Challenger Banks & Mutuals Are Providing Better CX Than Traditional Banks in Europe

By Oliwia Berdak, VP research director, Forrester

Research shows that customer experience (CX) leaders grow revenue faster, cut costs, reduce risk, and can charge more for their products than CX laggards can. However, according to new Forrester research, which benchmarks CX quality and ranks CX leaders in the banking sector, traditional European banks’ CX quality has stagnated in 2023, with customer experience levels all currently below industry average in the UK, France, Germany, Sweden and Italy.

THE UK LEADS IN EUROPEAN BANKING CX RANKINGS

The good news for banks in the UK is that, although incumbents’ customer experience levels are still relatively low, on average, UK banking brands provide the best customer experience in Europe. The competitive market involving multiple challengers and FinTechs means both traditional and mutual brands are forced to go the extra mile to deliver for their customers. As a result, the average CX quality in the UK is the highest in Europe for the eighth consecutive year.

Overall, UK banking customers are more satisfied with their experience than customers in any other country when it comes to banking services, communication, customer service, prices and fees, respect, and website and mobile app. Direct banks and mutuals — first direct, Starling Bank, Nationwide Building Society, and Monzo — provide the best customer experience in the UK and are also included in the top five in Europe.

HYBRID CX PROVIDES THE MOST EMOTIONALLY POSITIVE EXPERIENCES

Forrester’s research shows that the biggest driver of customer experience quality in the UK is immediate problem resolution. The top four banking brands have multiple always-on routes for customers to get in contact with them, including mobile apps, 24/7/365 phone lines, and chatbots.

Adopting tools such as sophisticated chatbots can help improve the customer experience as they allow customers to have their questions answered whilst reducing the dreaded wait times. However, having access to customer service representatives is still very important to most customers in the UK, particularly when they have a problem that needs to be resolved. A good example is Dot the Bot, first direct’s offering, which supports customers with queries, so they don’t have to wait for a customer service agent. First direct claims that one in four queries are answered solely by its chatbot, but human customer service representatives are available around the clock should the customer prefer to speak to a person.

Hybrid CX subsequently creates the most emotionally positive experiences. Although digital-only experiences are ranked highest for ease and experience, hybrid experiences win on emotion. It’s worth noting that emotion has the highest impact on customer loyalty, so it’s imperative that banks consider how different channels can be woven seamlessly into their customer journeys to create experiences with empathy and impact.

SECURITY, MOBILE APPS & CLEAR COMMUNICATION ARE AMONG THE TOP DRIVERS OF GOOD CX

Forrester’s research also reveals that UK banking customers value banks that care about the security of their personal and financial information. Protecting customers’ personal and financial information is one of three facets of financial protection that underpin financial well-being. Nationwide came out on top in the UK for this driver, and this is backed up by its extensive privacy statement.

Customers also want easy-to-use mobile apps. Forrester’s research indicates that mobile banking apps are the most popular banking channel for UK adults who have tried different channels. Banks that lead in this area help customers navigate complex apps by using strong search functionality, proactive help, good content readability, and information architecture that reflects the customer’s mindset. Starling customers score their bank’s mobile app among the highest for ease of use.

Finally, UK customers appreciate when banks use plain language. Clear communication is key. Jargon-filled language makes banking harder for customers to understand — and goes against the Consumer Duty rules launched by the Financial Conduct Authority, which demand that banks communicate information to customers in a way that is clear, fair, and not misleading.

The UK banking market is one of the most competitive and dynamic in Europe, and incumbents need to constantly innovate to stay ahead on customer experience. By having a better understanding of what their customers value and need, banks can ultimately reduce churn, strengthen loyalty and encourage customer advocacy, all of which only have a positive impact on the bottom line.