Improving customer engagement for a delightful experience is crucial to a customer retention strategy in the increasingly competitive banking and financial services world.
In the last few years, we’ve seen a rise in the number of financial services that provide similar services. And the competition is only getting more demanding as smaller, digital-only companies are challenging the more prominent and traditional organisations.
With many options, companies are contesting for customers’ attention. Once acquired, strategies for retaining customers become of the utmost importance to survive in this cut-throat world.
What is Customer Retention, And Why Is It Important in Banking?
Customer retention is the company’s ability to retain its customers. That is, patrons continue to buy the product or service and not defect to another business in any way.
We all know that acquiring new customers is expensive. Your banking service can adopt many customer acquisition strategies to reduce CAC, but the acquisition is a challenging game when there are too many players in a market.
On the other hand, customer retention is 5 times cheaper than customer acquisition. It also reduces CAC by upselling and cross-selling to existing customers.
Yes, companies need new customers to grow. But if you are looking at revenues and profits, nurturing existing customers will give you positive results.
However, most businesses feel if they have a great product or service, customers will stay.
Unfortunately, this is true only in some instances. The harsh truth is that they will leave if customers don’t get attention and good customer service.
Banking customers are generally not satisfied with their service. According to a study by J.D. Power, 78% of survey participants expressed their intention to remain loyal to their bank if provided with personalised support. However, the study also revealed that only 44% of banks are currently meeting this expectation.
To avoid churn, banking and financial services should thus focus on strategies to keep existing customers.
If customers stay longer with you, some of the benefits you will see are:
– Repeat customers spend more.
– Long-term customers are open to upselling.
– Existing customers require less marketing.
– Loyal customers foster word-of-mouth marketing.
Watch now: Creating Delight at Every Step of the Customer Journey
7 AI-Driven Customer Retention in Banking That You Should Use
Today, customers are more value-oriented as they have multiple alternatives. This increased competition, rise in technology and globalisation has subsequently changed the way people bank.
Working on customer expectations can help your organisation retain valuable customers.
As per a 2023 Global Banking Consumer Study conducted by Accenture found that::
- Banks globally invested $124 billion in new IT in 2021, a 24% increase compared to 2019.
- Advanced technologies like generative AI hold significant potential for revolutionising the customer experience in banking.
- Traditional banks face stiff competition from digital-only banks and non-traditional financial services providers, which can reduce their relevance and touchpoints with customers.
- Consumer preferences and behaviours have changed due to the pandemic, requiring banks to provide more than just convenient experiences and adapt to individual customer needs.
- Digital channels in banking are often impersonal, lacking emotional connection and personal conversations, making it difficult for banks to provide meaningful advice and sell complex products.
- There is an opportunity for banks to leverage generative AI to have personalised conversations with customers and explore new channels like the metaverse.
- Banks have the potential to increase revenues by over 20% per customer per year by addressing customer dissatisfaction and fragmentation.
Customer retention strategies based on technology, such as AI and customer support automation, can help banks become AI companies of the future.
Suggested Reading: 10 Conversational AI Use Cases in Banking
How to Use Technology to Retain Customers in Banking?
Retaining customers is a crucial goal for any business, and in the banking industry, it becomes even more important. In this article, we will explore effective strategies to retain customers using technology, ensuring a seamless customer experience and improved satisfaction. Let’s dive in!
1. Enhance Customer Service Quality
One of the top reasons customers switch banks is poor customer service. To address this, it’s essential to provide high-quality, 24×7 support that is fast, accurate, and responsive. Leveraging technology, such as chatbots, can play a significant role in achieving this. Chatbots can provide immediate responses, screen customer complaints, and assist with issue resolution. Equipping agents with access to customer data enables them to respond more efficiently and with greater accuracy. Furthermore, advancements in technology, like AI, can enhance security, understand customer intent better, and enable transactions directly within chat applications, reducing friction in online banking.
2. Embrace Omnichannel Approach
As smartphones continue to evolve, customers spend more time on them, making it essential for banks to offer services across various mediums and channels. By embracing an omnichannel approach, banks can facilitate seamless interactions with customers both offline and online. This includes providing services through websites, apps, social media platforms, and even WhatsApp. Embracing AI-powered customer support channels can enhance the omnichannel experience. Additionally, automating the onboarding process allows customers to choose their preferred channel and time, resulting in a smooth and effortless experience.
3. Solicit Feedback Effortlessly
Understanding how customers feel about your bank is crucial for improvement. While traditional feedback forms can be cumbersome, leveraging automation tools in customer service processes can eliminate the need for lengthy forms. Implement conversational banking support that asks precise, personalised questions. Moreover, simplify form-filling for customers by utilising autofill tools. By collecting and analysing feedback data, you can identify and address customer problems effectively.
4. Proactive Customer Engagement
To retain customers effectively, it’s crucial for banking businesses to proactively communicate with customers, reaching out to them when they are available and through their preferred channels. Automation in customer support enables engagement through various media formats, such as text, images, videos, PDFs, voice, and maps. Moreover, multilingual bots can facilitate communication in multiple languages, catering to diverse customer bases.
5. Personalise Communication
In today’s dynamic banking landscape, one-size-fits-all communication methods are no longer sufficient. Banks must tailor their engagement strategies to meet specific needs and diverse markets. To achieve this, banks should focus on understanding market needs, attitudes, and behavioural patterns. This valuable data can inform chatbot algorithms, enabling the delivery of smart, personalised messages, tips, and customised business solutions.
Suggest Reading: A Complete Guide On Conversational Banking
What Are the Benefits of Customer Support Automation?
1. Reduce Operational Costs: Integration of chatbots can save banks approximately $7.3 billion globally, automating repetitive tasks and reducing human effort.
2. Enhance Ease of Use: Automated services, including chatbots, offer intuitive user interfaces, simplifying customer experiences and increasing satisfaction.
3. Improve Customer Satisfaction: Customers value 24×7 personalised services. Automated customer support provides immediate assistance for simple queries while equipping agents with relevant information for faster query resolution. Satisfied customers not only increase retention rates but also offer high lifetime value and reduce churn.
4. Expand Market Reach: Automated services enable banks to tap into new markets. Multilingual bots operating around the clock increase accessibility for consumers worldwide. Simultaneously, demographic and geographic segmentation can help retain existing customers by tailoring engagement strategies accordingly.
5. Gather Customer Information: Automated services, like chatbots, allow banks to collect valuable customer data, such as location, age, gender, and language preference. This data empowers personalised messaging, helps identify warning signs, and enhances understanding of user intent.
Suggest Reading: Leverage Voice AI Technology for Enhanced Customer Interaction
Embrace AI-Powered Strategies to Propel Your Banking Services
Designing customer retention strategies prioritising personalisation and scalability is vital for banking services.
By leveraging AI-driven technologies, banks can build strong customer relationships, set themselves apart from competitors, and ultimately increase customer retention. Embrace the future as the AI-powered bank of tomorrow. Schedule a demo today with our team and explore the endless possibilities.