What are the best service recovery practices for financial institutions?

1 Service recovery strategies

Financial institutions can employ various strategies to recover from service failures, depending on the nature, severity, and impact of the problem. Apologizing to customers for their inconvenience or dissatisfaction can reduce their negative emotions and restore their confidence in the service provider. Offering tangible or intangible rewards, such as refunds, discounts, vouchers, loyalty points, or free services can increase the customer's perceived value and fairness of the service recovery. Fixing the root cause of the service failure and preventing it from recurring demonstrates competence and reliability, as well as improves service quality and performance. Additionally, providing clear, accurate, and timely information to customers about the service failure and recovery actions can help manage expectations and reduce uncertainty and frustration.

2 Service recovery principles

To effectively implement service recovery strategies, financial institutions should adhere to some general principles that can guide their actions and decisions. Customer orientation is essential for creating rapport and trust with the customer, as well as understanding their dissatisfaction and expectations. It is also important to empower frontline employees with the resources and training to autonomously and promptly handle service failures and recoveries. Additionally, proactivity is key in anticipating and preventing potential service failures before they occur, or detecting and resolving them quickly. Finally, collecting data from service failures and recoveries can help to improve processes, systems, and standards, while also reducing costs and risks of service failures.

3 Service recovery examples

To illustrate how financial institutions can apply service recovery strategies and principles in practice, here are some examples. For instance, if a customer's credit card is declined due to a system error at the bank, the bank should apologize and explain the reason for the decline. They should also correct the error and reactivate the card within 10 minutes, as well as compensate the customer with a $50 voucher and 500 loyalty points. Additionally, they should communicate with the customer via phone and email to confirm the resolution and follow up on their satisfaction. The bank should then review its system and implement preventive measures to avoid similar errors in the future. In another scenario, if a customer's insurance claim is delayed due to a missing document, the insurance company should apologize and request the missing document while empowering their agent to expedite the claim process and waive fees for the customer. They should also compensate the customer with a free upgrade of their policy and a thank-you card, communicating with them via SMS and online portal to update them on the status and outcome of their claim. Lastly, if a customer's investment portfolio is underperforming due to a market downturn, the investment firm should apologize and empathize with their concerns while correcting the portfolio by adjusting asset allocation and diversification according to their risk profile and goals. They should also compensate with a free consultation and personalized report, communicating via video call and email to explain changes and recommendations. Moreover, they should proactively monitor market trends and alert customers of any opportunities or threats.

Service recovery is an essential aspect of service operations for financial institutions as it can influence customer satisfaction, loyalty, and advocacy. By following best service recovery practices, financial institutions can turn service failures into service opportunities, thereby enhancing their competitive advantage and reputation in the market.