A new report by American consumer research company JD Power published this month shows that American banks have achieved the highest customer satisfaction levels in five years, but that persistent failures around aggressive sales practices are beginning to threaten recent progress.
The report, based on a survey of 83,000 individuals, focused on US banks, but brings to light culture and conduct failures that are pervasive in the UK, Europe, and around the world.
The JD Power report received considerable media attention in the U.S., largely because of heightened scrutiny of aggressive sales practices in the aftermath of the Wells Fargo “cross-selling” scandal. According to the Wall Street Journal, over a 15 year period “Wells Fargo opened as many as two million deposit and credit-card accounts without customers’ knowledge.” Branch employees were under significant pressure to increase sales, and regularly misled customers during the course of interactions in order to sell “products [customers] do not want or value,” as stated by a Wells Fargo’s spokeswoman to the newspaper.
The report confirms fears that aggressive sales tactics remain commonplace among retail banks, undermining the improvements otherwise seen in the public perception of banks over the last five years.
The proportion of individuals who would recommend their banks to others is at the highest level in five years, rising from 30% in 2012 to 36% in 2016. In addition, public perception of banks has rebounded since the financial crisis, with 79% of respondents reporting that they believe their banks “acts in their best interest” and 81% believing that their bank “acts ethically.”
But in characterising the clear concern over aggressive sales practices, the authors of the JD Power report describe “cracks in the foundation” of improved customer satisfaction in American banks. For example, the proportion of individuals who cite pressure to purchase investment products that they “did not want or need” nearly doubled from 6% in 2015 to 11% in 2016.
The consequences of unclear selling practices are very clear. Of individuals who felt pressured into a particular mortgage product during their customer interaction, 72% regretted the lender they chose. Of those individuals who were surprised by fees charged to their accounts, 46% indicated they were considering switching banks. Poor customer interactions, characterised by aggressive sales practices and incomplete disclosures of fees, have a direct negative impact on brand loyalty.
For banks, one of the key challenges is monitoring conduct and culture at the branch level. Former Wells Fargo Chairman and CEO John Stumpf, who resigned in the aftermath of the scandal, admitted to the Wall Street Journal that there had been failures in oversight, stating “Could we have done more, faster, better? Of course.” But Stumpf also indicated to reporters “that employees didn’t honor the bank’s values,” suggesting that there was little more he could do to manage customer interactions across the 6,000 branches.
Having seen analog solutions for such pervasive failures in culture and conduct fall short time and again, Recordsure’s response for financial services makes it possible for managers in compliance and customer service roles to leverage digital tools that can help identify when customer interactions are falling short of company guidelines and values. Recordsure’s unique technologies provide the visibility necessary to make better and faster improvements to customer engagement at the branch level.
Importantly, the JD Power survey also confirms that the bank branch remains central to how financial products are sold. Just 18% of new accounts were opened online, with 78% opened in the branch. Among technologically savvy Gen Z customers, an even higher proportion opened their accounts at the branch–82%– suggesting that younger customers want the advice of a trusted banker as they make their first financial decisions. Getting these conversations right will be crucial as retail banks seek to prove their appeal to younger customers, who are now bombarded with non-traditional “fintech” banking services.
Overall, the quality of the customer interaction is directly associated with customer value of the bank. Of customers who felt that their banker “completely understood [their] needs,” 65% said they would definitely recommend the bank. On average, these individuals placed 48% of the investable assets at the bank. Of those individuals who felt that their banker “did not completely understand [their] needs, just 20% said they would recommend the bank. These individuals then only entrusted 31% of their investable assets with the bank. The authors of the JD Power report come to a clear conclusion– banks need to “stop selling and start advising”.
We at Recordsure wholeheartedly agree.