CUSTOMER LOYALTY IN RETAIL BANKING: GLOBAL EDITION … · Customer Loyalty in Retail Banking:...
Transcript of CUSTOMER LOYALTY IN RETAIL BANKING: GLOBAL EDITION … · Customer Loyalty in Retail Banking:...
CUSTOMER LOYALTY IN RETAIL BANKING: GLOBAL EDITION 2016
Cost savings hinge on promotingmobile adoption
Net Promoter Score® is a registered trademark of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.
Copyright © 2016 Bain & Company, Inc. All rights reserved.
Acknowledgments
This report was prepared by Gerard du Toit and Maureen Burns, partners in Bain’s Financial Services practice, and a team led by Christy de Gooyer, a practice area director. Team members are Karan Chhabra, Sourish Gue, Lakshay Kataria, Rachit Jain, Thiago Lamelo and Pranav Singh. The authors thank Bain partners in each of the countries covered in the report for their valuable input and John Campbell for his editorial support.
Key contacts in Bain’s Global Financial Services practice
Global Edmund Lin in Singapore ([email protected])
Americas Mike Baxter in New York ([email protected]) Maureen Burns in Boston ([email protected]) Gerard du Toit in Boston ([email protected])
Asia-Pacifi c Peter Stumbles in Sydney ([email protected])
Europe, Middle Henrik Naujoks in Zürich ([email protected])East and Africa
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Contents
Massive migration in sight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 3
1. Mobile banking ekes out gains, but branch and phone use persists . . . . . . pg. 11
2. How branch closures affect consumers . . . . . . . . . . . . . . . . . . . . . . . . . pg. 19
3. Hidden defection goes digital and siphons off value . . . . . . . . . . . . . . . . pg. 23
4. Movement on the loyalty leader boards . . . . . . . . . . . . . . . . . . . . . . . . . pg. 29
Appendix: Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 33
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Massive migration in sight
Delight customers, and costs will drop out. It might sound counterintuitive, but this approach can change the
trajectory of profi ts for large, traditional retail banks that have been frustrated by the slow pace of taking out costs.
Consider the $11.4 billion annual opportunity for the 25 largest US banks. If these banks reached the level of mobile
and online banking use of their counterparts in the Netherlands, they would improve their Net Promoter
Score®—a key metric of customer loyalty—by an average of 12 percentage points, Bain & Company estimates. That’s
because mobile interactions are far more likely to delight customers than interactions at branches or through
contact centers. Dutch banks began to reconfi gure their branch networks a decade ago, as the country’s strong
broadband infrastructure and shift to cashless commerce enabled consumers to adopt mobile banking early on.
The payoff is not only customer loyalty, but reduced costs as well. Each mobile interaction incurs a variable cost
of about 10 cents, a small fraction of the $4 cost of a teller or call-agent interaction. As interactions migrate to
mobile, a bank needs fewer tellers and call-center agents. So the 25 US banks would save $11.4 billion annually in
aggregate if customers’ branch and call-center use declined to the Dutch level, and the banks reduced headcount
accordingly (see Figure 1).
Loyalty thus points the way to profi table growth. Of course, earning loyalty is not easy. The locus of loyalty has
shifted in recent years from friendly service at the branch to other attributes, especially simplicity and conve-
Figure 1: Large US banks have an $11.4 billion cost savings opportunity
Estimated addressable service cost base ($ billions)
Estimate for top25 US banks (national
and regional)
16.4
Domesticbenchmark
(best in class)
Australiabenchmark
Netherlandsbenchmark
Full potential
5.1
−3.2
−4.2
−4.0
20 4+ + + =4 4 32
0
5
10
15
20
EstimatedNet Promoter Score(percentage points)
$11.4 billion change in cost base by attaining benchmark’smix of branch and contact-center interactions
Note: Cost components are roundedSources: Bain/Research Now Retail Banking NPS Survey, 2016; SNL Financial; Bain analysis
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nience. And those features depend largely on creating strong digital channels, then teaching customers how to
use them.
This constitutes a sea change for banks, particularly for midsize or smaller regional banks that have relied on local
knowledge and branch service to attract and keep customers. Top loyalty scores for an excellent branch experience
miss the main point: Mobile channels have become the new way for busy consumers to do their banking. Banks
that expect people to travel to the branch or wait in the queue for a phone agent for routine transactions are wasting
people’s time.
Senior managers who understand this shift have a massive opportunity within their grasp, if they can wrangle
their organizations to harness the mobile revolution. By accelerating the migration of customers from high-cost
branches and contact centers to self-service mobile and online, they stand to reap a threefold payoff:
• They would earn greater customer loyalty by developing simple, digital channels that customers embrace.
• As more customers adopt digital, the level of routine or avoidable transactions in high-cost branches and call
centers will go down. Subsequent staff reductions and reassignments to higher-value activities will lower
variable costs.
• Banks can then close branches and increase digital sales, which expands profi tability.
Realizing the fruits of the mobile revolution will require new management techniques. Most banks will have to
become more aggressive and thoughtful about guiding customers to mobile self-service. Banks also must
improve their mobile apps to make them truly easy and convenient. Bain’s new global survey of 137,034 consumers
in 21 countries suggests where banks should focus their efforts, and practical ways to sequence that process.
