The report, which found that only one in seven companies in the sector have excellent systems and people, says many customers have to endure robotic processes when dealing with their banks and insurance companies and that it can take around 15 minutes before they can actually speak to anyone.
Research suggests that customers are becoming increasingly unhappy with the level of service offered by their financial services companies. For example, the Banking Code Standards Board, which polices a system of self regulation in the sector, revealed it had a 59% increase in complaints about its members in 2002/2003 when compared to the previous year. Complaints about poor customer service more than trebled.
Direct Excellence and Sainsbury’s Bank are calling on the financial services industry to review their propositions to ensure that they are focused on customers, accessible and easy to use.
According to the report, the companies guilty of poor customer service have generally been operating for decades and have been able to build up large market share as a result of limited competition. However, the report concludes that they are rapidly losing business to new and more efficient providers that base their propositions around competitively priced quality products and superior customer service. Indeed, only five companies in the non-intermediary general insurance sector were identified as ‘best buys’ in the report and four of these are new entrants. They are Sainsbury’s Bank, Esure, Tesco and Direct Line – the fifth is HBOS.
The research involved thousands of mystery calls to financial services call centres as well as customer satisfaction surveys.
Colin Lloyd, Chairman, Direct Excellence said: "As companies increasingly offer ‘me too’ style products, the importance of customer service and brand in terms of differentiation is growing.
"Many older and more established financial services companies are failing to address poor customer service levels. This could ultimately cast doubt on their prospects for survival as they continue to lose customers at an alarming rate to new entrants who tend to be more customer-focused."
Derek Bottom, Deputy Chief Executive, Sainsbury’s Bank said: "Financial services companies spend millions of pounds every year attracting new customers through developing creative marketing campaigns. However, of equal or greater importance is ensuring that customers’ feel valued when they interact with you, through, for example, making an insurance claim. This can only be achieved through ensuring you have quality products, qualified and motivated staff and a high level of customer service."
"Sainsbury’s Bank’s strategy is built around this principle which helps explain why we have a rapidly growing customer base of nearly 2 million people. Our personal loans, for example, start from 6.5%APR and are among the lowest available and our motor and home insurance cover have been identified as not only offering some of the lowest premiums available, but also some of the best cover. Research also shows that we have the highest level of customer satisfaction in the motor insurance marketplace."
In analysing the customer service proposition of financial services companies, the report identifies four groups:
The Old Guard
These companies represent 60% of the financial services sector and they offer a service based on inadequate processes. Normally, these are organisations that have been around for decades in markets where there has been little or no competition. They maintain their profitability through the apathy that inhibits their customers from moving to a better proposition. These companies have recently implemented new technology to reduce costs but not to improve service levels. Many of these companies are on a long drawn out downward spiral towards extinction.
The Service Robots
Representing 20% of the sector, financial services companies in this group provide a consistent but at best only average service. They believe that superior systems and processes can make up for a lack of interaction with qualified and friendly staff. They also believe that their customers prefer a fast and efficient service.
Staff tend to be well motivated by performance related incentives and if these companies need human intervention they will outsource to organisations or countries that can deliver the best possible price. However, often the selection of staff or outsource partner will be driven by short term cost and efficiency rather than long term effectiveness.
The Laboratory
These companies, that represent around 5% of the financial services market, recruit extremely talented people through a combination of work ethic and performance related incentives. Their systems and process are not the best but their teams are able to compensate through sheer hard work and dedication. A highly motivated workforce will find ways to make the systems work for them. However, this is not a model for long term economic sustainability. Talented staff, for example, will leave to join companies that offer better rewards, culture or systems or possibly a combination of all.
High performers
Representing only 15% of the sector, these companies combine excellent systems with very able staff. Fundamentally, they have created a culture that continuously challenges itself to move forward and grow. These companies frequently emerge from the merger of a strong brand with a strong process experience. Often, this will take the form of a joint venture but to succeed it has to be a marriage of equals. Companies that fall into this category include Sainsbury’s Bank, Esure, Egg and Tesco Personal Finance.
Derek Bottom said: "There are too many companies that take the view that if they lose one or two customers there are hundreds of others behind them. This mentality is dangerous and is not the answer to success in an industry where customers increasingly want service with a human touch.
"The financial services industry needs to take a long hard look at itself and make sure that it’s meeting the needs of customers. The key to success is not necessarily coming up with new products but to make sure that you are doing the basics well - offering good quality products through convenient channels, and under-pinning everything with strong customer service.
Companies need to remember that customers are the only reason we exist and they are the key to our success."
