Recent times have seen economic news hit the front page with daily regularity. While oscillating market conditions have dominated the headlines, consumers have seen letters on their doormats from their mortgage providers and energy companies with bad news. A trip to the shops offers little respite.
And consumers are responding accordingly. Our Moments of Truth study tells us that two in three consumers cut household energy usage. A third plan to leave the car at home, with some of that (1 in 7) taken up by public transport.
The OBR anticipates household incomes falling cumulatively 5.7% over ’22 and ‘23, in part due to tax rises, cuts in energy subsidies and guaranteed rises in fixed-rate mortgages for 2m households (costing each mortgaged household £3,000 extra in 2023). The 9.7% increase in the minimum wage and 10.1% rise in welfare benefits and pensions in April 2023 will however soften the blow somewhat for lower-income households.
Meanwhile, the Resolution Foundation for lower-middle-income households describes 2023 as a Groundhog Year – repeating 2022, with another ration of pain on the way.
There is light: according to data from Consensus Economics, aided by falling energy prices and better than anticipated business and consumer sentiment, the UK economic outlook for this year has improved from its most recent darkest days.
But that move towards a brighter outlook has yet to be fully felt in the present. Moments of Truth results show that 75% of consumers felt, either through choice or necessity, the need to be cautious, with discretionary spending largely affected.
Consumer spending on restaurants (51%), entertainment (37%) and holidays (33%) are all being hit, (although the sight of packed bars and restaurants in many towns and cities might give you the opposite impression).
Beyond spending cuts, 25% of consumers expect to dip into their savings this year to tide them over and over one in five have already used their overdraft at least once in the past 12 months.
Regardless of whether these dire predictions pan out as forecast or the economy continues to fluctuate, giving us glimpses of recovery and calming waters, banks simply must invest time and energy into proactively forging strong relationships with their consumers. Moments of Truth tells us that if the attention is given now, they’re in with a good chance of building a lifetime of loyalty.
There is work to do. To date, only 10% of those who claim to be ‘struggling’, expect to discuss their financial situation with their bank in the next three months. If the relationship was sound, we’d expect the trust that comes with it to drive conversations about short- and long-term solutions.
Which banks are getting it right?
first direct is one to watch. According to customer ratings in the Moments of Truth benchmarks, it offers by far the best overdraft customer experience.
first direct also held an impressive lead over its peers for telephone contact throughout 2022. 50% of people contacting the bank got through to a person in just one minute, which is significantly better than the industry average of 20%. On top of that, queries are dealt with swiftly and effectively, without the typical sources of friction or stress. The same cannot be said for some other providers assessed by the study.
Elsewhere, Newcastle Building Society, Coventry Building Society and Monzo offer clear demonstrations of best practice across various offline and online experiences – be that through minimising branch queues, efficient product applications or game-changing app features.
Ultimately, a brand has the power to make or break someone’s day. Operational success or failure can have a huge emotional impact on the end customer, and the shockwaves can be far-reaching when it comes to money – especially if that person is already feeling under pressure.
It is vital that customers enjoy a close relationship with their bank, so that any issues can be resolved before they become crises. Banks and building societies need to be accessible and approachable – just as we are seeing with the top performers in the Moments of Truth results. Recent market volatility placed extra emphasis on the importance of this and we are pleased to see banks and building societies working to create outstanding customer experiences.
The leading players are proof that when customers feel like they have less, they can still experience more.
About the research
Moments of Truth assesses consumer banking experiences through 30,000 online interviews annually, across 80 providers and 16 key customer journeys. Learn more.