Leaders make it simple and digital
Globally, direct banks continue to lead in Net Promoter Scores in most countries. These branchless institutions
generally offer simpler product lines and streamlined operations, which appeal to many consumers who get over-
whelmed by too much choice. Tangerine Bank, the loyalty leader in Canada, offers just one type of checking
account online, compared with four to six at the major traditional banks. Some of the largest global and regional
banks have borrowed a page from the playbook of direct banks, as they simplifi ed products and improved their
digital operations.
In the UK market, for example, Santander has steadily improved its relative Net Promoter Score over the past fi ve
years. The bank simplifi ed its current-account product suite from about 100 to fewer than 10 products under the
“123” branding, which refers to the mix of interest rates and cash-back rates. That simple proposition made it
much easier for new customers to buy products and for bank agents to sell them. Critically, Santander migrated
its entire back book of existing customers to the new system, even though the higher rates compressed its mar-
gins. (The bank recently reduced its interest rates, as the runaway success of 123, combined with record-low
central bank rates, have made the program prohibitively costly to run in light of the new Brexit circumstances.)
Santander also accelerated the development of its digital channels ahead of some other traditional banks, so that
a customer now can refi nance a mortgage online.
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Smaller national or regional banks, by contrast, are getting squeezed in the middle. Many of them remain rooted
in their branch experience and have not pushed as hard to build out their digital presence. Their past loyalty
advantage that centered on the branch experience has waned.
Mobile growth starts to level off
For the fi rst time in our annual survey, mobile growth has moderated, and in some countries appeared to be
approaching the top of the classic S curve for technology diffusion. Transactions on smartphones and tablets,
however, did continue to displace those on desktop and laptop computers, with nearly all countries now showing
more mobile than online transactions.
Mobile adoption has been highest among the youngest consumers, but there is still ample room for growth
among those in their 50s and older. Too often, this group has been overlooked by banks, which typically neglect
to give older consumers guidance or even much information about the benefi ts of using mobile apps. (For a
detailed analysis of US consumer behavior by age and transaction channel, see the Bain Brief “Bank Branch/Call
Center Traffi c Jam.”)
Despite the rise of mobile, high levels of routine transactions persist at branches and call centers. In the US, for
instance, nearly 90% of respondents visited a teller during the previous quarter, and nearly half called their bank.
A relatively small group of high-frequency customers create much of the traffic. Just 18% of respondents
accounted for 58% of teller interactions, and 5% of respondents accounted for 39% of phone interactions. Digital
channels often are not as effective as banks would like; many consumers trying these channels contended with
various problems and wound up visiting a teller or calling a contact center anyway. When consumers failed in
their attempts to transact digitally, more than one-third cited technical problems or lack of functionality.
Consumers who do not use bank mobile apps reported several reasons, notably habit, but also lack of knowledge
and access issues. In addition, older users are slightly more dissuaded by habit and security concerns. Unless
banks take an active role in addressing these issues, the pace of moving transactions from branches and call
centers to digital channels—and the attendant cost reductions—will remain slow.
Do consumers resent branch closures?
As the shift to mobile banking progresses, most banks in most countries have begun to pare back their branch net-
work. Both the extent of branch closures and the consequences for consumer loyalty vary greatly by market. Of survey
respondents who experienced a nearby branch closure in the past year, 27% in the Netherlands and 54% in India
said they completely switched banks or started using some products from a competitor (see Figure 2). More-
over, a branch closure caused Net Promoter Scores to drop by an average of 12 percentage points, and as much as
21 points in France, compared with the scores of respondents who did not experience a closure.
Here again, the Dutch experience is instructive for many countries. Dutch banks have not completely eliminated
brick and mortar, but rather changed the nature of the branch. ING has side counters in bookstores and tobacco
shops, while SNS has franchise arrangements with insurance agents and others. Most customers in this densely
populated country thus still have access to a banker in walking or biking distance, but in a streamlined, low-cost
format. So while many Dutch respondents said they have experienced a branch closure, relatively few switched
banks or gave a lower Net Promoter Score as a result.
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Given that many consumers still use a branch—60% of UK respondents visited one during the previous quar-
ter—it would be dangerous to make large cuts to the brick-and-mortar network until customers fi nd it easy to
handle routine transactions through self-service digital channels. Banks can accelerate customers’ transition to
digital channels, and planning for a new branch network should occur now, as it can take three to fi ve years to
reconfi gure the network.
Hidden defection is rampant
Many consumers—about 29% globally on average—said they would switch their primary bank if it were easy to
do so. And hidden defection—purchasing a new banking product from a competing bank or fi nancial technology
fi rm—is taking place everywhere. It’s most pronounced in developing markets, where fewer consumers have
long-standing relationships with an institution.
When the ball is up for grabs, a primary bank wins 64% of all purchases on average. But look at what walks out
the door: Credit cards, loans, insurance and investments are the most purchased categories at competitors, where-
as the primary bank tends to get a higher share of new, low-value deposit accounts (see Figure 3). The primary
bank win rate for loans is just 57% vs. 78% for deposits. The stakes are high, as a 5-point increase in the overall
win rate represents about $5 billion in revenue across the 25 largest US banks, we estimate.
