Poor customer experience costs Big 4 UK banks billions

11 February 2016 Consultancy.uk 5 min. read

The value of excellent customer services experience can be considerable. In the UK, the largest four banks – Barclays, HSBC, Lloyds and RBS – may be missing out on an average £3.7 billion between 2015 and 2018 due to the lacklustre experience offerings. Prioritising six key pillars in the customer experience journey may provide a means for the banks to pick up their game and hold onto the loyalty of their current 77% market share of customers.

Creating an excellent customer experience is becoming more and more important across a range of businesses as cross-channel competition heats up. Companies that can provide compelling services that put customer experience first, as well as disclose ethical business practices aimed at improving the situation of the respective customers, are able to differentiate their offerings, which ultimately will drive up revenues and profits.

The art of delivering excellent customer service is changing however, and not every institution has acted upon the changing times, as, for instance, technology trends and the millennial generation comes of age. Particularly the large banks in the UK are not meeting customer expectations, and thereby potentially losing out on billions of lost sales.

In a new report by KPMG Nunwood*, titled ‘2016 Banking Sector Briefing: Banking the Customer Experience Dividend’, the consultancy explores (global) customer experience trends with an eye on the banking sector. The survey for the report examined the performance of 927 brands across three continents. In the past six years, over one million consumer evaluations were collated to provide an in-depth assessment of what sets the top performers from their peers.

Customer Experience Excellence rankings 2015

Top 100 
The research highlights that customers have started taking a sector independent view of customer experience. Customers have good examples of high quality customer experiences, and expect brands across industries to replicated or improve on those experiences. The bar therefore, has been set high by select brands. In the UK a number of banks in the cross-sector ‘Top 100 Customer Experience Excellence Index’ performs relatively well, including First Direct (2nd), Skipton Building Society (7th), M&S Bank (12th), Nationwide (23rd) and, thanks to a transformational performance over recent years, Santander (at 53rd). Many of the brands have seen increases on 2014, with only First Direct, Nationwide and Halifax seeing drops.

The index finds however that the UK’s largest four banks, the Big 4, Barclays, HSBC, Lloyds and RBS, do not make the top 100. These four banks manage 77% of UK current accounts. The consequence is according the authors that the large majority of the UK’s banking customers are being underserved in the customer services arena.

sector revenue growth comparison

Added value
The research further explores the effect between Customer Experience Excellence and revenue growth over the past three years. The analysis, when comparing sector revenue growth to FTSE peers, finds that improved customers experience scores on KPMG Nunwood’s index for the financial services industry are correlated with revenue growth of 14.2% compared to an average of 5.4% – representing a 163% higher than the sector average for the FTSE 100.

rapid growth trajectories for big 4 banks

As part of the analysis the researchers studied the effect that poor customer services experiences may have on the long term revenue growth outlook of the big four banks. The growth multiplier developed to reflect the revenue growth of brands operating in the top 100 index for customer experience, applied to the growth rate of the largest banks in the UK, suggests that improvement to customer experience may add an additional £9 billion to revenues per year by 2018, up from the business as usual combined revenues of £101 billion to combined revenues of £110.3 billion. In terms of the period between 2015, it would equate to an average additional revenue of £3.7 billion to each bank.

six key pillars

Key customer pillars
The research further explores the areas in which banks in the UK can make strives to improve their relationship with their customers. The analysis identifies six ‘key pillars’ that define customer excellence and are the key to unlocking more rapid growth for the banking sector. These pillars include personalisation, by better understanding customers’ needs; integrity, by providing services in an honest and transparent manner and without international fraud; expectations, meeting the and exceeding the expectations of customers; resolution, being focused on improving customer experiences; time and effort, creating seamless easy to use services for customers; and empathy, understanding the situation of customers and the large impact a minor change in services can have on their situations.

* KPMG Nunwood was established following the acquisition of Nunwood by KPMG in May 2015.