Key Trends in Banking & Upcoming Digital Banks

By Institute of Service Excellence, SMU Posted 2yr(s) ago Reading Time: A few minutes

The Customer Satisfaction Index of Singapore (CSISG) is an annual benchmarking study of service levels across eight industry sectors and Singapore’s only cross-industry customer satisfaction measurement.

A total of 6,030 respondents were surveyed for the finance and insurance sector and the results were recently released earlier this year.

In 2019, the banking sector scored 75.3-points (+0.9% compared to 2018), which is highest ever reported for the banking sector since it was first measured in 2007.

Let’s take a look at some of the key findings that are driving customer satisfaction in the financial services and also discuss an incoming disrupter that may be a concern to the banking industry.

Besides measuring customer satisfaction, the CSISG model also studies the three primary drivers of customer satisfaction. They are:

  1. Perceived Value: the level of perceived quality relative to the fees;

  2. Customer Expectations: the level of quality or performance the respondent is predicted to receive for the product/service prior to their experience;

  3. Perceived Overall Quality: the level of quality evaluated through their experience with the bank's product/service.

In the 2019 findings, customer expectation saw a significant rise in scores for the first time since 2015. This increase in customer expectation bodes well for the industry as a higher customer expectation usually has a positive effect on customer satisfaction if the level of quality they received meets or exceeds their expectation.

However, we also saw a marginal decline in the perceived overall quality that customers received. While the perceived overall quality score still exceeds the customer expectations score, a continuation of this trend may result in lower customer satisfaction in the future. The banks should continue to manage customer expectations while improving the quality of product/service for their customers.

2019 saw a significant increase in customer expectation scores and a marginal dip in perceived overall quality for the banking sector

In an on-demand economy where social and mobile innovations have significantly expanded the range of crucial touchpoints, service differentiators will be determined by their ability to diversify and personalize methods of engagement across the entire banking customer journey. Over the past few years, we have seen banks making investments in expanding the services and functionality of their digital services; in the form of their internet banking and mobile banking.

In our CSISG findings, we observed that there is an increasing proportion of bank customers who used their banks’ digital services in the past three years. In 2017, 67.3% of respondents mentioned that they had used their banks’ internet banking or mobile app within their last three months. This proportion had increased to 72.1% in 2019.

Looking further into the age profiles, we see that this increase is mainly driven by the significant growth in usage by the 35-59 years age group. However, digital channels are still not preferred by everyone as suggested by the declining proportion of respondents aged 60 years and above who used the digital channels across the past three years.

 Digital users continue to rise

With Singapore’s digital banking licenses due to be awarded in 2020, current banks in Singapore will face more competition in an already saturated industry. The CSISG study looked into the potential profile of these digital banks’ customers by asking customers of existing banks on their willingness to apply for various bank products with the new digital banks.

Unsurprisingly, this segment of customers was mostly made up of the younger, middle income demographic. The majority were also already users of the internet and mobile banking services their current banks offered.

However, this sizeable proportion of retail banking customers, i.e., 43.3%, that expressed a willingness to try out the new digital banks, were also observed to have a relatively higher level of loyalty to their current banks.

This does not bode well for the incumbent banks. It suggests that this segment of customers, who have significantly higher loyalty levels, are going to be more willing to give the new competition an opportunity to do business with them.

43.3% of respondents expressed interest to try the new digital banks and they tend to have higher loyalty to their current bank

The Customer Satisfaction Index of Singapore (CSISG) has been conducted by the Institute of Service Excellence (ISE) since 2007, and our findings through the years showed that customer expectations of their bank and credit card issuers have been constantly evolving. What the customer wants and needs 10 years ago, maybe even 5 years ago, are starkly different from today.

As we continue to see satisfaction with the banking industry rising, increased customer expectations is expected and the slight dip in perceived overall quality may worrying if it continues to dip below what customers expect.

And with MAS introducing digital banks in Singapore, the banking industry will get more competitive. It is important for banks, now more than ever, to really understand their customer and find out what will delight them and keep them loyal to their brands.

Can you imagine what the banking industry would be like 5 years down the road?