Evolving Customer Experience: Study on Traditional Banks Versus Neobanks

The last two years have changed how banks are approaching their digital journeys. Pandemic has pushed the fast-forward button on digital transformation. Our most recent study on traditional and neobanks shows that bank customers have changing expectations and banks need to identify the areas that need to improve customer experiences.

Dan Gingiss - The Experience Maker™, recently sat down with Melissa Douros and Jeff Sheehan, to discuss how customer experience is changing across traditional banks and how neobanks were emerging as a solution to some of the long waiting issues of customers.

The show took an interesting turn when Dan discussed how customers expect different things in a Neobank vs a Traditional bank. But at the same time in a few aspects, customers expect exactly the same things irrespective of the kind of bank.

This episode of the CX See Why show focused on the banking industry, which comprehensively dug deep into the significant customer experience aspects of traditional and digital banking.

Melissa Douros, Head of Digital Product Experience at Discover Financial Services, isn’t a novice at digitalization. At Discover, she has led enterprise-wide digital transformation during a period of rapid business growth. She is a visionary digital product manager with 20+ years of success in digital product and leadership. Melissa is here to provide thought leadership, strategy, and guidance in digital transformation strategy.

On the other hand, we have Jeff Sheehan, a customer Experience Management Consultant with a deep understanding of how brands and customers interact in a rapidly evolving role that data and technology play in customer experience. Jeff has authored and published the Amazon best-selling book Customer Experience Management Field Manual: The Guide For Building Your Top Performing CX Program in 2021, and has received international recognition as a Business Strategy, CX Thought Leader, and Influencer in 2021 and 2022.

In this Talk show Melissa and Jeff talk about:

How can banks rethink their products and services to improve CX?
What strategies traditional and Neobanks can follow to catch up with each other?
Key concerns that prevent banks from optimizing the customer experience

Watch the video above or read on for a condensed version of the interview.

Traditional Banks or Neobanks? Is The Choice of Banks Generational or Cross Generation?

Melissa said that there are 2 different types of populations. She thinks there is comfort and security people feel with physical banks in their town. If something happens to customers' money or if there is fraudulent activity, people feel that sense of security since they can go into that bank and talk to a human and get it solved. Melissa talks about how the population is changing and how thoughts are changing. People are getting more conformable with digital interfaces for their finances.

Jeff adds, "I think there's a bit of the generational demographics at play. Those born in the digital world would be comfortable and have access to a mobile device or an iPad, and they feel free to use them for banking. As a boomer, I use Apple Pay all the time, and my kids, who are millennials, are not using it. Instead, they use bill-splitting apps and other digital apps to pay for things."

Dan shares an interesting point that how his father never went to an ATM as he preferred to walk into a bank, while his teenage kids also never visited an ATM as they move around money on their mobile phones!

This makes it more interesting, and that's why it makes it such a fascinating industry.

What Are The Major Drivers of Customer Experience in Banks?

Source: Clootrack Banking CX Tracker

Dan refers to Clootrack’s analysis that found top category drivers influencing the customer experience in traditional banking based on the volume of customer reviews around them.

Dan was interested to know if Melissa thought any of the drivers came out as interesting, different, or surprising.

Melissa did not find these drivers surprising. She said, there is a group of people who feel it's convenient to walk to the banks, and there are no surprises with the mobile banking apps because all traditional banks have a mobile app version now. But Melissa was surprised with the Cheques on the list. She mentioned that it continues to surprise her because it clearly shows that cheques are not yet outdated!

But the million-dollar question - Will the list of drivers change when it comes to Neobanks?

Melissa’s hypothesis was that it won't be much different. And Jeff was in total agreement with Melissa. Jeff guessed that the ‘App Performance’ will have much more review volume in neo banks than traditional banks. And Melissa strongly guessed that ‘Convenience’ will still be there on the neo banks list.

Their guesses were correct! No wonder we have them on our show. They are indeed the industry experts!

Check Out The Top Drivers of Neobanks

Source: Clootrack Banking CX Tracker

The app performance and convenience switch places but they are still the top two drivers.

And there are 3 different category drivers in the neobanks compared to traditional banks. They are Response Time, Recommendation, and Transactions.

Convenience is The Winning Factor For Banks

Source: Clootrack Banking CX Tracker

We learned that convenience is the key driver in both the traditional banks as well as the neobanks. Let us drill down the Convenience driver in both banks. Have a look at the subcategories that makes convenience important in banks.

Source: Clootrack Banking CX Tracker

One word that pops out as you can see across the board is the word ‘Easy’

Jeff said, here that ‘Easy’ means effortless, frictionless, and one and done. Checking and verifying everything iteratively will be tiring for customers in online banks. There should be fewer clicks for the customers to do transactions.

Melissa thinks the most common requirement of customers is easy logging in. She says the number one customer complaint everywhere is to know the passwords to log in. Another point she mentioned is how easily an online bank can transfer customers’ money, how it can quickly pay people, pay utilities, etc.

When we think of ‘Easy,’ it covers all seamless communications and transactions of customers with their banks.

In some neo banks, the main advantage of easy logging in is the integration of biometrics. It is easy to do login by tapping on the app on their phone and just showing their faces to the sensors. Moreover, it enhances the security, thereby trust from customers.

For Dan, easiness also means the speed and how fast customers can do banking activities. Customers do not want to stand in a queue where twenty people are in their front to check out. They need it quickly and conveniently from anywhere in the world.

What Drives Positive Online Customer Reviews for Banks?