Direct banks and fi ntechs are taking a substantial share of new purchases on the strength of their relatively simple
product lines and streamlined user experience, and appear to be well-positioned to continue expanding their
Figure 2: About 40% of customers who experienced a branch closure took their business to other banks
0
20
40
60
80
100%
Net
herla
nds
Pola
nd
Aus
tralia
Can
ada
Sout
h Ko
rea
US
UK
Mex
ico
Spai
n
Hon
g Ko
ng
Fran
ce
Ger
man
y
Italy
Sing
apor
e
Braz
il
Mal
aysi
a
Indi
a
Share of respondents who experienced a branch closure in the previous 12 months
Didn’t switch, but started using products/servicesof competing banks
Started using another branch or channelof the same bank
Switched
Note: Excludes countries with fewer than 100 respondents who experienced a branch closureSource: Bain/Research Now Retail Banking NPS Survey, 2016
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share. Consumer purchases of additional banking products through digital channels, especially online, have
become common and should increase as the ranks of younger, plugged-in generations swell.
Established technology companies with powerful brands and huge customer bases also are poised to move into
such banking realms as consumer lending. For example, Apple offers leasing of its iPhones, and WeChat offers
instant lending in China. In fact, developments in China may provide a glimpse of the future. Our survey respon-
dents in China actually reported lower mobile usage for routine banking interactions this year, probably because
consumers increasingly use more convenient and engaging non-bank platforms such as WeChat and Alipay for
payments, savings and other daily fi nancial transactions (see Figure 4). We expect these and other major tech
fi rms to wedge their way further onto banks’ traditional turf.
For banks looking to stem the tide of hidden defections, our analysis of the survey data shows where they
should focus. Based on the variables in the survey, purchases from a competitor are most likely when the con-
sumer owns multiple products at a primary bank, gives a low Net Promoter Score and is older. Of course,
other elements also explain defections, such as exceptional products, pricing and salesmanship at the winning
competitors. Still, there are no shortcuts to organic growth, especially with regulators’ heightened scrutiny of
cross-selling practices and their desire for banks to focus on high-quality advice and service over sales.
Sustained organic growth hinges on earning the right to sell customers another product. Nationwide Building
Society in the UK, for instance, ranks as the loyalty leader among traditional banks and has above-average win
rates for product purchases.
Figure 3: Primary banks may win deposits, but they’re losing higher-value products like loans to competitors
0
10
20
30
40
50
60%
0 10 20 30 40 50 60%
Poland
Italy
China
Hong Kong
India
UK
Japan
Poland
Italy
IndiaCanada
US
Share of purchases at primary bank in last year, by product
Share of purchases at competing banks in the last year, by product
MalaysiaSwitzerland
France
SpainGermany Mexico
Singapore Australia
Canada
South Korea
US
SwitzerlandUK
France
Spain
GermanyChina
Hong Kong
MalaysiaMexico
Singapore
AustraliaSouth Korea
Japan
Loans Deposits
More loans purchased at competing bank
More deposit products purchased at primary bank
Source: Bain/Research Now Retail Banking NPS Survey, 2016
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The path to digital adoption
For banks that have decent mobile apps, yet still lag in migrating customers to digital, the way forward is clear.
First, they should step up efforts to encourage mobile adoption and move routine transactions out of the branch
and call center. Many older consumers require active guidance and information from banks about using mobile
apps. Younger people present a separate challenge, mostly involving the basics of banking. They are still navigat-
ing how to pay bills, deposit checks, transfer money and generally resolve issues with their accounts—and they
generate more interactions in the process. In China, respondents age 18–24 make almost twice the number of
banking interactions on average as those age 65 or older. If young consumers don’t know how long it takes for a
balance to update after a transaction, they will be more apt to phone the call center several times. Younger respon-
dents also say they fi nd digital channels confusing or inadequate for their banking, and often need help.
Banks should continue to streamline the experience of using both mobile or online channels, so that consumers
turn to those channels before the branch or contact center. That will require designing simple and easy apps.
Here, banks can take a cue from other industries, such as online retailers that send consumers a “Your purchase
has shipped; click here to track” confi rmation email. Improving the digital experience also entails eliminating
bank policies or processes that impede convenience and reliability.
Once banks have accelerated mobile adoption and improved the digital banking experience, they can turn to
building new functions for consumers to research and purchase products.
Figure 4: Growth in mobile banking is leveling off in many countries, and actually declined in China
0
5
10
15
20
25
30
Netherlands
South Korea
2012 2013 2014 2015 2016
Number of mobile interactions per respondent in the previous quarter
India
ChinaCanada
UK
SpainUS
Note: 2012 data not available for NetherlandsSources: Bain/Research Now Retail Banking NPS Surveys, 2012–2016; Bain/GMI NPS Survey, 2013
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Organizing for simple and digital
Understanding the nature of this once-in-a-generation opportunity for digital migration is fairly straightforward.
The bigger challenge lies in organizing the migration and instilling changes at the front line and back offi ce in
order to greatly improve how consumers do their banking.
Established banks tend to organize around functional silos, such as operations, compliance, IT and contact centers,
along with their associated metrics. That legacy, combined with traditional process thinking, creates a powerful
paradigm that makes it hard for the organization to see banking through its customers’ eyes and act accordingly.
But a few banks are making real progress toward a simple and digital experience—meaning fast, lean, automated
and right the fi rst time—by organizing around episodes rather than functional silos. From a customer’s perspec-
tive, the entire episode of buying a home and mortgage or resolving card fraud matters more than any single
interaction along the way. Episodes tend to cut across many functions and departments. So organizing and man-
aging directly around episodes is essential for succeeding with digital adoption and thereby earning greater loyalty
from customers.
