

Japan

2013 2015


Figure 8: Mobile and branch usage varies substantially, even among countries with similar market structures

Figure 7: Mobilizing routine interactions allows banks to reduce routine branch visits


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0

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Netherlands

FranceAustralia

Poland

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Average number of mobile interactions per respondent in last quarter, 2015

Average number of branch interactions per respondent in last quarter, 2015


US bank Country average

Figure 9: Branch and mobile usage also varies substantially among banks within countries

• Experiences that are easy, reliable and effi cient create stronger loyalty. Mobile apps, especially for routine transactions, are more likely to delight customers than branch or phone experiences. An app is one-third more likely to delight a US customer than a branch visit for a routine inter-action. Conversely, a routine branch visit is 2.4 times more likely to annoy than a routine mobile app interaction.

• The pattern is similar in the Netherlands and South Korea, where mobile usage is highest. In South Korea, the functionality of advanced ATMs also performs well.

• Mobile gets high experience scores (defi ned as the percentage of recent interactions that delighted minus the percentage that annoyed) in most coun-tries, and its lead over other channels is most pro-nounced in the US. ATMs also score favorably in India, Mexico and Brazil, where broad ATM roll-outs have reduced the need to visit a branch and wait in line.

• Within a country, some banks excel far more than others in using mobile to delight. Those leaders and top mobile performers in other industries raise the bar for all banks.

• In the US market, for instance, Chase has steadily progressed in loyalty rankings relative to regional banks, in part by developing a distinctive mobile experience. This creates a challenge for regional banks that struggle to match the investment required to lead in mobile. But the biggest winner in creating distinctive experiences is direct bank USAA.

• The quality of all channel experiences accounts for roughly 70% of the difference in experience scores between USAA and regional banks, with the mix of channels accounting for the other 30%.

2.Creating customer delight through mobile


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Phone

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interactionsin last quarter

Branchroutine Branch

sales/service

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Reliable

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Variable

Mobileapp routineOnline routine

ATM

Mobilesales/service


Dec

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Percentage of Netherlands respondents, 2015

Notes: Responses on a scale from -5 to 5 for “to what extent did the interaction increase or decrease your likelihood to recommend your bank?”; likelihood to delight=percentage of respondents answering ≥4; likelihood to annoy=percentage of respondents answering ≤-1Source: Bain/Research Now Netherlands NPS survey, 2015


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Dec

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Notes: Responses on a scale from -5 to 5 for “to what extent did the interaction increase or decrease your likelihood to recommend your bank?”; likelihood to delight=percentage of respondents answering ≥4; likelihood to annoy=percentage of respondents answering ≤-1Source: Bain/Research Now US NPS survey, 2015


Branchroutine

Figure 11 : In the Netherlands, mobile apps are more likely to delight for routine interactions

Figure 10: In the US, mobile is consistently more likely to delight than other channels


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routine


Reliable

Percentage of South Korea respondents, 2015

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Variable

Notes: Responses on a scale from -5 to 5 for “to what extent did the interaction increase or decrease your likelihood to recommend your bank?”; likelihood to delight=percentage of respondents answering ≥4; likelihood to annoy=percentage of respondents answering ≤-1Source: Bain/Research Now South Korea NPS survey, 2015


Figure 12: In South Korea, mobile is consistently more likely to delight than other channels


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Figure 13: Digital outperforms the branch and phone in every country surveyed

UK

Spain

Poland

Netherlands

Germany

France

South Korea

Singapore

Japan

India

Hong Kong

China

Australia

US

Mexico

Canada

Brazil

Channel experience score relative to leading channel, which is indexed to zero, 2015

0% –5 –10–10 –15 –20 –25 –30

Americas

Asia-Pacific

Europe

Mobile Online ATM Branch Phone

Note: Channel experience score is defined as the likelihood to delight minus the likelihood to annoySource: Bain/Research Now NPS surveys, 2015


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Figure 14: The preference for mobile broadly applies across age groups

China

UK

US

55–64

18–24

65+

45–54

35–44

55–64

45–54

35–44

25–34

18–24

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0% –5 –10–10 –15 –20 –25 –30


