Bain’s research indicates that high digital failure rates (DFR) remain to be a challenge for most Indian banks
According to customer data on Indian banks, obtained through NPS Prism®—Bain & Company’s competitive benchmarking tool, the emergence of neo-banking and neo-card alternatives in the market has led to a higher rate of switch and customer defection in 2021, not only for loans and investment products, but also for frequently-transacted products like savings account and credit cards.
Bain & Company, using its proprietary NPS Prism® tool, tracks banking customers’ experiences (CX), revealing deeper insights into their changing customer perceptions and behaviours. It also
analyses the rise of digital banking which is transforming CX in the Indian banking sector.Insights from Bain’s NPS Prism® reveal key themes in customer loyalty, that are shaping the consumer banking sector.
Earning customer loyalty is critical for banks
Earning loyalty in consumer banking in India is getting more challenging with more than 50% customers indicating their willingness to switch their bank in the next 12 months provided they
are offered a better experience or products. As per Bain’s NPS Prism® analysis, 56% of the customers are prepared to switch banks for a savings account; 59% for a credit card; 63% for an auto loan; and 69% for a personal loan.
“With low barriers for switching, providing good and consistent customer experience across customer journeys has become crucial, both for customer retention as well as growth.” said Rakesh Pozhath, Bain & Company partner in Financial Services who is leading the launch of NPS Prism® in India.
Bain’s NPS Prism® analysis suggests that promoters are 2.5 times more likely to buy banking products with the same provider compared to detractors and this firmly establishes the economics of customer advocacy. Promoters are also likely to provide 20-30 percentage points higher share of wallet, have 3-4 times more positive referrals and 2-3 times less likely to defect/switch providers for add-on products and services. A stronger customer advocacy also drives multi-product ownership—since promoters are likely to have more products with the bank, it provides an opportunity for the bank to grow its cross-sell.
Speed, ease and convenience feature more prominently as the critical drivers of customer advocacy compared to previous years, even as Brand Trust, Recognition and Security continue to be mportant. “Banks and financial providers in India have been dealing with critical changes to their industry for some time now, resulting in an urgent need to refocus, prioritise customer needs, and identify ways to offer superior experiences,” said Saurabh Trehan, a Bain & Company partner and Financial Services Lead in the India office.
Being a ‘primary bank’ is key for customer advocacy–A key parameter that distinguishes loyalty leaders from laggards is the percentage of customers who consider them their primary bank. Rakesh Pozhath further added, “The more customers the bank can convert from non-primary to primary the better the advocacy becomes. The three indicators of what defines a primary bank are—
primary savings account, total relationship value and the number of transactions. With primary customers, the analysis is seeing an average of 3+ products/product categories, especially for the salaried, mass affluent segment.”
A shift to Digital Banking
Since the onset of the pandemic, customers are increasingly choosing digital channels, not just for routine transactions including funds transfer and reviewing account information, but also for account opening/onboarding and servicing episodes. However, digital failures (i.e. journeys starting in digital, but concluding in a human interface) result in a substantial drop in customer Net Promoter Score℠. Bain’s research indicates that high digital failure rates (DFR) remain to be a challenge for most Indian banks. In 2021, DFR for Indian banks was almost twice compared to banks in the US.
NPS Prism® analyses a wide range of data and metrics including, Net Promoter Score℠, a reliable metric to link improvements in customer loyalty to business outcomes; at a relationship, product and journey level, trends by behavioural segments, product ownership and relationship value based on detailed surveys and interviews conducted with a large base of retail banking consumers.
NPS Prism® began in response to an increasing demand from major banking players in India to become more customer centric. The role of digital banking in CX rose further as an impact of Covid-19, and the shift from physical branches and payment methods to digital options. The tool aims at helping companies drive meaningful customer experience changes in their businesses and empower Indian banks to monitor the real-time impact of CX efforts on their customer advocacy, across the following areas:
– How does my CX compare with that of competitors at the brand, product and episode levels?
– Which customer episodes have the greatest impact on customer loyalty?
– In which channels am I (and my competitors) delivering a better experience?
– How do I compare with competitors on customer-reported metrics (e.g., digital failure rates, “first time right”, call center wait times)?
– How is my digital penetration and digital experience compare to peers?
CDOs, CMOs, Customer Experience Officers, Channel heads, CPOs and CEOs will be able to make critical strategic decisions with data-backed insights. For example, episode level CX and digital benchmarking provides CDO-relevant insights on which journeys to prioritise for digitisation/redesign, enhancement of existing features in current digital assets and sequencing of features/products for new initiatives like a digital attacker/neobank.