Focusing on your customer

Ernst & Young banking advisory services

The shift of power from banks to customers

US retail banks have entered a new, challenging era. With consumer loyalty and trust at alltime lows and regulatory and political changes posing new hurdles, banks are under pressure to restore consumer confidence and repair their reputations. The focus on customer-centricity is increasing as banks work to retain their market share and rebuild their brands.
A recent global survey of retail banking customers by Ernst & Young1 highlights significant challenges that banks need to consider as they crack the code on customer-centricity. Loss of confidence and trust in their institution was emphasized by many retail banking customers as a key issue. Since the start of the economic crisis, banks have experienced huge challenges in building and maintaining customer relationships. The crisis directly affected perceptions of banks and the way that they interact with their customers. Figure 1. Main reasons for attrition for US customers who have changed their bank or are planning to change (multiple choices allowed).
General levels of service quality Products and services on offer Proximity of branches Price 23% 23% 21% 21% 19% 16% 10% 7% 7% 5% 3% 2% 31%

Fifty-five percent of US retail banking customers say that their confidence toward the banking industry has decreased.2
Banks need to focus on earning back the trust and confidence of customers and rebuilding their brand. The banks that fail to do so will most likely see attrition rates continue to rise.

Lack of trust Access A specic service failing Brand image/reputation Friends recommendation Ethical Financial advisory competency Minimum safe deposit limits Innovation in direct channels

Thirty-eight percent of US customers have changed their main bank in the past, and 7% are planning to do so in the future. Poor service quality is the main driver of attrition.3
1 Global Consumer Banking Survey: a new era of customer expectations, Ernst & Young, February 2011. 2 Ibid. 3 Ibid.

Source: Global Consumer Banking Survey, a new era of customer expectations, Ernst & Young, February 2011.

Increasing demand for personalization With poor service quality as the key driver of attrition, banks recent efforts to improve service quality seem to have had only a limited impact on customers perceptions. In fact, many customers continue to feel that they are not getting the level of personalized service they would like.

Satisfaction levels with the branch and internet channels rate well over 80%. Conversely, the mobile banking and call center channels receive the lowest satisfactions scores, 34% and 60%, respectively.6
Banks need to improve their understanding of what customers expect from each channel and how to effectively integrate the customer experience across channels. A new consumer protection regime The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). is shifting power to the hands of the regulators, as well as to the individual customer. The legislation strives to provide greater protection to the consumer. Banks have started to adapt internal practices across the business, operations and technology to improve transparency in communication, provide more product choices, address customer complaints, and simplify sales practices.. However, there is a risk that all these efforts to protect customers are resulting in a more cumbersome and complex customer experience. Ernst & Young believes that the banks that are able to combine better consumer protection and regulatory compliance with an enhanced customer experience will gain an edge over their competitors.

One-third of all customers claim they get no, or only occasional, personalized attention from their main bank.4
Further emphasizing the severity of the issue, Forrester Researchs 2010 Customer Advocacy5 survey found that less than 40% of the customers of all large US retail banks agree that the bank does what is best for its customers, not just for its own bottom line. Misaligned channel experience With consumer behavior and channel preferences changing, banks have invested heavily in existing and new channels, including mobile and social media, over recent years. However, the survey results suggest that banks investments in channel development have not always been aligned with customer behaviors and preferences.

4 Ibid. 5 Customer Advocacy 2011: How Customers Rate US Banks, Investment Firms, And Insurers, Forrester Research, Inc., 8 March 2011.

6 Global Consumer Banking Survey: a new era of customer expectations, Ernst & Young, February 2011.

Focusing on your customer Ernst & Young banking advisory services

Rising to the challenge

Customer-centricity is the new win strategy Facing the challenges of this new era, a customer-focused strategy has re-emerged as a key lever of growth for US retail banks. Throughout the industry, investments in channel innovation, sales training, advertising campaigns and customer relationship management (CRM) solutions are increasing. However, many banks are not reaping the full benefits of their investments because they lack holistic, end-to-end thinking. They have not coordinated their efforts across business functions and channels to fully transform their business and consistently deliver a differentiated customer experience. As a result, while many banks are talking about being customer-centric, there are few, if any, that have succeeded in putting it into practice. Becoming customer-centric Customer-centricity is attainable when the customers view is incorporated into the banks business strategy, product offerings and service delivery across all channels and at every interaction. Successful transformation to customer-centricity requires a twopronged approach that includes an outside-in perspective on what customers want across the banking relationship life cycle and identifies all business enablers from the inside-out. (See Figure 2.) Simply put, the customers and companys views must meet. Only through this two-pronged approach will banks be able to transform themselves into truly customer-centric organizations that provide differentiated value and experiences for target customer segments. Ernst & Young believes that a banking organization that truly wants to achieve a customer-centric business transformation should concentrate its efforts on the six key areas illustrated below. Banks can move toward enhanced customer-centricity in different ways and at different speeds ranging from tactical improvements in a single unit to enterprise-wide transformation. Every path to change, however, should consider both the customers and companys perspectives.