25–34

Channel experience score relative to leading channel, which is indexed to zero, 2015

Mobile Online ATM Branch Phone


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MobileMobile

Online

Online

Online


Mobile

Branch

BranchBranch

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USAA Chase Average regional bank

Source: Bain/Research Now US NPS survey, 2015

Lowest bankAverage

Highest traditional bankHighest direct bank

Canada

US

Australia

China

South Korea

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Germany

Netherlands

UK

–40 –30 –20 –10 0%

Euro

peA

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Channel experience score for mobile, 2015, relative to highest bank, which is indexed to zero


Figure 16: In the US, Chase differentiates on mobile while USAA leads across all channels

Figure 15: The quality of the mobile experience varies greatly within countries


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Factor Statistically significant Contribution to NPS

Branch

Likelihood to annoy

Share of interactions

Online

Likelihood to annoy

Likelihood to delight




Mobile

Likelihood to annoy


Results of regression between US bank Net Promoter Score and various factors, 2015


28% 31% 77%

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NPS

Percentage of total interactions in last quarter, US, 2015

Averageregional bank

Chase USAA

Mobile/tablet

Online

ATMBranchPhone

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20.31.8 1.1 23.2

3.0

9.8 36.0

Bank average channel experience score, US, 2015

Averageregional

bank

Channelmix

Channelmix

Channelquality

Channelquality

Chase USAA


Figure 18: Increasing delight in digital channels and reducing annoyance caused by the branch raise loyalty scores

Figure 17: Both the quality and the mix of channels infl uence a bank’s channel experience score

• Mobile took off by making routine interactions easy to carry out anywhere, anytime. Now it’s coming on strong in sales and service. Almost one-third of sales or service interactions occurred via mobile in the past quarter, with the greatest share in the Netherlands and South Korea.

• Some 59% of buyers used both digital and tradi-tional channels for their research and purchase. The share of digital-only research and purchase was signifi cant at 28%, with the highest shares in the UK and the Netherlands.

• For research alone, online is the most common method, but mobile has risen as well—especially for simpler products and notably in China, India, Hong Kong and Singapore.

• For actual purchases, while the branch still dom-inates, markets such as China, the UK and Hong Kong show mobile’s potential. Younger customers are even more likely to go digital for product re-search and purchases, highlighting the need for banks to develop digital sales capabilities.

• Within every country, there’s a wide variation among banks in the share of product purchases made via mobile channels. In the UK, for instance, Barclays has attained 25% compared with the UK average of 18%.

• Mobile is more likely than the branch to delight customers in sales and service interactions and less likely to annoy in most countries.

3.On the horizon, mobilizing sales


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Percentage of respondents who made a purchase at their primary bank in the last quarter, 2015, by channels used for research and purchase

Digital only Human and digital Human only


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nds

Sout

h Ko

rea

Hon

g Ko

ng

Braz

il

Sing

apor

e

Chi

na UK US

Indi

a

Fran

ce

Pola

nd

Aus

tralia

Spai

n

Japa

n

Can

ada

Mex

ico

Ger

man

y

Online Branch


Figure 20: Many consumers use digital channels for research and purchase

Figure 19: Mobile has become a major channel for sales and service


Page 25

Phone

Percentage of purchasers using channel for purchase, 2015

Mobile Online Branch

0 20 40 60 80%

37788889101313131417171820

MexicoGermanyFranceAustraliaCanadaPolandBrazilJapanSpainNetherlandsIndiaUSSingaporeSouth KoreaHong KongUKChina

20 40 60 80%

138111213

712

799911

781011

6

00 20 40 60 80%

1035

1324

2035

2037

2244

2920

2417

2237

22

0 20 40 60 80%

7345

615255

4656

4256

2845

5152

5747

2951


0 20 40 60 80%

1415

1118

1415

121717

1419

1212

202121

16 1.1

1.31.31.31.21.21.41.61.6

1.21.21.21.31.31.31.21.2

Average numberof channels used

Phone

0 20 40 60 80%

2343

3447

3040

5530

2732

4933

4746

3855

49

0 20 40 60 80%

1414161819212222

232324

2931

404143

52

FranceGermanyCanadaPolandMexicoAustraliaNetherlandsSpainSouth KoreaBrazilJapanUSUKSingaporeHong KongIndiaChina

