Customer churn is the loss of customers, or in other words, is it the percentage of customers that have stopped using your company’s product or service throughout a certain time frame. You can calculate it by dividing the number of customers you lost throughout a certain time period, by the number of customers you had at the beginning of that time period.
When it comes to customers, getting a new customer, on average, tends to cost five times as much as just retaining an existing customer. This alone shows why it is important to track as well as manage customer churn. Focusing on the long-term relationship, as well as observing customer behavior, can be a lot more profitable than just spending a lot of money on marketing as well as campaigns in order to attract new customers.
In recent history, the revolutions in home internet and mass mobile phone adoption showed us that when a service provider offers more than one product or service to the same customer, churn dropped significantly. In the 2000’s we saw national utility companies invest heavily to become so-called ‘multi play’ providers. It is now common for legacy landline companies to offer bundles of home internet, mobile, and tv services. The holy grail of having customers availing of three or more services led to massive reduction in customer churn, and significant higher margins. With the advent of mobile wallets we can expect to see a similar pattern in financial services. A wallet provider who can only offer closed loop services for specific use cases will suffer significantly more churn than a well connected wallet which can be used in a variety of situations. With Verso, wallet providers will be able to offer a suite of previously inaccessible financial services to their customers. Offering new and exciting services is not only good for revenues, but reduced churn means less need for costly customer acquisition activities, and the ability to focus on customer retention with relevant customer engagement.
Now, remember that financial services are highly competitive, as well as highly regulated. With regulated KYC requirements, the cost of customer acquisition is high. Encouraging customer loyalty in a specific audience can be a challenge, especially among digitally educated populations. This creates a challenging barrier for banks and aggregator services, but Verso helps both sides of the equation from its unique position in the middle, connecting customers to products that they otherwise might never be aware of.
The main reasons why customer churn occurs are poor customer service, lack of perceived value, poor market fit, failed onboarding, and involuntary churn.
Focusing on customer service specifically, which is the #1 reason, many companies think that customer service is a cost that can be minimised. What they rarely realise is the fact that customer experience plays one of the most important roles, as that is how the customer perceives your brand, and that is how they describe the brand to other people.
So, why is churn the financial services industry’s biggest enemy? Well, if retained customers will spend up to 67% more on your company’s products, then an increase in customer retention of just 5% can create a 25% increase in profit.
To reduce customer churn, you need to surprise and delight your customers with tailored diverse products that the customer both wants and needs. Focus your attention on the behaviours of your best customers, analyse churn as it occurs, and show your end customers that you care and respect them.
Verso enables wallet providers and other account issuers to offer exciting new products to their customers. This allows them to focus on customer experience with an eye on retention. Industry experience tells us that churn is a key metric that will decide the outcome of the impending ‘wallet wars’. The financial services industry is already going through huge changes, and that pace is only going to increase. The financial service providers who can successfully minimise churn will by definition be the last ones standing.
Customer facing account issuers, like wallet providers, stored value facilities, etc are already working with Verso to be amongst the first to offer next generation products. Now you know why. Stay tuned for exciting announcements on that front in the near future.