Are you suffering from hidden defection?

By : Robert Johnston

March 17, 2015 12:30 PM

Fidelity can be an aspiration rather than the reality, and nowhere is this more true than in the field of banking. All too often a bank will never realize that their customer is actually maintaining a relationship with a competitor on the side.


Defections are “rampant,” according to a new study, and go undetected. But there is a way round this: investing in mobile to deliver an omnichannel banking experience.


One-third of customers bought a new banking product at a bank other than their primary bank last year, reported management consulting firm Bain & Company in a recent study on customer loyalty in the banking industry. But mobile-based digital innovation can help.


“Accelerating the development of mobile sales capabilities will help banks address a significant but little-noticed problem: the hidden defection of customers who go to another provider for additional products such as mortgages and credit cards,” the report said.




Banks rarely know they have lost out and mobile banking could tip things in either direction. As ever in the world of disruptive technology, there is both an opportunity and a challenge from mobile as it pertains to hidden defections.


Firstly, the problem of legacy systems needs to be addressed. Bain & Company notes, for example, that banks could lose more customers to start-ups and specialist non-banks that are “less encumbered by legacy systems and regulations, (that can) offer better, simpler solutions, and make it easy for people to find them”.


The authors added: “Banks that fail to respond, risk getting saddled with the bulk of low-margin accounts, while other firms siphon off high-margin products like credit cards and mortgages.”




But mobile can also stem the flood of defections when used correct


Banks must realize that alongside the branch, digital technology is “critical for effective selling.” For example, American consumers typically use at least four or five sources of information to research a new financial product. The bank’s website was the most used, while their mobile apps were at the bottom.


“Deploying mobile apps to make it easy for customers to connect to the right bank resources and employees during their shopping process, and pre-approving them for the best offer, could substantially raise the odds of winning the sale,” states the report.




The how is the hardest part. Nevertheless, Bain & Company highlights how some banks are taking a fresh “design, build, use” approach to developing better customer experiences that actually enlists the consumers to create the experience.


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Robert Johnston

NCR Financial Services

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Based out of NCR's R&D center in Dundee, UK, Robert Johnston is a global evangelist for NCR’s retail banking software strategy. Here, Johnston shares his insights on the banking industry and how consumers are driving today's conversation.