Percentage of purchasers using channel for research, 2015

0 20 40 60 80%

544447

4255

4328

51

4845

3844

2835394242

Mobile Online Branch

Note: Purchasers may have used more than one channel to researchSource: Bain/Research Now NPS surveys, 2015

Figure 22 : Consumers are starting to buy bank products via mobile

Figure 21: Asian consumers lead in using mobile for product research


Page 26

0

20

40

60

80

100%

Pola

nd

Indi

a

US

Ger

man

y

Spai

n

Braz

il

Can

ada

Fran

ce UK

Hon

g Ko

ng

Sout

h Ko

rea

Chi

na

Percentage of mobile purchases, by product type, 2015

Deposit Credit card Investment Loans Other


Figure 23: Deposit accounts and credit cards are the most frequently purchased products via mobile


Page 27

• Most customers, including younger people, still use both physical and digital channels. In most countries, these omnichannel customers give their primary bank higher loyalty scores, as measured by Net Promoter Score, than branch-only or digital-only customers, and they are more likely to buy a product from their primary bank. Also, the more interactions that omnichannel customers have, the higher their Net Promoter Scores.

• When it comes to switching behavior, the more customers use a branch the more likely they are to switch banks: In the US, frequent branch use correlates with an almost three times higher like-lihood of switching than infrequent use. By con-trast, frequent use of mobile and online channels correlates with a 40% lower likelihood to switch banks than infrequent use.

• Banks have been trying to shift their branches away from routine transactions such as deposits, pay-ments and cash withdrawals and into digital self-service channels instead. Progress in making that shift varies widely, with the Netherlands leading and Mexico lagging; Mexico has more than six times the number of routine branch interactions per respondent than the Netherlands.

• The prevailing wisdom has assumed that as banks shed routine volumes from the branch, they should increase sales and service activities. Yet the data show divergent paths: In some markets, such as Hong Kong and Singapore, banks have indeed been transforming branches to take on more sales and service activities. In other markets, such as China and South Korea, banks have downshifted on all interactions, whether routine or sales-oriented.

4.The branch will change or die


Page 30

0

20

40

60

80

100%

Percentage of traditional bank respondents, 2015

18–24 25–34 35–44 45–54 55–640

20

40

60

80

100%


18–24 25–34 35–44 45–54 55–64 65+

China UK

Note: Branch-only users, omnichannel users and digital-only users include respondents who interact via ATM and phoneSource: Bain/Research Now NPS surveys, 2015

Branch-only users Digital-only users Omnichannel users

0

20

40

60

80

100%


Chi

na

Indi

a

Mex

ico

Spai

n

Sout

h Ko

rea

Braz

il

Can

ada

US

Hon

g Ko

ng

Fran

ce

Pola

nd UK

Aus

tralia

Sing

apor

e

Ger

man

y

Net

herla

nds

Japa

n

Branch-only users Digital-only users Omnichannel users

Note: Branch-only users, omnichannel users and digital-only users include respondents who interact via ATM and phoneSource: Bain/Research Now NPS surveys, 2015

Figure 25: Even younger customers tend to use both digital and physical channels

Figure 24: Most customers still use both digital and physical channels


Page 31

0

20

40

60

80

100%

Low High0

20

40

60

80

100%

Low High0

20

40

60

80

100%

Low High

Branch usage Online usage Mobile usage

Unlikely to switch Likely to switch


Notes: Responses for “likely to switch” and “unlikely to switch” are based on responses to the question: “Thinking of your primary bank, how likely are you to switch from it to another bank in the next three months?”; low-usage respondents are in bottom third of frequency for that channel; high-usage respondents are in top third of frequency for that channelSource: Bain bank switching survey US, 2015

Omnichannel users gave higher Net Promoter Scores and weremore likely to purchase a product at their primary bank

They are more engaged, especially through digital channels

Traditional bank Net Promoter Score in US, 2015

Branch-only

Digital-only

Low

Omnichannel

Medium

HighBranch-

onlyDigital-only Low

OmnichannelMedium High

8% 10% 22% 30% 31%

Number of total interactions Number of total interactions

0

10

20

30

40%

Percentage ofrespondents

who purchaseda product inlast quarter,

2015

0

20

40

60

80

100

Average number of interactions in last quarter, 2015, traditional bank respondents in US