• Mobile banking now exceeds online banking among consumers in most countries, with Sweden, South Korea, the Netherlands and Australia leading the way. But the previous torrid pace of mobile growth slowed in 2016.
• Yet banks still have a major opportunity to encour-age older customers to adopt mobile, as seniors’ mobile use is well below that of young customers in every country.
• Routine interactions such as checking a balance or making a deposit have been slowly declining at branches. Levels of call-center use, however, persist and even tipped slightly higher in some countries. The Netherlands, where mobile banking took off early, has very low branch and phone use, and has experienced the greatest decline globally in commercial bank branches per capita.
• A small group of heavy users drives much of the branch and phone activity in every country. Brazil and Mexico have the highest share of heavy users.
• Besides the Netherlands, banks in a few other countries have made the greatest progress to-ward digital self-service by customers: Sweden, Poland and Australia. By contrast, Mexico, China, Hong Kong and India are the most branch-dependent markets.
1.Mobile bankingekes out gains, but branch and phoneuse persists
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Figure 5: Mobile continues to displace online
10
20
30
40
50
60%
10 20 30 40 50 60%
Sweden
Germany
South Korea
UKSpain
Online interactions' share of total interactions in the previous quarter
Mobile interactions' share of total interactions in the previous quarter
ItalyIndia
Netherlands
Mexico
France
Australia
China
Canada
Singapore
Hong KongPoland
US
Japan
Mobile exceeds online
Online exceeds mobile
2013 2016
Notes: Mobile refers to interactions on smartphones and tablets; online refers to desktop and laptop computer interactions; Brazil, Malaysia, Switzerland not included in2013 surveySources: Bain/Research Now Retail Banking NPS Surveys, 2013 and 2016; Bain/GMI NPS Survey, 2013
Figure 6: Growth in mobile banking is leveling off in many countries, and actually declined in China
0
5
10
15
20
25
30
Netherlands
South Korea
2012 2013 2014 2015 2016
Number of mobile interactions per respondent in the previous quarter
India
ChinaCanada
UK
SpainUS
Note: Netherlands was not included in 2012 and 2014 surveys; line is interpolated from other yearsSources: Bain/Research Now Retail Banking NPS Surveys, 2012–2016; Bain/GMI NPS Survey, 2013
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Figure 8: Use of branches is declining slowly
0
2
4
6
UK
SingaporeNetherlands
China
Australia
2012 2013 2014 2015 2016
Average number of routine branch interactions in the previous quarter, per respondent
Canada
USIndia
Notes: Netherlands was not included in 2012 and 2014 surveys; line is interpolated from other yearsSources: Bain/Research Now Retail Banking NPS Survey, 2012−2016; Bain/GMI NPS Survey, 2013
Figure 7: Younger customers are more likely than older customers to bank via mobile
0
20
40
60
80
100%
Indi
a
Sout
h Ko
rea
Chi
na
Net
herla
nds
Mal
aysi
a
Swed
en
Sing
apor
e
Braz
il
Mex
ico
Aus
tralia
Spai
n
Italy US
Pola
nd
Hon
g Ko
ng UK
Fran
ce
Can
ada
Ger
man
y
Switz
erla
nd
Japa
n
Share of respondents using mobile banking in the previous quarter
Under age 25
Age 55 or older
Average
Source: Bain/Research Now Retail Banking NPS Survey, 2016
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Figure 9: Many countries still have a high number of branches
Spai
n
68
Italy
49
Braz
il
47
Switz
erla
nd
45Fr
ance
38Ja
pan
34
US
32
Pola
nd
31
Aus
tralia
29
UK
25
Can
ada
24
Hon
g Ko
ng
22
Swed
en
21
Sout
h Ko
rea
17
Mex
ico
14
Ger
man
y
14
Indi
a
13
Net
herla
nds
13
Mal
aysi
a
11
Sing
apor
e
9
Chi
na
8
Estimated number of commercial bank branches per 100,000 adults, 2015
−4 −1 0 0 −2 0 3 −2 5 −8 −1−2 −2 42 −2 −2 0 −1 1 −1
0
20
40
60
80
CAGR (%)2006−2015
Notes: Commercial bank branches exclude credit unions, financial cooperatives and all microfinance institutions; compound annual growth rate for Brazil calculated from 2007−2015 and for China from 2012−2015Source: 2016 Financial Access Survey data, International Monetary Fund
Figure 10: Consumers in most countries still want to use contact centers
0
1
2
3
Japan
Spain
India
2012 2013 2014 2015 2016
Average number of contact-center interactions in the previous quarter, per respondent
France
US
Netherlands
China
Australia
Notes: Netherlands was not included in 2012 and 2014 surveys; line is interpolated from other yearsSources: Bain/Research Now Retail Banking NPS Survey, 2012–2016; Bain/GMI NPS Survey, 2013
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Figure 12: Frequent users account for most of the volume in branches
0
20
40
60
80
100%
Respondents Interactions0
20
40
60
80
100%
Respondents Interactions0
20
40
60
80
100%
Respondents Interactions
Percentage of total respondents by number of branch interactions in previous quarter
