Ernst & Young: 25% of GCC customers may switch banks within a year if their banking experience does not improve

According to Ernst & Young’s latest study "Retail Banking in the GCC: Competing for customers", 25 per cent of GCC retail banking customers plan on switching their bank within the next year. Another 10 per cent have revealed that they have already switched, citing dissatisfaction with their overall banking experience. The survey examined customers’ needs and the quality of their experience, reasons for attrition and how to prevent it, as well as ways to encourage customers to recommend their bank to others

Salmaan Jaffery, MENA Financial Services Retail Banking Sector Leader, Ernst & Young commented: “The GCC retail banking market has become increasingly competitive and since customers have many more choices, banks need to do more to provide customers with a better overall experience. Our survey points to a large number of customers who are not particularly loyal to their bank and will move if underserved – adding to the mounting challenges that banks already face. Banks must realize, however, that a quality customer experience and ensuing trust is actually built one transaction a time.”

Gordon Bennie, MENA Financial Services Industry Leader, Ernst & Young said: “With the worst of the economic downturn past us, retail banking customers are demanding better service from their banks and are willing to move to a better provider in the blink of an eye. This demonstration of customer power is impacting banks who are starting to realize that improving customer experience is an effective way to increase financial performance and build sustainable banking franchises.”

Customer experience 

The survey points out that customer experience needs to be driven by the operational excellence of each transaction. 71 per cent of respondents said trust is highly important to their personal relationship with their primary bank but 70 per cent cited transaction speed and 66 per cent tagged service quality. While 45 per cent consider personal attention to be highly important, only 7 per cent of customers surveyed confirmed they get that from their current banks. The report also reveals that if specific steps are not taken to understand customer needs and deliver these with exceptional transactional quality, banks will be unable to build the strong franchises that deliver profitable growth.

Customer Loyalty

The single most important reason for switching banks was a specific service failing (45%) followed by transaction speed (24%), service quality (23%) and the need for Islamic products (21%).

Commented Jaffery: “As the number of multiple bank relationships increases, the amount of products sold or length of a banking relationship, while important, are no longer the only accurate barometers of a customer’s loyalty. Needless to say, banks need to more accurately understand failures and behaviours that may predict attrition.”

Generating customer loyalty requires that their needs are accurately met. Crucially, single serious service failures need to be avoided. GCC customers are using more banks and reliance on their primary bank is decreasing as nearly 60 per cent of respondents have a relationship with more than one bank. 35 per cent of GCC respondents have recently switched or plan to switch banks and only 19 per cent of banking relationships exceed 10 years.

Customer Advocacy

GCC customers can be advocates when happy, so ample rewards exist for banks that pay attention to their customers. The survey revealed that 41 per cent said they would recommend their bank. Differences existed across regions with advocacy higher in Saudi Arabia and Kuwait but lower in Qatar and Bahrain. 40 per cent of customers cited transaction speed as an area requiring most improvement in their bank while 34 per cent needed more Islamic products. Shari’a sensitive respondents were more likely to promote their bank.

“Banks have an opportunity to take advantage of GCC customer propensity to recommend their bank, especially when satisfied. Customers cite the need for Shari’a products and services as a core need so it is an important driver of attrition and advocacy. Banks should view advocates as a source of highly profitable revenue,” said Jaffery.

Islamic banking customers are seeking greater transaction speed and better service quality

Shari’a sensitive customers are not getting enough transaction speed, service quality, and innovation from their banks, according to the study. Such gaps in service delivery are more or less typical of a fast growing sector but also represent an opportunity for Islamic banks to adapt and scale up to meet growing customer demands. 83 per cent of Shari’a sensitive respondents cited transaction speed as highly important to them as compared with 70 per cent of all respondents. 78 per cent of the Shari’a sensitive cited customer service as highly important.

The opportunity

“Banks need to understand gaps in their current customer service delivery platform and work on maximizing customer experience by ensuring consistently high transaction quality across multiple channels. Perceptions created via high quality repetitive ‘touches’ can be reinforced by more focused brand building and by harnessing the power of new media and social networks. Banks that start this process now and who shape their organizational DNA around customer centricity can build strong customer franchises and will be positioned for long term success in these growing lucrative markets,” concluded Jaffery.