Mobile Online ATM Phone Branch

Note: Branch-only users, omnichannel users and digital-only users include respondents who interact via ATM and phoneSource: Bain/Research Now US NPS survey, 2015

Figure 27: The likelihood to switch banks decreases with frequent digital usage but increases with branch usage

Figure 26: Omnichannel customers continue to be more loyal and more engaged


Page 32

0.0

0.3

0.6

0.9

0 1 2 3 4 5

Routine interactions at branch in last quarter, 2013 and 2015, US

2013 2015Shrinking branch

2015Redefining branch

2013

Sources: Bain/Research Now US NPS surveys, 2013 and 2015

Sales/service interactions per respondent at branch in last quarter, 2013 and 2015, US

TD Bank

Bank ofAmerica Regions

SunTrust

Citibank

CapitalOneBank

Wells Fargo

PNCBank Fifth

ThirdBank

KeyBank

Citizens BankChase U.S.Bank

0

1

2

0 1 2 3 4 5

Mexico

Routine interactions at branch in last quarter, 2013 and 2015

Sales/service interactions per respondent at branch in last quarter, 2013 and 2015

US

India

Netherlands

France

GermanyAustralia

South Korea

China

Canada

Singapore

Hong Kong

Poland

Japan

UK

Spain


2013 2015Shrinking branch

2015Redefining branch

2013

Figure 29: US banks are pursuing different branch strategies, but still have room to shed routine volume

Figure 28: Routine interactions at the branch are declining everywhere, but the trend is mixed for sales/service


Page 33

• Large traditional banks continued to make mean-ingful improvements in their Net Promoter Scores relative to direct or smaller competitors. That change was most pronounced in the US and UK.

• While it is hard to foster change in large organi-zations, some big banks have demonstrated sus-tained progress over the past few years. In the UK, Santander has signifi cantly improved its Net Promoter Score, rising to the No. 2 position among traditional banks. Santander has focused on a simplifi ed current account proposition, fully digital, streamlined account opening and a dedicated switching team to onboard customers. In the US, Chase has followed a similar upward trajectory relative to its competitors.

• What matters most to an individual bank is how it performs relative to its peer group within their market. Using that lens, Net Promoter Scores varied widely from bank to bank. In Germany, for instance, top performer ING-DiBa had a Net Promoter Score that was 97 percentage points higher than the worst performer and 52 points above the country average.

• In-country differentials between the loyalty leader and the laggard were highest in Spain, the US Northeast region, the UK and Germany.

• While there have been some changes in loyalty leadership positions, several banks have held the top spot year over year. These include USAA and Huntington in the US, Bendigo in Australia, Sparda-Bank in Germany and fi rst direct and Nationwide in the UK.

5.Movement on the loyalty leader boards


Page 36

Figure 30: In most markets there is a large gap between leaders and laggards

Canada

Mexico

US-Midwest

US-Northeast

US-South

US-West

–100 –80 –60 –40 –20 0%

Am

eric

as

Primary banks’ Net Promoter Scores relative to loyalty leader, which is indexed to zero, 2015