US Germany Japan
Source: Bain/Research Now Retail Banking NPS Survey, 2016
0 1 2 3 to 5 More than 5
Number of interactions
Figure 11 : A few countries lead in developing self-serve banking models
5
15
25
35
45
0268
Sweden
China
Poland
Japan
Hong Kong
Malaysia Spain
France
Netherlands
Australia
Human channels
SwitzerlandItaly
Germany
South Korea
CanadaMexico India
Singapore
Brazil
USUK
4
Self-serve
Low interaction
Heavy interaction
Branch dependent
Average interactions per respondent in the previous quarter, by channel
Digitalchannels
Note: Digital channels exclude ATMsSource: Bain/Research Now Retail Banking NPS Survey, 2016
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Figure 13: The share of frequent branch users varies signifi cantly by country
0
10
20
30
40
50%
Braz
il
44
Mex
ico
38
Chi
na
28
Indi
a
26
Mal
aysi
a
26
Italy
23
Spai
n
22U
S
18H
ong
Kong
18
Can
ada
17
Aus
tralia
17
Sout
h Ko
rea
14
Fran
ce
13
UK
12
Ger
man
y
11
Japa
n
10
Switz
erla
nd
10
Pola
nd
9
Sing
apor
e
8
Swed
en
6
Net
herla
nds
4
Share of respondents who conducted branch interactions more than five times in the previous quarter
Source: Bain/Research Now Retail Banking NPS Survey, 2016
Figure 14: Frequent users account for most of the volume in contact centers
Percentage of total respondents by number of contact-center interactions in the previous quarter
US UK South Korea
0
20
40
60
80
100%
Respondents Interactions0
20
40
60
80
100%
Interactions0
20
40
60
80
100%
Respondents Interactions
Source: Bain/Research Now Retail Banking NPS Survey, 2016
Respondents
0 1 2 or 3 More than 3
Number of interactions
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Figure 15: The share of frequent users of contact centers varies signifi cantly by country
0
10
20
30%
Braz
il
23
Mex
ico
19
Indi
a
15
Mal
aysi
a
12
Spai
n
10
Hon
g Ko
ng
10
Italy
10
Aus
tralia
9Fr
ance
7C
hina
6
Sout
h Ko
rea
5
UK
5
Ger
man
y
5
Sing
apor
e
5
US
5
Can
ada
4
Pola
nd
4
Switz
erla
nd
4
Net
herla
nds
3
Swed
en
3
Japa
n
1
Share of respondents who called contact centers more than three times in the previous quarter
Source: Bain/Research Now Retail Banking NPS Survey, 2016
• A signifi cant share of consumers experienced a nearby branch closure. Spain, which experienced a wave of consolidation, had the highest share of respondents reporting a closure, at 17%. Next were India, where the government recently relaxed regulations on urban branch closure, and the Netherlands and the UK. Japan and China had the lowest shares, at 1% and 2%, respectively.
• Branch closures affect consumer behavior and perceptions. Roughly 40% of respondents globally reported that they switched their primary bank or started using other institutions for purchases of new banking products after they experienced a bank closure. India and Malaysia had the greatest share of such behavior; the Netherlands and Poland had the least.
• Closures correlate with lower loyalty scores in every country surveyed, but the effect varies sub-stantially. Banks in France, Germany, Canada and South Korea suffered the sharpest drop in Net Promoter Scores after closures. Those in Singa-pore and India had only a slight decline associated with closures.
• Closures can have ripple effects, depending on how a bank handles the transition. Consumers who experienced a closure said they are 3 per-centage points more likely in Australia and 24 points more likely in India to switch their primary bank in the future. Globally, the gap averaged 11 points.
2.How branch closures affect consumers
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Figure 16: Banks in a few countries have been more aggressive in closing branches
0
5
10
15
20%
Spai
n
17
Indi
a
16
Net
herla
nds
14
UK
12
Mex
ico
11
Sing
apor
e
10M
alay
sia
9Br
azil
9
Ger
man
y
9
Hon
g Ko
ng
8
Aus
tralia
6
Fran
ce
6
Italy
6
Pola
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5
US
5
Switz
erla
nd
5
Can
ada
4
Sout
h Ko
rea
3
Chi
na
2
Japa
n
1
Share of respondents who experienced a branch closure in the previous 12 months
Source: Bain/Research Now Retail Banking NPS Survey, 2016
Figure 17: About 40% of customers who experienced a branch closure took their business to other banks
0
20
40
60
80
100%
Net
herla
nds
Pola
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Can
ada
Sout
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US
UK
Mex
ico
Spai
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Indi
a
Share of respondents who experienced a branch closure in the previous 12 months
Didn’t switch, but started using products/servicesof competing banks
Started using another branch or channelof the same bank
Switched
Note: Excludes countries with fewer than 100 respondents who experienced a branch closureSource: Bain/Research Now Retail Banking NPS Survey, 2016
Customer Loyalty in Retail Banking: Global Edition 2016 | Bain & Company, Inc.
