Banks are held to account

New customers looking to open savings and deposit accounts now favour quick, online applications. Failure to offer effective online solutions will cost financial institutions dear

With banks in the firing line again over charges and under investigation by the Office of Fair Trading, customers are hoping that the findings will be in their favour. Yet while on the one hand banks are criticised for high charges, they are looking to attract more consumers with the lure of high-interest savings accounts.

These emerged in 2003 and now claim millions of UK customers. However, institutions are still grappling with how to give savers what they want, even though the number of customers opening up an account online has increased.

To find out how schemes are performing, Global Reviews surveyed the preferences of over 1,500 savings account holders across the UK and compared these to what is delivered online by a dozen leading financial institutions.

It shows that both deposit and savings accounts are popular across most demographics in terms of gender, income and location except that in the latter there is a slight dip in the 25 to 44 age sector presumably because young families and mortgages make saving more difficult.

Respondents most value a high interest rate when opening a savings account. Access to money without penalties is the main plus point for one in five, while 15% say that the ability to access money at any time is their primary concern. Higher income earners are even more likely to be swayed by a high interest rate.

Surprisingly perhaps, no or low charges are the main attraction for just 7% of respondents. However, most say they would be turned off an account if fees were introduced.

Fee and interest rate information though is key for nine in ten. This suggests that though the interest rate is the biggest draw, fees and charges heavily influence decision making.

Those quizzed were also asked which channel they used to open their most recent deposit account. There is a clear skew towards online and branches, with telephone banking coming a very poor third.

Higher income earners prefer online accounts – good news for financial institutions which are keen to target them.

It’s all the more remarkable therefore that some major banks and building societies do not allow new customers to open online savings accounts. Organisations such as LloydsTSB, Barclays and Nationwide allow only existing clients to apply for them. Application forms must be completed within the account management website – inaccessible to non-customers.

But many other institutions, including Halifax, Natwest, ING Direct and HSBC’s First Direct, allow new applications to be completed online. Failure to offer applications on the Web is likely to deter prospective customers, especially since there is the added requirement of having to open a current account, as well as the desired savings account. This will impact most on prospective customers with higher incomes and less time to spend on formalities.

Clearly, those failing to offer online applications to new customers are at a disadvantage.

After examining what customers are looking for from banks’ websites relating to online savings accounts, Global Reviews conducted a 450-criteria review of a dozen leading institutions.

There are areas of strength and weakness across the benchmark but even the leading website from ING Direct manages a score of only 60% when it comes to meeting customer preferences.

The best performing category is “navigation and site tools”, which achieves an average score of 74%; ING Direct leads with 91%. The second best performing category is “prospective customers” which scores an average of 56% – at the top of the list here are Barclays (70%) and HSBC (68%).

The weak sectors are customer support and savings-related tools and content – both chalk up averages of around 35%. In each category, the leaders attain between 60% and 70% but a number are marked below 25%.

ING Direct and Egg score more than 90% for their FAQs (frequently asked questions) but four institutions don’t offer these at all. In addition there’s a lack of savings-related calculators across the industry guiding customers towards a savings plan.

Given the preference of all, particularly high-value, customers for completing applications online, the fact that only about two-thirds of the 12 accounts surveyed offer this facility is disappointing. This would seem to signal serious opportunities to improve the customer experience.

To encourage customers to complete applications, the correct information needs to be presented in the introduction. Halifax and Natwest achieve more than 60% in this department but the industry average is only 37%. Failure to tell prospective customers how long the application process will take and what material they should have handy can lead only to frustration and abandonment.

Informing customers about what happens after the completed form is submitted and how long it will take for the account to be set up should also be made clear.

Opportunities exist for institutions willing to fill the gap between today’s customer experience and what customers want. Online application forms are only the most obvious example of where an opening for industry leadership exists.

A greater alignment of customer needs with what institutions offer is the challenge lying before the industry. 

Adam Goodvach, UK director of Global Reviews, contributed to this week’s Trends Insight

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