Tangerine

USAA

USAA

TD Bank

TD Bank, PNC Bank, M&T Bank

Huntington

Bank of the West, Chase

USAA

USAA

National Bank, TD Canada Trust

Scotiabank, Banorte

Australia

China

Hong Kong

India

Japan

Singapore

South Korea

Asi

a-Pa

cific

–100 –80 –60 –40 –20 0%

China Merchants Bank, Bank of Communications

Citibank, Hang Seng Bank, HSBC

Industrial Bank of Korea, Shinhan Bank

Japan Post Bank, Shinsei Bank

POSB, OCBC Bank, DBS

ING Direct

Citibank

Bendigo bank

France

Germany

Poland

Spain

UK

Euro

pe

ING DirectLa Banque Postale

ING DiBaSparda-Bank

ING Bank

ING DirectBankinter

first directNationwide

–125 –100 –75 –50 –25 0%

Lowest bankAverage

Highest traditional bankHighest direct bank



Page 37

–1

–5

–25

–38

–19

–19 Bank 4

Chase

Bank of the West

Bank 3

Bank 5

Bank 6

Bank 7

NPS relative to loyalty leader, US, 2012–2015

2015 ranking2012

–4

–14

–17

–19

–37

–8

2013

–0

–9

–9

–22

–4

–10

2014

–10

–2

–22

–6

–25

–13

2015

Sources: Bain/Research Now US NPS surveys, 2012–2015

Figure 32: Chase has improved its loyalty ranking in the western US

–33

–70

–94

–86

–93

–76

–103

–22

Bank 4

Nationwide

first direct

Santander

Bank 5

Bank 6

Bank 7

Bank 8

Bank 9

NPS relative to loyalty leader, UK, 2012–2015

2015 ranking2012

–31

–69

–79

–83

–83

–81

–81

–47

2013

–30

–55

–53

–68

–76

–53

–70

–59

2014

–22

–71

–45

–63

–71

–51

–64

–54

2015

Sources: Bain/Research Now UK NPS surveys, 2012–2015

Figure 31: Santander has signifi cantly improved its loyalty ranking in the UK


Page 38

US UK Australia

–20

0

20

40

60

80%

Net Promoter Score

Big 4

Regional/smaller banks

Direct banks

–20

0

20

40

60

80%

Net Promoter Score

2009 2012 ‘13 ‘14 ‘15 2012 ‘13 ‘14 ‘15‘10 ‘11 ‘12 ‘13 ‘14 ‘15

Directbanks

RegionalbanksNationalbanks

–20

0

20

40

60

80%

Buildingsocieties

Direct banks

Net Promoter Score

Large branchbanks

Sources: Bain/Research Now NPS surveys, 2009–2015

Figure 33 : In some countries, large banks have been improving their loyalty scores relative to direct and regional competitors


Page 39


Page 40

Appendix: Methodology

Bain & Company partnered with Research Now, the online global market research organization, to survey consumer

panels in Australia, Brazil, Canada, China, France, Germany, Hong Kong, India, Japan, Mexico, the Netherlands, Poland,

Singapore, South Korea, Spain, the UK and the US. The survey’s purpose was to gauge customers’ loyalty to their

principal bank and the underlying reasons customers hold the views they do. Conducted between July and September

2015, the survey polled 114,696 respondent consumers of national branch network banks, regional banks, private

banks, direct banks, community banks and credit unions in these countries.

In the Americas and Europe, for the individual bank analysis, we included only those banks for which we received at

least 200 valid responses. In Asia, we included banks with at least 100 responses. In many instances, sample sizes

exceeded these thresholds.

Survey questionsRespondents were fi rst asked to identify their primary bank, after which they were asked the following questions to

assess their loyalty to that institution:

• On a scale of zero to 10, where zero represents “not at all likely” and 10 represents “extremely likely,” how

likely are you to recommend your primary bank to a friend or relative?

• Tell us why you gave your primary bank the score you did.

We asked which channels respondents use to do their banking. For each channel used, we asked whether the inter-

action increased or decreased their likelihood to recommend their bank. We also asked respondents whether they’d

purchased a product in the last three months. If so, we asked further questions about which products were purchased

and which channels they used to research and actually buy their banking product. The remaining questions elicited

demographic profi le information: household income, investable assets and region of residence.

On the question of statistical signifi cance, the results of our data analysis are robust both for the measurement of

bank Net Promoter Scores by country and for respondent Net Promoter Scores for each demographic category. For

the Americas and Europe, the Net Promoter Scores measured for each bank in the country and US regional rankings

are statistically signifi cant to an 80% confi dence level, with a two-tailed test of the confi dence interval ranging from

±2.4% (n=992) to ±7.5% (n=200). In Asia, where sample sizes were smaller, confi dence intervals are wider, with a

maximum of ±9.1%.

For more information, visit www.bain.com

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Bain advises clients on strategy, operations, technology, organization, private equity and mergers and acquisitions. We develop

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Documents

Customer Behavior and Loyalty in Retail Banking