Consumers less likely to back their bank

Roy Morgan’s Advocacy Report – Financial Institutions June 2018, which surveyed 4,000 bank customers, has found that 54.4 per cent of main financial institution (MFI) bank customers were highly likely (“high advocates”) to recommend their bank to a friend or colleague in June.

This figure was down by 4.6 per cent from 59 per cent in February (before the royal commission started) and marks the lowest monthly level of advocacy since November 2016 (54.1 per cent).

According to Roy Morgan, the decline in the level of “high advocates” since February is mainly as a result of customers becoming “medium advocates” (up by 3.9 per cent).

There was only a slight rise in the proportion of customers considering that they would be unlikely to recommend their bank (“low advocates”), up from 8 per cent in February to 8.5 per cent in June.

However Roy Morgan noted that when combining the 34.9 per cent of “medium advocates” and “low advocates”, there are 43.4 per cent of bank customers who are “reasonably indifferent” to their bank, up from 39 per cent in February.

Earlier this week, Roy Morgan research also revealed that customer satisfaction with banks dropped to 78.3 per cent in June, the lowest recorded satisfaction level since April 2012.

The research group partly attributed this to the financial services royal commission’s ongoing inquiry.

Commenting on the group’s latest research, Roy Morgan’s industry communications director, Norman Morris, observed: “There are many factors that drive the levels of customer advocacy in banks. These include areas such as interest rates, fees and charges, customer experience, reliability and security, and product offering.

“It is not surprising that, currently, there is the additional impact on satisfaction with banks, NPS and customer advocacy as they face a continuing level of negative publicity from reporting on the royal commission.

“Despite the decline in advocacy this year among bank customers, it remains above historic levels, but the potential impact of continued negative publicity represents a major challenge for banks.”

ING tops customer advocacy list

Moreover, the research found that in the six months to June 2018, 83.3 per cent of ING customers were very likely to recommend them (“high advocates”), the highest level of the 10 largest banks and an increase of 12.6 per cent over the last year.

In second place was Bendigo Bank with 68.7 per cent, followed by Bank of Queensland (61.2 per cent) and St. George Bank (60.5 per cent).

Each of the big four banks was below the six months total average of 56.8 per cent, with the best being Commonwealth Bank (55.4 per cent), followed by Westpac (53.5 per cent), NAB (52.8 per cent) and ANZ (50.2 per cent).

Trust in the banking sector also slipping

The research comes in tandem with the release of joint research from financial services marketing agency Yell and research firm Ipsos, which shows that consumer trust in banks fell by 8 per cent from June 2017 to June 2018.

Financial services organisations ranked according to trust, banks also slipped to third place from second place in 2017.

“This year’s results showed an acceleration in the gradual erosion of consumer trust that’s still not being recognised by the industry as a whole,” said Yell founding partner Nigel Roberts.

“The challenge for all of financial services, and especially the banking sector, is to halt the slide in trust or face real consequences.

“This can be achieved, but will involve much greater empathy and delivering solutions that truly meet customer needs, rather than meeting sales targets.”

Mr Roberts urged the sector to adopt a “human-centred approach” in the delivery of their services.

“The shift away from pushing product requires more than just having a view on the vast quantities of data currently being collected; it needs a human-centred approach as well.”

[Related: Bank satisfaction falls following royal commission and rate hikes]