Page 21
Figure 19: Consumers who experienced a branch closure are 11 percentage points more likely to switch banks
0
10
20
30
Indi
a
Ger
man
y
Spai
n
US
Can
ada
Sout
h Ko
rea
Sing
apor
e
Net
herla
nds
Italy
Fran
ce
Mal
aysi
a
UK
Braz
il
Mex
ico
Pola
nd
Hon
g Ko
ng
Aus
tralia
Difference in likelihood to switch, between those who experienced a branch closure and those who did not (percentage points)
Notes: Includes respondents who selected “somewhat likely” and “extremely likely”; excludes countries with fewer than 100 respondents who experienced a branch closure;likelihood to switch has been adjusted for the mix of banks (those that did/did not have a branch closure that respondents experienced)Source: Bain/Research Now Retail Banking NPS Survey, 2016
Figure 18: Branch closures correlate with lower loyalty scores
−30
−20
−10
0
Fran
ce
Ger
man
y
Can
ada
Sout
h Ko
rea
Hon
g Ko
ng
Spai
n
Italy
Pola
nd
Aus
tralia UK US
Braz
il
Mex
ico
Mal
aysi
a
Net
herla
nds
Indi
a
Sing
apor
e
Difference in Net Promoter Score between respondents who experienced a branch closure over the previous 12 months and those who did not(percentage points)
−21−20
−19 −19−18
−15−13
−12 −12 −11
−9 −9 −8
−5−4
−2 −2
Low
er N
et P
rom
oter
Sco
res
Notes: Excludes countries with fewer than 100 respondents who experienced a branch closure; difference in Net Promoter Scores has been adjusted for the mix of banks (thosethat did/did not have a branch closure that respondents experienced)Source: Bain/Research Now Retail Banking NPS Survey, 2016
• About one-third of consumers globally said they would be more likely to switch their primary bank if it were easier to do so, with India and Poland at the highest levels. Younger customers globally were even more likely to express a desire to switch. India, Malaysia and the UK had the largest switching gap between young and old consumers.
• Not only did many customers say they would switch, but hidden defection—the purchase of additional banking products outside the primary bank—is even more prevalent. China, Hong Kong and Malaysia had the highest rate of hidden defection. The proportion of people purchasing only from a competing bank was particularly high in the UK and US, at 22% and 20%, respectively.
• What are consumers buying? In every country ex-cept Spain, consumers bought more higher-value products such as loans at competing institutions, while primary banks everywhere tended to win new lower-value deposits or current-account purchases.
• Consumers used digital channels about 1.4 times as often for purchases at competing institutions than for those at primary banks. This digital gap was greatest in the US, Japan and Canada.
• Direct banks and fi ntechs took a substantial share of product purchases. The share reached 34% in the UK, 29% in Germany and France, and double digits in 16 of 19 countries.
• Greater loyalty improved the odds of cross-selling. Consumers who are promoters of their primary banks were far more likely than detractors to buy the next product from that bank.
3.Hidden defection goes digital and siphons off value
Customer Loyalty in Retail Banking: Global Edition 2016 | Bain & Company, Inc.
Page 24
Figure 20: About one-third of all consumers would switch banks if it were easy
0
20
40
60%
Indi
a
Pola
nd
Mal
aysi
a
Hon
g Ko
ng
Braz
il
Mex
ico
Sout
h Ko
rea
Spai
n
Sing
apor
e
Chi
na UK
Italy
Net
herla
nds
Fran
ce
Aus
tralia US
Ger
man
y
Can
ada
Switz
erla
nd
Japa
n
Share of respondents likely to switch if switching were easier
Age 35 or younger
Age 55 or older
Average
Note: Includes respondents who selected “somewhat likely” or “extremely likely”Source: Bain/Research Now Retail Banking NPS Survey, 2016
Figure 21: Hidden defection exists everywhere, most acutely in developing markets
0
20
40
60
80
100%
Chi
na
Hon
g Ko
ng
Mal
aysi
a
Indi
a
Mex
ico
Braz
il
Sout
h Ko
rea
Sing
apor
e
Japa
n
UK
Spai
n
US
Ger
man
y
Can
ada
Pola
nd
Fran
ce
Italy
Switz
erla
nd
Aus
tralia
Share of respondents in the previous 12 months, by purchasing behavior
Purchased from both primaryand competing banks
Purchased from competingbanks only
Purchased from primarybank only
Did not purchase anybank product
Source: Bain/Research Now Retail Banking NPS Survey, 2016
Customer Loyalty in Retail Banking: Global Edition 2016 | Bain & Company, Inc.
Page 25
Figure 23: Consumers make digital purchases at competing banks at 1.4 times the rate at their primary banks
0
20
40
60
80%
UK
Ger
man
y
Aus
tralia US
Japa
n
Can
ada
Pola
nd
Italy
Chi
na
Fran
ce
Switz
erla
nd
Indi
a
Sing
apor
e
Spai
n
Hon
g Ko
ng
Sout
h Ko
rea
Braz
il
Mal
aysi
a
Mex
ico
1.4 1.7 1.6 1.0 1.2 1.3 1.1 1.1 1.1 0.9 1.31.5 1.5 1.9 1.9 2.0 1.2 1.5 1.0Competingbank multiple
Share of purchases made digitally
Competing Primary
Note: Only the most recent purchase consideredSource: Bain/Research Now Retail Banking NPS Survey, 2016
Figure 22 : The primary bank loses one-half to one-fi fth of product purchases to competing banks
Spai
n
68
Chi
na
68
Aus
tralia
73
Fran
ce
73
0
20
40
60
80
100%
Italy
78
Pola
nd
74Br
azil
Mex
ico
67
Indi
a
Switz
erla
nd
66
Sout
h Ko
rea
Can
ada
Japa
n
61
Hon
g Ko
ng
58
Ger
man
y
57
Sing
apor
e
55
Mal
aysi
a
US
UK
Primary purchases as a percentage of all purchases in the previous 12 months
7367
63 6155 52 51
2014 2016
Note: 2014 data not available for SwitzerlandSources: Bain/Research Now Retail Banking NPS Surveys, 2014 and 2016
Customer Loyalty in Retail Banking: Global Edition 2016 | Bain & Company, Inc.
