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The Power of NPS in Banking: Driving Customer Loyalty and Growth

BY QDegreesPUBLISHED
Dec. 23, 2024

The banking and finance industry is one of the industries which is driven by customer satisfaction and loyalty. If you ask why? The answer is the need to retain customers for long. Yes, banking and finance companies don't have a product that they can keep selling to the customers. Instead, they have services where the longer customers retain, the more revenue can be earned. For instance, a bank’s credit card may seem like a product but it is more like a service of providing a credit limit which the more customers use, the more interest the banks can earn. And all this ultimately depends on the customer's trust in the banking or financial institution.

It's important to track your customers’ satisfaction. One of the best ways to do so is to use NPS in banking. But what is this, and how does it work? In this blog, you'll learn everything about NPS.

Understanding NPS in Banking and Financial Institutions

NPS stands for net promoter, a metric used to gauge customer satisfaction. In banking, it's crucial to monitor customer satisfaction and loyalty, which is why NPS becomes crucial as well. NPS in banking works very simply, which is why it's often the first measure of customer satisfaction. And if you wonder how simple it can be, well, it mainly takes just one question to do an NPS survey.

Additionally, there's no need to answer the question, instead, it has a scale of mainly 0-10. The score of this metric comes between -100 to 100 and the industry average for banking and finance is 73.

But before we explore its details, let's consider the importance of customer satisfaction for BFSI companies.

The Power of Loyal and Satisfied Customers in Banking

See customer satisfaction builds customer loyalty which is one factor that businesses always look for. The reason is the benefits of a loyal customer base. Here's what you get with a loyal customer base:

Increase in Profits

With a loyal customer base, banks and financial institutions can earn more profits. Let's get it with a simple example. If there's a credit card holder who's loyal, you may not need to give him offers every time so he uses your card. Similarly selling other products to such customers is easier than other customers.

Less Customer Acquisition Cost

Customer acquisition costs for normal customers can be higher while a loyal customer retains for a longer time making CAQ spend less.

Higher Referrals

When it comes to marketing, referral marketing is the best option and loyal customers make such programs successful. Even if they get nothing in return, they refer you to others due to their experience with your company.

Provides Feedback

A major difference between a loyal and a normal customer is that they don't leave you on a single unsatisfied interaction, and provide you with feedback. But that's not the case with a normal customer as they tend to leave without any feedback or disclosure of the reason why they left.

Reasons Why You Should Measure NPS in Banking and Other Financial Services

Let's now get back to NPS and the reasons why you should measure NPS in banking and other financial services.

NPS indicates the growth of a company by letting you know about the promoters and detractors. The more promoters you have indicates the possibility of positive growth and vice versa.

NPS also helps you to know where you stand in your industry by comparing your NPS with the industry average and competitors’ NPS scores.

In banking, it helps to identify the people with lesser chances of retention and allows you to reach them out.

And lastly, when you focus on increasing your NPS, you make many things better than before in the process of increasing the NPS.

Calculating NPS in Banking: Step By Step Guide

Now, it's time to have a closer look at what NPS look like.

An NPS survey mainly asks questions like “How likely are you to recommend our banking services to your family and friends?”. To this question, the respondents can respond with any rating from 0-10. Now, before looking at the calculations here's the segregation of promoters, passives and detractors based on the ratings:

Promoters: the customers who rate you 9-10 are promoters and are highly satisfied.

Passives: the customers who rate you 7-8 and don't actually have any emotional connection with the brand yet.

Detractors: they rate you 0-6 and are highly dissatisfied with your company.

Now, the formula used for calculation is % of promoters - % of detractors.

So, if a survey’s results are as follows:

Total responses = 200

Promoters = 100

Passives = 50

Detractors= 50

Hence, % of Promoters = (100/200) × 100 = 50%

And, % of Detractors = (50/200) × 100 = 25%

So, NPS = 50 - 25 = 25

Three Benefits of Using NPS in Banking

Net Promoter Score (NPS) offers invaluable benefits for banks and financial institutions in measuring and improving customer satisfaction. Here's why leveraging NPS can be a game-changer:

Customer Retention Insights

By identifying promoters and detractors, banks can proactively address issues and retain customers who might otherwise leave.

Actionable Feedback

NPS surveys collect direct feedback from customers. Hence, you can highlight areas that require immediate attention and pave the way for continuous service improvement.

Competitive Benchmarking

Comparing your NPS against industry benchmarks helps evaluate your standing and set realistic goals for improvement.

What Defines a Strong NPS Score in the Banking Sector?

Now before we jump to benchmarking NPS scores in the BFSI industry, let's have an understanding of what's a good score in banking and financial services.

See, while a score above 0 indicates that you have more promoters than detractors, you can't use this logic to conclude if you are good or bad in terms of customer satisfaction. In banking and finance services, an excellent score is considered anything above 50 and top-notch companies are those with a 70 or above. However, within the BFSI industry, the NPS can differ for insurance companies. The average is 80 whole financial services have a score of 73.

Step by Step Guide to Benchmarking NPS Score

Here’s a step-by-step guide to achieving accurate benchmarking:

Understand Industry Standards

Begin by familiarizing yourself with the average NPS scores in the BFSI sector. For example, insurance companies average around 80, while financial services maintain an average of 73.

Define Competitor Benchmarks

Identify key competitors in your niche and analyze their NPS scores to understand where you stand.

Segment Your Customers

Divide your customer base by demographics, product usage, or transaction type to assess variations in satisfaction levels across segments.

Conduct Regular Surveys

Use standardized NPS surveys to gather consistent and comparable feedback from your customers.

Analyze Trends Over Time

Compare your NPS performance over months or quarters to track progress or areas requiring improvement.

Align Goals with Benchmarks

Set realistic goals to either meet or surpass the industry average, driving continuous improvement.

Achieving High NPS Scores in Banking and Finance

Now what can you do to get a high NPS score in banking and finance? Well, here are some actionable steps:

Streamline Customer Journeys

Complex processes are a major issue in banking and finance which makes customer journeys unsatisfactory. So, work on the streamlining of all your processes.

Prioritize Personalization in Your Services

Deliver personalized solutions for your customers which can align with their individual needs instead of offering a common solution to all.

Leverage Technology

With technologies like AI and data analytics, you can make your processes easier and offer more personalization.

Future Trends in Banking and Financial Institutions

The banking and financial services sector is rapidly evolving, with several key trends shaping customer expectations and experiences:

Digital Transformation

Digitization of banking and finance services is one of the key trends to focus on as it has already started to emerge.

Focus on Personalized Experiences

As we already discussed, customers have higher expectations of personalization than ever and that's absolutely a trend to seek.

Increased Emphasis on Security

Alongside personalization, people are also concerned about their data, making data security a trend too.

Why Choose QDegrees for Your NPS Survey?

By the end of this blog, you may have started developing questions like how can you do NPS surveys or if it is really easy to get insights from NPS and many more. But worry not as here we are the QDegrees with a one-stop solution for all your queries.

At QDegrees, we offer your SurveyCXM, a complete NPS software which you can use for your banking or financial organisation and get an NPS score in a go. Not only this but, our software also helps to turn the data into actionable insights that are personalised for your company.

And if you think that's all that you get, you also get access to creating NPS surveys that align with your brand. Additionally, you can add open-ended questions to make your surveys give you more than just the NPS score. So, get in touch with us today to take advantage of NPS for your company.