Banking industry is hugely affected by thousands incidents similar to one that happened to my friend, let's call him Steve. Steve wanted to buy a house by taking a loan at a bank he desired, but, in the end, he used another bank. I thought, it’s just a common thing because the offer by the other bank was better. Surprisingly, my friend denied this, saying the proposals were absolutely identical, which really intrigued me. Let's find out what influenced his decision.
Little things with huge impact on the banking industry
I asked Steve to tell me more details about what caused him to switch to another bank. It was important to understand what the first bank did wrong. How was the first bank able to so easily lose a ready-to-pay customer with a good credit score?
During my investigation, I came up with interesting and perhaps frightening conclusions. It seems many banks are losing customers because of outdated banking design and poor banking user experience. And the size of these losses is staggering.
Even by rough, but conservative, estimates, medium-sized banks lost millions of potential revenues each year. For the larger banks, the total losses from bad UX design in the next 10 years could reach billions of dollars.
A hundred times smaller budget is enough to improve the situation. But it's not happen because the reasons that cause such losses may look at bank employees as "little things." So they do not pay needed attention to increase bank revenues, and no actions to eliminate "leakage" are taken.
To get service from the bank - it’s a challenge
How did I come to the conclusions that are mentioned above? Steve’s history began when he decided to get a mortgage for buying a house. He chose a bank he had heard a lot about, which ran a huge advertising campaign often seen in his state. When I asked why did he not choose his primary bank, he argued that the conditions were not as good. According to research, more than 50% of customers do the same thing.
First of all, Steve visited the bank’s page on the internet. To his great surprise, Steve did not find a credit proposal on the first page. Instead, there were a lot of promos about how good the bank is, how they appreciate their customers, which socially responsible projects they support, how many millions of credits they have issued, etc.
According to Steve, he spent 10 minutes unsuccessfully trying to sort out all of this information by clicking the various buttons and moving around different areas, but he did not find a mortgage section with an online form for which he could apply. Anyone in such a situation would simply close the page and look for an offer from another bank. But Steve never gave up. So he found the contact section and sent a request to the bank’s e-mail about his intention to take the mortgage.
Steve did not receive a tempting invitation to become a bank client to this day. As he said, there was a feeling that the bank just did not need him as a client. It was as if the bank was turning away potential customers by creating obstacles. And this occurred despite the fact that the financial institution, according to the advertising activity, is spending hundreds of thousands per year on marketing, including digital channels.
But, as I said, Steve is a stubborn man, so he decided not to wait and found the contact of a loan officer from this bank through Google. He called him directly by phone. Instead of reacting with joy from hearing from a potential new client, the officer asked Steve where he got his contact information. After receiving an explanation, the loan officer offered to book an appointment for an interview at the bank the following week.
Disaster starts with a bad user experience
Here I have to note that my friend is from the Y-generation, and therefore prefers to solve all issues remotely, via the Internet. According to polls, he is not the only one. Thirty percent of U.S. consumers secure a mortgage online. On top of that, he was about to solve this issue instantly because he finally found a suitable home, and was leaving for vacation the following week.
After hearing the description of this situation, the loan officer offered to fill out an online application for the loan, which was somewhere on the web page. Unfortunately, the bank employee wasn’t able to provide more information on the online mortgage application procedure because he was just another department employee. Nevertheless, he sent my friend a link to the online application form.
Opening the page, my friend discovered more than 50 fields to be filled in. He spent about an hour filling out all the information, including upload of an excerpt from his account and other documents. Having met some frustrating questions at the end of form, he decided to ignore them and pressed the "Continue" button. Imagine his feelings when the bright red error message appeared on the screen, and all the form inputs became empty. This was the final straw.
As a result, as you have guessed already, my friend got his mortgage, but from another bank with similar conditions. Now he is very happy, and I relate this story as an anecdote at parties.
How many customers banks lose
While carefully listening to the story, I was wondering how many customers banks lose due to a poor banking ux design. Using Google search, I found that this particular bank provides an average of 3,000 mortgage loans per year. It is not surprising that the bank is not worried if someone leaves them for a competitor.
I continued to search and found that the average loan size in the United States banking sector was $170,000 dollars for up to 30 years. As we already know, 30% of the customers get loans online, which equates to 900 people a year in this case. And this number grew by 70% last year.
To estimate the amount of lost customers, I have analyzed 186 case studies of conversion rate improvement using design. You can find 100 of them at the Kissmetrics website. The average conversion growth across all case studies was 64%, with the minimum 2% and maximum 591%. I also included the analysis of statistics available from a 70+ financial services redesigned in UXDA.
The range of results is quite extreme, so I focused on case studies related to simplified main page design and improved navigation, emphasizing key services and form optimization. Similar issues that caused bank to lose Steve as a customer. Average improvement in similar cases was 37%. Given the large flow of requests and the specifics of the banking sector, we will be cautious and lower the forecast seven! times to 5%. This means that correcting mentioned problems in a design and user experience of the website, the bank could increase the number of new customers minimally by 45 people.
Bank's revenue is under attack
45 lost customers per year. Is that a lot or a little? Well, actually, it is a lending volume of $7,650,000. If we open the bank payment calculator, it is easy to calculate that, with an annual interest rate of 3% only in the first five years, such clients will cost the bank $23,988. This means that our bank, in the next five years, will lose $1,079,460 from 45 clients! It is scary to imagine how the problems in the banking ux design will impact interactions with other products of the bank, since mortgages are not the only product.
It is obvious that these calculations do not enter the minds of loan officers who refuse to help a client, project managers who creates overly long application forms, bank UI designer who add to the home page all he was asked about without defining key user scenarios or developers who ignore the usability rules. Nevertheless, I am sure that the management of the bank still care about organization revenue. I hope they will read this article and think about such "little things" like banking UX design, which can be a perfect way to increase revenues in the banking industry.