Get to know your customers

Develop segment-based value propositions

The bank should use advanced analytics to develop an enhanced understanding of its customers and their behaviors and to identify opportunities to deepen existing relationships. It should apply the analysis to improve product offerings and customer service experiences, and to develop strategies to grow revenue and profit margins.

The bank should segment customers into groups that share similar characteristics across key dimensions, such as needs, behavior, values and strength of relationship. It should then deploy targeted customer value propositions and actionable treatment strategies for each distinct segment.

Figure 2. Customer-centric transformation

Outside-in (customer view)

Segment needs and values Differentiated value propositions End-to-end experience

Customer centricity

Inside-out (company view)

Strategy and operating model People, process and technology capabilities Execution

Deliver on the brand promise

Organize around the customers

Build technology and data for the customers

Reward customerfocused behaviors

The bank should ensure that it consistently delivers customer experiences that align with its brand promise so that customers know what to expect from their relationship with the bank. This implies forming a clear understanding of what the brand promise means and how it ought to be delivered throughout sales and service experiences across channels.

The bank should move away from organizational product and channel silos and create a customer-focused model that enables the business to approach customer needs holistically. This requires answering key questions around who owns the customer, what the roles and responsibilities of the segment, product and channel areas are, and how these areas interact.

The bank should keep the customer experience at the center as it designs, prioritizes, selects and deploys technology and data solutions. It should work diligently to overcome internal technology barriers and create solutions that tie together various system components and enable a single view of the customer across channels.

The bank should tailor performance measures and incentive systems to induce and maintain customercentricity in the organization. This includes reviewing compensation structures and finding mechanisms to promote customer-focused behaviors among management and staff.

Focusing on your customer Ernst & Young banking advisory services

Ernst & Young services

Ernst & Young provides advisory services to financial institutions focused on enhancing their customer-centricity. Our experienced customer and retail banking advisory professionals assist companies with the implementation of a combined outside-in/inside-out approach. This approach encompasses a customer view, based on research and analytics of customer data, and a company view that considers how operations, products and delivery processes should be tailored to take into account the customer view. Our experienced advisory professionals can assist with all phases of this approach, including:

Outside-in perspective
Customer insights and analytics Customer retention and profitability analysis Voice of the customer analysis Customer interaction analysis Customer strategy Brand vision and value proposition Growth strategy Customer segmentation Product and pricing strategy Customer experience Customer experience and multichannel design Customer satisfaction management Complaints management

Inside-out perspective
Operational effectiveness Sales force effectiveness Contact center transformation Marketing transformation Operating model and organization design Capability assessment and planning Process improvement Solution enablement Architecture definition Channel renewal/integration Single customer view CRM integration Service-oriented architecture Analytics engine and business intelligence integration Execution excellence Program planning and management Change management Performance measurement

Contacts
Heidi Boyle
Principal, Financial Services US Customer Practice Leader Ernst & Young LLP +1 312 879 3820 heidi.boyle@ey.com

Clayton Baker
Principal, Financial Services US Banking Advisory Practice Leader Ernst & Young LLP +1 415 894 8862 clayton.baker@ey.com

John Weisel
Principal, Financial Services US IT Advisory Services Leader Ernst & Young LLP +1 212 773 8273 john.weisel@ey.com

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About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 141,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. Ernst & Young is a leader in serving the global financial services marketplace Nearly 35,000 Ernst & Young financial services professionals around the world provide integrated assurance, tax, transaction and advisory services to our asset management, banking, capital markets and insurance clients. In the Americas, Ernst & Young is the only public accounting organization with a separate business unit dedicated to the financial services marketplace. Created in 2000, the Americas Financial Services Office today includes more than 4,000 professionals at member firms in over 50 locations throughout the US, the Caribbean and Latin America. Ernst & Young professionals in our financial services practices worldwide align with key global industry groups, including Ernst & Youngs Global Asset Management Center, Global Banking & Capital Markets Center, Global Insurance Center and Global Private Equity Center, which act as hubs for sharing industry-focused knowledge on current and emerging trends and regulations in order to help our clients address key issues. Our practitioners span many disciplines and provide a well-rounded understanding of business issues and challenges, as well as integrated services to our clients. With a global presence and industry-focused advice, Ernst & Youngs financial services professionals provide high-quality assurance, tax, transaction and advisory services, including operations, process improvement, risk and technology, to financial services companies worldwide. Its how Ernst & Young makes a difference. 2011 Ernst & Young LLP. All Rights Reserved.
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