Financial services brands can build customer loyalty and increase customer lifetime value through user experience. Great mobile banking apps are one way to achieve this.
Customer loyalty is a challenge for financial service firms. Like many businesses, this sector has often had a greater focus on new customer acquisition than retaining existing customers.
There are obvious benefits of a focus on customer retention. For example research shows the potential of selling new products to existing customers at 60-70%, compared to between 5% and 20% for new customers.
It’s now more of a challenge that it used to be. Thanks in part to the Current Account Switch service, introduced in 2013, it’s now much easier to change banking providers.
More than 3m customers have switched accounts since 2013. Moreover, there is less of a perception amongst the public that changing banks is a major hassle. 83% find it easy to switch.
Now that switching is easier, banks have to work harder to hold on to their customers, and user experience has a huge part to play here.
This is where digital comes in. The use of banking websites and apps has grown rapidly, with mobile banking apps used 11 million times a day in 2015, up from 7 million in 2014.
Banking apps and online services are now a key part of the experience for finance customers, and providing an excellent user experience in this area can be key to retaining (as well as attracting) customers.
To put it simply: if users find it easy to use banking services on mobile and desktop, then they’re more likely to be happy customers.
Why Does UX Matter in Financial Services?
What is good UX in finance? Kirsty Cooke from Mapa Research explains:
“Good UX means digital solutions (apps, websites, journeys within those platforms) that enable visitors to a bank’s website, potential customers, people applying for products digitally, customers trying to complete tasks digitally to achieve their aims efficiently and effectively.”
The past few years has seen plenty of change in the finance sector, as companies have reacted to the challenges around digital and developed new products and features.
A key area has been mobile banking, and banks have introduced lots of useful functionality for users. From simply being able to check balances, users can now make payments on the move, manage direct debits, block stolen cards and more.
Some features become hygiene factors though, meaning customers expect their bank to provide them (and they may consider switching to a competitor that does).
TouchID for mobile banking apps is one such feature. It provides a mixture of security and convenience which will encourage more customers to use mobile banking.
Many features are being introduced to the market by new players. For example, here are some stats from Mapa Research which show how many banking apps have them:
- Personalization (shortcuts, showing/hiding specific accounts, option to change/personalise design) – 44% of audited banks offer the ability to personalise your digital banking experience, 56% don’t.
- Card blocking functionality (ability to block your card if it card is lost or stolen) – 45% offer it, 55% don’t.
- Later being able to unblock card (because you found it down the back of the sofa!) – 17% offer it, 83% don’t.
It’s not just about having these features though, it’s about helping users complete their goals with minimum effort and frustration.
This is also an area where ‘challenger banks’ often drive innovation.
In part, this is because the smaller teams and more agility means there can be a greater focus on UX, but also because these challengers need to beat the existing banks to establish themselves.
Let’s look at Monzo, a digital, mobile-only bank. This image shows the five steps required to block and then order a replacement.
It’s an important security feature, and thanks to great UX it can be achieved in a fraction of the usual time. And no phone calls to make.
The app also allows users to later unblock their card if they later find it. Simple features well designed which make customers’ lives easier.
This doesn’t mean that the bigger banks can’t or don’t offer a great user experience. Indeed, the Natwest mobile app was rated best in class by Android users.
This was thanks to ease of navigation and smooth payments, as well as the Emergency Cash feature, which allows users to withdraw cash if they forget their card.
Lloyds’ mobile banking app is another excellent example.
Here on the Transfers & Payments page, customers have useful options to manage their payees – something which is lacking in other apps.
A Manage button is located next to payment recipient’s titles, this button enables customers to make a payment or delete that recipient.
(image credit: Mapa Research)
Stephen Jones, Senior Analyst at Mapa Research rates the Lloyds app highly:
“Lloyds Bank’s app stands out above those of other UK incumbents because it does an excellent job of balancing functionality with usability, creating a great user experience. For example, customers are able to manage all payments and transfers through the same section of the app and can easily turn payments into standing orders.”
User experience, for finance or indeed any sector, has a big part to play in both customer acquisition and retention.
Good user experience keeps existing customers happy by making their lives easier. For example, a relatively simple feature like card blocking and unblocking saves customers the time they would previously have spent on the phone to customer services.
It also helps to appeal to new customers. Features like emergency cash withdrawal can do that, while great UX leads to greater brand advocacy, important when people are considering switching.
In many industries, I think we’ll see user experience become as (or perhaps more) important than price and product as the key brand differentiator.
Indeed, a great user experience can be one of the most valuable competitive advantages that a company can have.
Graham Charlton is Editor in Chief at SaleCycle. He's been covering ecommerce and digital marketing for more than a decade, having previously written reports and articles for Econsultancy. ClickZ, Search Engine Watch and more.