Bank executives have gotten the message: customer experience is critical to maintaining market share in the face of pressure from nontraditional competitors.
In a survey released Wednesday, KPMG found senior bank executives focused on improving their customers’ experience and transforming their business strategically, operationally and structurally.
Nearly a third of respondents said wealth management would be their biggest revenue growth driver over the next one to three years.
Asked to identify the top three drivers of transformation for their business over the next three to five years, 47% of executives cited “customer demand/changes in customer focus, buying patterns and preferences,” 43% said “coping with the change in technology” and 37% chose “domestic competition.”
KPMG noted that previously regulatory change rather than customer demand had driven significant changes in banks’ business models.
“The banking industry is at a critical juncture where it needs to transform on a number of fronts — most importantly, upgrading old and implementing new technology to enhance and simplify the customer experience,” Brian Stephens, national leader of KPMG’s banking and capital markets practice, said in a statement.
“In addition to tougher competition and regulatory demands, consumer dynamics and preferences are evolving. In order to compete and succeed, banks need to become more advanced and agile to effectively meet customer expectations.”
The KPMG survey, which was conducted during the spring, captured the responses of 100 senior banking industry executives.
Thirty-eight percent of respondents represented banks with more than $250 billion in assets, 12% banks with between $100.1 billion and $250 billion, 15% institutions with between $50.1 billion and $100 billion, 17% banks with between $20.1 billion and $50 billion and 18% banks with less than $20 billion in assets.
Fastest Growing Customer Segments
While banks look to transform themselves, they must also focus on different customer segments. Asked which customer segments presented the greatest growth opportunity, 27% of the bank executives surveyed cited the top 10% of income earners, up from 25% in last year’s survey.
The unbanked and underbanked represent the fastest growing customer segments — nearly double in survey responses from last year. Twenty three percent of executives chose the underbanked, up from 12% in last year’s survey, and 13% cited the unbanked, up from 5% last year.
Nontraditional competitors, such as retailers, have already started gaining market share from this market segment, KPMG said.
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