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Blog-Header Image-Building your engagement engine-EN

Building your engagement engine: turning NPS into EPS

Better engagement can counter unbundling and increase customer lifetime value

Karan Oberoi

Karan Oberoi,
Chief Product Officer, Backbase

TL;DR: Higher NPS leads to higher CRO, which translates to higher ARPU, therefore higher CLTV and stronger ROA & EPS for your bank.

If we trade the acronym soup for common words, better engagements with your customers are key to making them happy and unsurprisingly, getting them to use more services from your bank.

Bain’s recent Customer Behavior and Loyalty in Banking: Global Edition 2023 report offers data to back this up. There was a 103-point NPS spread between people who successfully digitally opened a bank account on their first attempt and those who could not open the account. What’s more, people who strongly agree that their bank interacts based on knowing who they are and those who strongly disagree earned a 123-point NPS spread.

Average relationship NPS of respondents' primary bank

A recent survey covering wealth management revealed similar findings. Wealth management customers who receive “useful short- and long-term financial planning advice for their specific needs” have an average NPS 14 points higher than those who don’t. The customers receiving advice, Bain’s data show, refer other customers 20% more often, are 10 percentage points less likely to switch managers, and keep a higher share of their assets with that manager.

RBC's AI personalization engine, NOMI

The Bain banking team calls out Canada’s RBC as an example of getting this right. RBC’s AI personalization engine, NOMI, earned 50% more digital interactions relative to the entire customer base, 93% more time spent on financial accounts, and 2% attrition of NOMI customers vs. 8% for their peers.

Gartner’s 2021 Financial Services Technology Survey echoes the prioritization of deploying tech to improve customer experience, where 46% of respondents said improving customer experience was their top digital initiative. More intriguing is the breakdown Gartner’s Fabio Chesini provides of the difference in priorities between low and high-performers on revenue growth. Gartner’s research shows that high performers are using digital banking platforms for “service improvement,” while low performers focus on cost savings.

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Top use cases of digital banking platforms

Building your engagement engine

It’s clear personalization drives business results. What’s not always clear is how banks should build an engine for engagement. Bain’s eye-opening report shows the value, but not the roadmap. Let’s dive into how banks can build personalization and engagement.

     1. Seamless acquisition

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Digital account opening's impact on NPS

The data in Bain’s survey shows the correlation between a good digital first impression and an increased lifetime customer value. Achieving this requires a change, first of all, in mindset. Banks need to focus on modernizing single journeys and all the components therein, rather than investing in individual technologies in isolation. This approach, known as progressive journey-led modernization, is a more pragmatic and achievable approach to modernizing legacy systems in banks, compared to the "big bang" approach of replacing the entire system at once. By taking a gradual, iterative approach, banks can reduce risk, control costs, and improve agility and competitiveness over time.

     2. Holistic view of customer data

Once customers have been wowed in their first engagement, banks need to build a holistic view of the customer’s data. Personalization requires an accurate, timely map of the customer’s activity and needs, but this can’t happen without innate data visibility across all products and lines of business. The personalization and engagement engine that banks need runs on the fuel of comprehensive customer activity data. This is why when following the progressive journey-led modernization approach, banks need to build on single platforms, wherever possible, to simplify data portability within the bank.

     3. Empowered front line

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NPS based on whether respondents believe their bank knows them

Bain’s report shows that when customers believe their bank knows them, they trust their bank to make recommendations. Despite the arrival of generative AI solutions such as ChatGPT and the accompanying hype, the most effective customer engagement path continues to be a mix of AI-generated insights and timings, along with human judgment and empathy. Rather than a push notification or WhatsApp message with a CTA, banks should empower their frontline staff to interact with customers. This means pushing the holistic customer data profile through your single platform directly to the customer service agent helping your customer.

“Strong NPS makes for customers who stay longer, buy more, cost less to serve, and will more likely recommend the bank to friends and family.”

Bain

According to the Bain authors, banks must understand an individual’s needs, form a strategy to actively engage them at the right moments, adjust the content of communications based on the customer’s actions, and measure the effect of each action. Building a customer engagement engine that runs on holistic customer data and is translated through empowered human interaction is proven to drive increased engagement. And through that engagement, financial institutions can grow.