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Standard of managing customer loyalty in a digital banking world

Digital transformation has eroded traditional loyalty of the customers with banks. Customer loyalty has turned out to be a world of moving targets. Sentiment of the banking consumer is shifting regularly on the advent of fintech and digital innovations. So, for members of the banking industry, it is very hard to stay on top. The balance of power in the banking sector has changed in favor of the customer. With the available panorama of digital solutions, the customer expectations have sky rocketed. Banking customers are now in a position to dictate terms; what they expect, how they would like to be serviced, what information they are willing to share and how loyal with the bank they are intended to be, is all at the customers’ discretion.

The banks and financial institutions are under exceptional pressure not only to retain their existing clients but also to market new customers for long term relationship, in the wake of digitization of financial services. With fickle customer loyalty, the traditional banks are losing their business in big proportions. Around two decades back, customer attrition was negligible because the clients had to stay loyal with the traditional bank branch. Shifting funds from one bank to the other was a big hassle. Then, the rise of internet and the technologies of digital communications introduced radical changes in the conventional relationship between the banks and their clients.

GAFA, the combination of Google, Amazon, Facebook and Apple, is mainly responsible for a big shift in customers’ expectations. Facebook has started P2P payment through its app Messenger. Apple allows its users to send money to each other by using iMessaging. Amazon has commenced SME lending. Google Pay facilitates payment transactions. These are the titans of technology who possess a major share in consumer to business (C2B) financial transactions. Free from any regulatory obligations, GAFA networks, with their purchasing and payment potential, have diluted the customer loyalty of traditional banks for their greater acceptability with the consumers in their 20s and early 30s.

Pakistan is one of the top GAFA network user countries. Digital transformation in Pakistan is also supported by demographics. About 55% of 208 million people are under 25 years of age. There are around 45 million bank accounts while 90 million are the mobile subscribers; leading to a ratio of 1:2. Such massive use of cell phone is estranging the bank customers from traditional loyalties and associating them with touch away financial solutions without the limits of time and space.

 

The circumstances portrayed above contribute to unstable customer loyalty and resulting shrinkage in business of the banks. Therefore, this serious challenge is to be coped with positively by evolving a strategy in line with the ground realities.

The following guidelines are elaborated in order to overcome the challenge:

  • Omni-channel customer engagement
  • Enhancement of digital experience
  • Data mining for customer intelligence
  • Recognition of banking industry as a service industry
  • Digital brand building
  • Total relationship loyalty
  • Eliminating digital pain points of customers
  • Recognition of customers’ limits to absorb change

The secret of preserving customer loyalty in banking lies in getting more and more customer centric, meeting desires and expectations, treating pain points and delivering personalized services. Banks will have to rise above the transactional relationship and engage in the enhancement of customer experience that is far more satisfying and delightful. Adoption of digital mindset is very essential. The digitally conscious millennial customers of Pakistan possess very volatile loyalty. Customer has supreme significance under the digital paradigm shift in banking industry. Seamless customer experience is desired with more choices, prompt availability and click away delivery. Retaining the customers has turned out to be the biggest challenge of the banking industry. Investment in customer analytics and data driven marketing can also bolster customer loyalty.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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