Why banks need to take customer trust and satisfaction seriously

09 Oct 2019 4:01 am by Leela Bozonelis

Our largest financial institutions are subject of media scrutiny once again after the latest misconduct scandal hit the headlines. Over the past six years public anger at banks has left their reputations severely damaged. In a world where reputational damage is just a tweet away, it is vital that banks manage their reputations to restore customer trust and satisfaction.

A series of financial scandals, in addition to the role played by banks in the 2009 crisis, have severely tested the public's faith in financial institutions.  The LIBOR fixing debacle, revelations about foreign exchange market manipulation and anger at the size of bonuses paid to staff have shaken perceptions of these institutions, which were once seen as the custodians of consumer protection.

Most recently, the fines meted out to five banks over currency manipulation have again highlighted the mountain that these institutions must climb to rebuild trust with their customers.  Barclays and Royal Bank of Scotland were among those fined a total of $5.5 billion following an investigation into trading practices between 2007 and 2013 by the US Department of Justice, the Federal Reserve and other US and European regulators.

Net Promoter Score (NPS)

Partly in response to this, banks are increasingly turning to sophisticated measurements to monitor customer trust and satisfaction.  One of these gauges is the Net Promoter Score (NPS) which asks customers one question: How likely is it that you would recommend our company/product/service to a friend or colleague?

From the results, a company is able to divide its consumers into three categories: detractors, passives and promoters.  It then subtracts the percentage of detractors from its promoters to come up with its NPS figure – the higher the NPS is, the higher its clients' satisfaction level is and vice versa.

The measurement has been used by retailers and other service industries for at least a decade, but it is becoming increasingly significant in finance, as banks try to improve the service they offer their customers and subsequently their reputation.

Customer complaints on social media can be heavily influential

The banks' increased focus on customer satisfaction has not just been a reaction to the recent scandals: the growing ability for customers to switch accounts easily has made word-of-mouth and other peer recommendations more relevant in a market that traditionally made it difficult for account holders to switch to a rival.  In this new climate, better customer service has made NPS a powerful tool for banks to increase client loyalty and attract new customers from others.

NPS also has a major impact in a world where social media and mobile devices mean that the customer is constantly connected and able to make snap judgements and recommendations, influencing potentially thousands of other consumers at the touch of a screen or button.

Complaints are broadcast in seconds, with what once might have been seen as relatively minor issues ballooning into reputational disasters that can quickly get out of control.  One such example in the run up to Christmas in 2013 saw the debit card system fail and by the evening, more than 11,000 posts on Twitter made clear the size of the hit on banks' reputation.

Listening to customers to find out what is working

But NPS can also be used to build on success.  Knowing what works gives you a powerful tool when it comes to developing sales strategies, building on a successful message and capitalising on the things that a financial institution's customers like.

In an age of hashtags and social media, where a large majority of an organisations customers will be sharing their experiences online, the NPS score now reflects something a little more concrete.  Whereas in the past the NPS score was a great indicator of customer satisfaction levels in general, now it is a great indicator of what your customers are actually shouting out to the world.  The question is, what do you want them to be shouting?

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