Source: Clootrack Banking CX Tracker

Convenience and App Performance are the top aspects that gathered more positive customer reviews for traditional and neobanks. Neobanks outscore traditional banks in both convenience and app performance. When we go to Cheques and Cash deposits, traditional banks outscore neobanks.

Surprisingly neobanks did not receive any positive response regarding Call Support, Software Updates, and Security just as how Melissa had pointed out earlier.

Jeff said all this data makes perfect sense for him. It would have surprised him if it showed data on complex things like mortgages and insurance in digital banking. Because those complex services require calls and call support, which is lacking in digital banking.

Can Time Impact Positive or Negative Customer Experience?

Moving on let's look at how time can impact the positive or the negative customer experience.

Clootrack looked into two different periods, the first half from January - August 2021 (H1) to September 2021 - April 2022 (H2).

This is an important comparison not just for Banks but for all other industries as the things that your customers care about are not static!! They change over time. The reason could be that it's seasonal, competitors' changing strategies, or even the changing customer expectations.

But all those in the customer experience business definitely know that customer expectations are always getting higher and the data here really starts to pull that out.

As per the above data, it is clear that, in the traditional banks, the response time becomes more significant in the second half (H2) and so are cash deposits, transactions, and convenience that are becoming more and more important. Interestingly as we move down, we observe that Neo banks are doing better in card services and extra charges.

In contrast, in the second half, neobanks have shown a dip in security.

Melissa said that banks need to understand the security needs of their customers. She also believes customer expectations change as their problems change. Also, she says that if we think about the neo banks, there is a 95% chance that customers need a human connection when there is a fear of fraud or security concerns. Customers will connect with the bank when there is a disruption. So it's not surprising about the security.

Jeff shared an example around this of a digital-only bank. The bank was quickly expanding more than any other bank in the country with its offerings. But, checking their customer reviews, ratings, and other indicators, it seemed that their customers were frustrated only because they didn't invest in the call center. While enhancing their digital operation, they forgot to respond to customers with humans. A bank cannot survive if its customers are upset.

Dan added a couple of points to it. He said, in banking, digital-first should not mean digital-only. Because for talking and sharing their issues, customers need humans. This can build trust more than chatting with chatbots. And, if there is a great customer experience, customers will not require support assistance.

What Are the Main Concerns of Bank Customers?

Card Service is the top concern for the traditional banks while Account Closure comes up as the top concern for neobank customers.

So for a traditional bank, it's all about a debit card or a credit card. Melissa also thinks there are lots of challenges, especially around Card Delivery. But banks are focused on developing features that they believe their customers want. When we dive into the customer focus groups, interviews, and surveys in-depth, customers don't always tell banks precisely what they need in card services.

Customers often do not think about their problems in-depth, so they won't be able to communicate them with the banks. This makes banks fail in framing the right solutions for them. In such cases, banks work on what they think their customers need, which will differ from what their customers really need. This might be the reason for concerns around card utility.

There is a difference between the voice of the customer and their actions. Banks need to track customers' activities in real-time to know the exact customer actions and understand their concerns and requirements.

For example, check what customers are searching for in your website's search bar. That searched query would be the concern of a customer or a thing they find difficult to do by themselves.

Regarding neobanks, customers felt it more challenging to close their accounts. In neo banks, their money is in the cloud, and they transfer from app to app quickly and seamlessly. But it is difficult for them when they need to close an account. This is when customers freak out!

When we look into the Account Closure concern in detail, we can see that customers ask the bank to close their account, return their money, their account got locked, cannot access the account, and complains about fraudulent transactions.

Here, it is clear that customers get frustrated when they feel they do not have control over their money. If they are delighted with all neo banking services and in the next moment they feel they cannot take important action in their account, they will lose the complete trust in the entire digital banking. They will feel it is a scam.

Closing an account is the least transparent part of many banks. Because that is the only transaction, a bank doesn’t want to happen!

If banks make this closing transaction much more effortless on their way out, customers will feel comfortable with the bank, and there is a chance of returning to the same bank in the future. Also, they will suggest their friends and family choose that bank since they completely trust them.

Banking Industry Episode Highlights

Here are some bite-sized pieces from the episode. Check out these direct quotes from the CX See Why talk show:

1. Convenience Trump All Other Factors When Choosing a Bank

Melissa says: “A lot of it is driving among the less tenured digital generation is that factor of convenience. It's easy to walk into a bank but the more we make digital banking more convenient the shift in behavior is happening”.

Customers pay for brands to make their life and day-to-day tasks more convenient. If customers feel effortless to do banking activities with a bank and the mobile app performs very well without any glitches and delays, they will continue to be the bank’s customers for a long time. So, it is vital to make sure that your bank makes customers’ life more convenient without the complexity of conventional banking activities.

2. Customer Concerns Include Mostly Standard Parts of the Transactions

Dan says, “That's interesting to learn that things like cheques, cards, and closing accounts are coming up. These are pretty basic, and so we have to get the basics right.” “Do the simple ones better”

Basic things like cheques, getting cards, and closing accounts are the main concerns of customers rather than complex transaction issues. So banks should first focus on offering quality services in basic transactions. There is no point in providing advanced options unless the customers can quickly get their cash in simple clicks.

3. Security and Trust Are Paramount

Jeff points out, “ I know I am emotional when something goes wrong with my money. When there is a disruption, there has to be a human connection. Presumption of trust…presumption of availability behind the digital mechanics…”

If customers do not believe and trust the bank and feel their money is not secure, they will find other banks to make their money safe. So banks should focus on building customer trust by developing a sense of security.

For more interviews with CX leaders, check out all of the episodes of The CX See Why episodes here.

Evolving Customer Experience: Study on Traditional Banks Versus Neobanks

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