Does mobile banking hurt customer loyalty/advocacy?

• Position: MARKETING NEWS

YOUR CUSTOMERS WANT THE CONVENIENCE AND 24/7 AVAILABILITY of services such as online banking, mobile banking and telephone banking. So, you give it to them, right? But wait, there is a downside to bank's providing a multitude of alternative channels that handle transactions outside the physical bank branch, according to a paper released by the market research firm The MSR Group, Omaha, Neb.

Consumers who use alternative channels have a significantly lower level of advocacy/loyalty compared to those who visit a bank branch, says the author of the study, Dr. Moh Yin Chang. A study by the firm that tracks the level of advocacy among retail banking customers shows that in 2007, the net advocacy rating (NAR) of the alternative-channels-only group was 16 points lower than that of branch-only and 11 points lower than customers who used both the branch and alternative channels. The gap widened in 2008 and 2009 and, although they recovered slightly in 2010, ratings continue to be notably lower.

It isn't just advocacy that is at risk. Banks are capturing a smaller share of wallet from the alternative-channels-only customers. "These consumers tend to use multiple banks to meet their financial needs, while customers who incorporate branch visits into their usage mix tend to rely more strongly on a single bank," says Dr. Chang.

So what can banks do? As banks offer more channels for services, the challenge will be to use them in an integrated way for maximum impact, Dr. Chang says. Until technology advances to the point when it is able to replicate the branch experience, the retail location should be a key part of a combined communications by the bank. Since the branch is the primary place where...