Customers want better digital service, but their banks aren’t providing it.
That’s the essence of the conclusions made by Cisco in their new study, “The Internet of Everything for Financial Services,” released earlier today. It surveyed 7,200 consumers in 12 countries, finding that many of them feel greatly underserved in the digital realm by their banks.
“Consumers in general are becoming digital customers,” said Paul Jameson, Cisco’s global director for financial services, who helped author the report.
That trend has accelerated in recent times. In April, Deloitte estimated that digital interactions influence 36 cents of every dollar spent in retail stores, which came out to about $1.1 trillion; by the end of 2014, those numbers will rise to 50 cents and $1.5 trillion.
And just as consumers are growing more digital-friendly with how they spend their money, they are going in the same direction with how they withdraw, save and invest it. It seems, however, that banks aren’t adapting to changing desires.
Forty-three percent of those surveyed believe that their bank “does not know them and consequently cannot deliver personalized service.”
Perhaps most alarming for banks is this: 31 percent believe that their bank “is not helping them reach their biggest financial goals and consequently will look to alternative banking relationships.”
Mayday enables Kindle users to immediately connect to an Amazon Tech advisor free of charge. At any time, an advisor will appear on the screen of a tablet user, able to assist them with any technical problems they may have. The advisor cannot see the customer, only the screen of the tablet.
Something similar—like video conferencing with a trusted advisor on financial planning—suggested Jameson, is what current bank customers are after.
“Success comes down to a focus on convenience and personalization,” he said. The concern for customers is that “my bank does not know my needs. Even if it’s as simple as going to Amazon, consumers are comparing [their bank services] to personalized experiences that they’re getting in the rest of their lives.”
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And so far banks have fallen short, leading 31 percent to conclude that their business may lie elsewhere. Underlying their more modern apprehensions, however, is one of the oldest ones of all: Customers worry that their banks don’t understand them enough.
“There’s really a value concern,” said Jameson. “[Customers think], I’ve been with a bank for 15 years but you still don’t know me.”
Blurred age lines
This isn’t a millennial phenomenon.
Well, it is. Fifty percent of millennials surveyed states that their “bank does not know individual needs.” But that number remained high for Gen X-ers and boomers, falling only to 42 and 36 percent, respectively.
And when asked whether or not their bank was helping them meet their “most important financial goals,” while 24 percent of millennials answered no, 36 percent of Gen X-ers and 39 percent of boomers did.
Though all age groups desire greater digital engagement, the main difference between them lies in their acceptance of risk inherent to non-physical transactions.
While “consumers are interested in being assured the security is there,” said Jameson, millennials “are much more risk-oriented than their older counterparts. Acceptance [of risk] is getting pretty high. They’re waiting for the banks to start.”
Current and future successes
The good news for banks is that there’s “pretty shocking potential” for improvement, as Jameson put it.
The average mid-tier regional bank (think about 1500 branches and $10 billion in revenue) can make an extra $392 million before tax from implementing digital reforms, said the report.
That number includes an estimated $265 million from video mortgage and advisor services, as well as $26 million from mobile payment services, among other things.
A number of banks have already internalized and applied the survey’s findings, often accomplishing impressive results in the process.
The Bank of New Zealand, said Jameson, “went from seventh in their marketplace to second, based on making people available whenever needed.”
The Nationwide Building Society, the largest building society (an institution that provides financial services and is owned by its members) in the world, recently focused increasing its digital services.
In turn, it saw a 60 percent increase in its mortgage business, followed soon after by a 22 percent increase in customer satisfaction, said Jameson.
But perhaps if the success of those institutions is not enough to motivate digitally lagging banks, Cisco’s findings will jolt them into life: 65 percent of respondents said they would switch financial institutions for personalized Internet of Everything–enabled services.