Introduction

Customer Service and Support is a critical function for the success of any business. In this case study based on the UK Retail Banking Industry, we will look at the function in detail to understand how and why it has evolved over the years, including:

• History of the Customer Support Function
• Challenges and Choices When Providing Customer Support
• Customer Service and Support in the UK Retail Banking Industry

‍History of the Customer Support Function

The customer support function has evolved rapidly over the last thirty years. Back in the day customer support meant real people in a physical location, then with the introduction of telephones these people moved into call centers, followed by more recently being a mix of automated chatbots (not very helpful) and human webchats. With the introduction of Artificial Intelligence, it is expected that we will have fully automated chatbots that resolve a high number of customer issues in a short period of time. All this evolution in the customer support function has meant constant change for the people required to deliver customer services in many businesses. ‍

Challenges and Choices When Providing Customer Support

Nearly all management teams that I have worked with want to provide the highest level of service and support for their customers. Why? So, customers come back and buy more. Then why is it so common for us to experience poor levels of customer support in our daily lives? Well, it can be due to a range of things, but most commonly it is due to a lack of investment and priority from management teams.

This happens because management get distracted, either by selling and marketing to new potential customers or by the need to cut costs to maintain profitability. They forget about the ability to increase sales from existing customers, either by upselling or referrals that generate new business. The other thing is that management teams typically think about customer support as a cost center, rather than a profit center.

Deciding on which approach you will take is critical. Those that think about customer support as a cost center generally under invest and give up on providing high quality customer service. Year after year, the function becomes a target for cost reduction, which drives a worsening experience for customers, unhappy employees within the function, and ultimately hurts the top and bottom line of the business.

Then there are those who view customer support as a profit center. The challenge for those management teams is to find the balance of how much to invest in the function (typically between technology and people) to maintain profitability within the function. Let’s explore the UK Retail Banking industry to determine who is striking this balance, and who is not.

Customer Service and Support in the UK Retail Banking Industry

The UK retail banking industry has experienced significant changes, with the most recent being the impact of Covid-19. Many retail banks have reduced their geographical footprint following the pandemic. This action has had a significant impact on customer service and support employees. With the help of independent customer surveys and CompanySights headcount benchmarks, we will analyze three retail banks that have different approaches to customer service and support.

Metro: A UK bank with serious customer focus, especially when it comes to “services in branch”, which they ranked #1 in the latest independent customer survey. I am not surprised by this given the glowing Metro Bank reviews that I have received from friends and family over the years. While this is great for customers, it comes at a cost for the bank. Per the customer headcount benchmark graph below, Metro Bank also have the highest number of customer service employees as a % of total employees, which can become expensive!

Barclays: The second largest retail bank in the UK can be described in one word – Average. This is based on my personal experiences and is backed up with the customer survey rankings shown above. Per the CompanySights graph below, Barclays also have a mid-range number of customer service employees as a % of total employees, which reflects the average customer service that most of us experience.

Starling: One of the "online only" challenger banks to emerge in the past ten years. Starling has a strategic focus on customer experience, driven by technology and people. They arguably have the best banking app in the UK market, which helps satisfy a lot of customers per the #1 ranking for both “overall service quality” and “online and mobile banking services” above. At the same time, they have a high number of customer service employees as a % of total employees.

One could argue that Barclays has found the balance, but through personal experiences I don't think their service levels are high enough to get this title. Instead, I think that Starling has found the closest thing to being the right balance of delivering high quality customer service with appropriate levels of headcount (note: I appreciate that they have a high number of customer support employees). My view is further supported in the financial statements, with Starling Bank’s revenue growth rate being significantly higher than Metro and Barclays over the past three years (note: this does not account for the differences in scale between the banks). Meanwhile, Metro Bank also provides a great customer experience, but their top line could probably benefit with a greater focus on technology (e.g., improving the app).‍

Conclusion

Customer service and support is part of the broader sales and marketing function in every business. With great customer service, businesses will acquire more customers through word of mouth (for free), and easily retain those they already have. The challenge is to manage costs by finding the right balance of investment in people and technology, so that you can be the Starling Bank of your industry. Do that and you will win in the long run.