Page 26
Figure 24: Primary banks may win deposits, but they’re losing higher-value products like loans to competitors
0
10
20
30
40
50
60%
0 10 20 30 40 50 60%
Poland
Italy
China
Hong Kong
India
UK
Japan
Poland
Italy
IndiaCanada
US
Share of purchases at primary bank in last year, by product
Share of purchases at competing banks in the last year, by product
MalaysiaSwitzerland
France
SpainGermany Mexico
Singapore Australia
Canada
South Korea
US
SwitzerlandUK
France
Spain
GermanyChina
Hong Kong
MalaysiaMexico
Singapore
AustraliaSouth Korea
Japan
Loans Deposits
More loans purchased at competing bank
More deposit products purchased at primary bank
Source: Bain/Research Now Retail Banking NPS Survey, 2016
Figure 25: Direct banks and fi ntechs capture a substantial share of purchases
0
10
20
30
40%
UK
34
Ger
man
y
29
Fran
ce
29
Can
ada
23
Aus
tralia
23
Italy
23
Hon
g Ko
ng
23
US
22
Pola
nd
15
Spai
n
20
Switz
erla
nd
18
Mex
ico
15
Sing
apor
e
14
Mal
aysi
a
13
Japa
n
13
Sout
h Ko
rea
12
Braz
il
9
Chi
na
9
Indi
a
7
Share of purchases made at competing direct banks or online-only providers, in the previous 12 months
Source: Bain/Research Now Retail Banking NPS Survey, 2016
Customer Loyalty in Retail Banking: Global Edition 2016 | Bain & Company, Inc.
Page 27
Figure 26: Loyalty matters when it comes to purchasing additional products
33 39
59
79
57
79
4765
6781
70 76
60
7988 95
8593
31
53
50
71
Term depositInvestment
management/adviceSmall business
accountEveryday transaction
accountSavings account
Personal loanCredit card (primary)Credit card(secondary)
Home loan Super-annuationInvestment propertyloan
Australia: Purchases made at primary bank in the previous 12 months, as a percentage of all purchases in that category
Source: Bain/Research Now Retail Banking NPS Survey, 2016
Detractor Promoter
• Direct banks continue to lead in Net Promoter Scores relative to national, regional or smaller competitors. In a few markets such as the UK and Germany, large branch banks gained ground.
• Some big banks have demonstrated sustained progress over the past few years. In the UK, Santander has signifi cantly improved its Net Pro-moter Score, rising to No. 2 among traditional banks in 2015 and further closing the gap with the leader this year. In Spain, BBVA moved up steadily to clinch the No. 2 position among tradi-tional banks last year and has continued to nar-row the loyalty gap.
• For an individual bank, what matters is how it performs against peers in its market. Using that lens, Net Promoter Scores varied widely from country to country. In Australia, for instance, the score of top performer ING Direct was 86 per-centage points higher than the worst performer. In Hong Kong, loyalty leader HSBC outperformed the worst by just 12 percentage points.
• In-country differentials between the loyalty leader and the laggard were largest in the Northeast region of the US, Spain, Germany, Italy and the UK.
• Only a few banks have held the top spot year over year, including USAA in the US and First Direct in the UK.
4.Movement on the loyalty leader boards
Customer Loyalty in Retail Banking: Global Edition 2016 | Bain & Company, Inc.
Page 30
Figure 27: In the Americas, there is a large gap between loyalty leaders and laggards
Lowest bank Highest traditional bankHighest direct bank
Brazil
Canada
US–Midwest
US–Northeast
US–South
US–West
Caixa Econômica Federal,Banco Itaú, Banco Bradesco
TangerineTD Canada Trust,National Bank of Canada
Huntington National Bank
TD Bank
TD Bank
Union Bank, Bank of the West
USAA
USAA
USAA
USAA
–100 –60–80 –40 –20 0
Primary banks’ Net Promoter Scores relative to loyalty leader, indexed to zero, 2016
Source: Bain/Research Now Retail Banking NPS Survey, 2016
Figure 28: In the Asia-Pacifi c region, there is a large gap between loyalty leaders and laggards
Lowest bank Highest traditional bankHighest direct bank
Australia
China
Hong Kong
India
Japan
Singapore
South Korea
Malaysia
ING Direct
China Merchants Bank, ChinaMinsheng Bank, Bank of China
HSBC
Bendigo Bank, Suncorp Bank
Shinsei Bank, Japan Post Bank
ICICI Bank, Citibank
OCBC Bank Singapore
Industrial Bank of Korea,Shinhan Bank
Maybank
–100 –60–80 –40 –20 0
Primary banks’ Net Promoter Scores relative to loyalty leader, indexed to zero, 2016
Source: Bain/Research Now Retail Banking NPS Survey, 2016
Customer Loyalty in Retail Banking: Global Edition 2016 | Bain & Company, Inc.
