Trust Will Drive Market Share for Banks
Financial institutions are not doing enough to value customer privacy or to respond to email inquires, according to Customer Respect Group's "Third Quarter 2005 Online Customer Respect Study." E-Loan scored the highest on the research and consulting firm's Customer Respect Index for the second time in a row, followed by Wachovia. The index is based on an in-depth analysis of customers' online experiences when interacting with companies.
"Perhaps the most troubling finding is that the sharing of personal [data] outside the organization is back on the increase," says Terry Golesworthy, Customer Respect Group president. After dipping to 43 percent in first quarter 2005, now 53 percent of the surveyed firms share user-supplied data with business partners or other third parties without explicit permission of the user. These figures compare poorly with the average of companies in all industries over the past year, which stands at 24 percent. There also was a noticeable difference between U.S. and Canadian commercial banks. In Canada, federal laws were put in place recently to balance the privacy rights of individuals and as a result, no Canadian commercial banks shared information.
"The respect for personal data is a major issue for the financial industry. Firms believe the benefit they achieve from marketing activities outweighs whatever backlash they might receive from customers," Golesworthy says. Certain demographics, particularly the highly profitable 25-to-35-year-olds who make more than $50,000 a year, prefer self-service and online banking and lack of data privacy may be a deal breaker for them. "It's all about trust in the organization you're doing business with. [Consumers are] buying on reputation of a company. By sharing data, you're potentially damaging the one main asset. It will definitely become a marketing differentiator."
The financial services that are early adopters of these best practices score the highest. The top-10 scoring firms are:
E-Loan
Wachovia
CIBC
Lendingtree
Ameritrade
Royal Bank of Canada
TD Canada Trust
Quicken Loans
Bank of America
Fannie Mae
Golesworthy says E-Loan is part of a new group of Web financial companies taking money away from traditional organizations. "The Web is the only thing they have, so they need to make it good." E-Loan scored well on transparency of data sharing information, opt-in marketing, and responding to customer inquiries (an area in which traditional banks don't fair as well).
Despite the fact that 82 percent of financial services firms collect and reuse email addresses for further marketing activities, response to customers' email inquiries showed little improvement overall, with 16 percent of all emails going unanswered. Although 57 percent were answered within 24 hours, up from 47 percent, the number deemed very helpful, was 51 percent, down from 66 percent in the previous report. Web financials and savings institutions were the best at responding; diversified financials were the worst.
Wachovia, which climbed from the fourth-place spot, did well in explaining its policies and what data is being scored, and on how it benefited the customer. It took the second-place standing from Bank of America, which fell to number 9, primarily because of its lack of email responsiveness. However, Golesworthy attributes the decline to the bank's acquisition of Fleet and large system upgrade this past summer, and he expects it to move back up the list. "The people that do well have a total commitment to the Web. The Web is a critical part of their business, and it requires good back-end solutions and commitment from the top."
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