Page 31
Figure 30: In the UK, Santander has advanced by making its product line simple and digital
Net PromoterScore of leader
Leader
No. 2
No. 3
No. 4
No. 5
No. 6
No. 7
No. 8
No. 9
No. 10
First Direct
Nationwide
Santander
Bank A
Bank B
Bank C
Bank D
Bank E
Bank F
Bank G
Net Promoter Scores relative to the UK loyalty leader
2012 2013 2014 2015 2016
69 68 65 66 64
−22 −31 −30 −22 −26
−33 −47 −53 −45 −42
−70 −69 −53 −51 −46
−76 −79 −55 −54 −48
−86 −81 −59 −63 −59
−93 −81 −68 −64 −62
−94 −83 −70 −71 −62
−103 −83 −76 −71 −64
−109 −91 −84 −90 −85
Sources: Bain/Research Now Retail Banking NPS Surveys, 2012–2016
Figure 29: In most markets in Europe, there is a large gap between loyalty leaders and laggards
Lowest bank Highest traditional bankHighest direct bank
Sweden
Switzerland
Italy
Netherlands
France
Germany
Poland
Spain
UK
Handelsbanken
Raiffeisen Bank
FinecoIntesa Sanpaolo
La Banque Postale
Sparda-Bank
Bank MillenniumBankinter, BBVA, Banco Sabadell
Nationwide
Difference in Net Promoter Scores too close to call
ING Direct,BoursoramaDeutsche Kreditbank,ING-DiBaING Bank
ING Direct
First Direct
–100 –60–80 –40 –20 0
Primary banks’ Net Promoter Scores relative to loyalty leader, indexed to zero, 2016
Source: Bain/Research Now Retail Banking NPS Survey, 2016
Customer Loyalty in Retail Banking: Global Edition 2016 | Bain & Company, Inc.
Page 32
Figure 31: Direct banks continue to lead in many countries
US UK Australia
Sources: Bain/Research Now Retail Banking NPS Surveys, 2009–2016
−20
0
20
40
60
80
Big 4 and theirsubsidiaries
Regional/smaller banks
Direct banks
Net Promoter Score
−20
0
20
40
60
80
Directbanks
Net Promoter Score
Regionalbanks
Nationalbanks
−20
0
20
40
60
80
Buildingsocieties
Largebranchbanks
Directbanks
Net Promoter Score
2009 10 11 12 13 14 15 16 2012 13 14 15 16 2012 13 14 15 16
Figure 32: Direct banks continue to lead in many countries
Spain Germany Canada
Sources: Bain/Research Now Retail Banking NPS Surveys, 2011–2016
−100
−50
0
50
100
CreditunionsBig 5banks
Directbanks
Net Promoter Score
−100
−50
0
50
100
Net Promoter Score
Bailed-outregional
Directbanks
InternationalNationalRegional
−100
−50
0
50
100
CooperativebanksNationalbanks
Directbanks
Net Promoter Score
2012 13 14 15 162012 13 14 15 16 2011 12 13 14 15 16
Customer Loyalty in Retail Banking: Global Edition 2016 | Bain & Company, Inc.
Page 33
Appendix: Methodology
Bain & Company partnered with Research Now, an online global market research organization, to survey con-
sumer panels in Australia, Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Japan, Malaysia,
Mexico, the Netherlands, Poland, Singapore, South Korea, Spain, Sweden, Switzerland, the UK and the US. The
survey’s purpose was to gauge customers’ loyalty to their principal bank and the underlying reasons customers
hold their views. Conducted from July to September 2016, the survey polled 137,034 respondent consumers of
national branch network banks, regional banks, private banks, direct banks, community banks and credit unions
in these countries.
For individual bank analysis in the Americas and most countries in Europe, we included only banks for which we
received at least 200 valid responses. In Switzerland and Asia, we included banks with at least 100 responses. In
many instances, sample sizes exceeded these thresholds.
Survey questions
Respondents were fi rst asked to identify their primary bank, then were asked the following questions to assess
their loyalty to that institution:
• On a scale of zero to 10, where zero represents “not at all likely” and 10 represents “extremely likely,” how
likely are you to recommend your primary bank to a friend or relative?
• Tell us why you gave your primary bank the score you did.
We asked what major products respondents hold with their primary bank and with other banks, and which of
these products were purchased in the past year. We also asked respondents what their most recent purchase had
been, and the channels they used to make this purchase. Further, we asked how often they interacted through
various channels to do their banking in the past three months. We then questioned whether respondents experi-
enced a closure of a bank branch that they used. If so, we asked how this closure affected their relationship with
the bank, and if not, we asked their likelihood of switching their bank in the future. The remaining questions
elicited demographic profi le information: household income, investable assets and region of residence.
For statistical signifi cance, the results of our data analysis are robust both for the measurement of bank Net
Promoter Scores by country and for respondent Net Promoter Scores for each demographic category. For the
Americas and most countries in Europe, the Net Promoter Scores measured for each bank in the country and US
regional rankings are statistically signifi cant to an 80% confi dence level, with a two-tailed test of the confi dence
interval ranging from ±2% (n=868) to ±7.4% (n=228). In Switzerland and Asia, where sample sizes were smaller,
confi dence intervals are wider, with a maximum of ±10%.
Customer Loyalty in Retail Banking: Global Edition 2016 | Bain & Company, Inc.
Page 34
Customer Loyalty in Retail Banking: Global Edition 2016 | Bain & Company, Inc.
Page 35
Customer Loyalty in Retail Banking: Global Edition 2016 | Bain & Company, Inc.
Page 36
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