Why Employee Engagement Is the Key to Customer Loyalty in Financial Services

Employee engagement in the financial services industry refers to the emotional commitment and motivation employees bring to their roles. In banking, insurance, and advisory firms, this engagement is shaped by regulatory pressure, high turnover, and the need to build customer trust. As is the case in many industries, generational differences exist but they do paint an indication of turnover rates that the financial sector is struggling with. KPMG’s 2025 UK Financial Services Sentiment Survey indicates that 1 in 4 (26%) Gen Z employees have left their financial services employer in the past year. Nearly half (49%) of FS leaders also say Gen Z attrition has increased compared to five years ago. 

Engaged employees in this sector are productive, compliant, customer-focused, and resilient in the face of change. They understand the importance of accuracy, empathy, and discretion, especially when dealing with sensitive financial matters. 

In the financial services industry, employee engagement plays a pivotal role in building customer loyalty, as engaged employees are more likely to build trust and a personal connection. While marketing and product innovation play their part, the everyday interactions customers have with staff often make the biggest impact. Whether it's a helpful adviser, a responsive call centre agent or a knowledgeable branch employee, engaged staff are the ones who turn routine transactions into lasting relationships. 

The link between staff satisfaction and customer experience 

When employees feel valued and supported, they’re more likely to deliver exceptional service. McKinsey found that in contact centres, 52% of agents in banking, securities and financial services reported being “extremely satisfied” with their job. The key drivers of satisfaction noted include a meaningful mission and connection, sense of community, and recognition.  

In financial services, this can mean a bank teller who takes the time to explain account options clearly, or a call centre agent who handles a complaint with patience and empathy. These interactions build trust and leave lasting impressions. According to an Eagle Hill Consulting survey, 70% of workers say their day-to-day work experience affecting their mood impacts their productivity, and 69% say it impacts their ability to serve customers. In that same survey, employees who are dissatisfied are much more likely to report that their negative work feelings reduce their willingness to “help others” (22% vs 6%). 

Impact on retention and repeat business

Customers tend to return to institutions where they feel understood and respected. Engaged employees contribute to consistent service delivery, which helps build long-term relationships. Whether it’s a financial adviser remembering a client’s goals or a mortgage specialist following up proactively, these behaviours encourage repeat business. Research published in the International Journal of Research and Innovation in Social Science (IJRISS) found that branch staff warmth has the strongest positive impact on customer satisfaction: “a one-unit increase in staff warmth” resulted in a 35% increase in customer satisfaction. (John Carlvin Piyinchu, Customer Satisfaction with Banking Services: An Exploration of the Impact of Branch Staff Behaviour on Customer Loyalty).

Trust and reliability as loyalty drivers 

Trust is the cornerstone of financial services. Customers need to believe that their provider is reliable, secure, and ethical. Employee behaviour shapes brand perception. A brand where employees demonstrate exceptional punctuality, professionalism, and transparency will become a brand that customers are likely to trust. A disengaged workforce can erode this trust, while an engaged one reinforces it. Forrester’s Financial Services Customer Trust Index also identifies empathy and dependability as critical “levers of trust” for UK customers — yet only 48% of UK banking customers believe their primary bank “understands their unique needs and feelings.” The Financial Conduct Authority (FCA) also found that only 21% of adults expressed high trust in banks, while 40% reported low trust. (Financial Lives 2024) 

Despite the clear benefits of an engaged workforce, many financial services firms struggle to maintain high levels of employee motivation and satisfaction. The sector’s strict regulatory demands and possible legacy infrastructure can create environments where staff feel disconnected or undervalued. Engagement is one of the top HR challenges in financial services for 2025 and beyond, and we’ve addressed the other challenges and potential solutions in our blog. 

Regulatory and compliance pressures

Strict compliance requirements can limit autonomy and creativity, making roles feel rigid or transactional. This can dampen motivation, especially when employees feel they’re being micromanaged or judged solely on adherence. 

Legacy systems and poor internal communication 

Outdated technology and siloed departments often hinder collaboration. Employees may struggle to access the information they need or feel disconnected from broader organisational goals. This can lead to frustration and disengagement. If your business is still relying on outdated HR systems, it’s worth exploring our guide to the problems with legacy HR systems to see if it’s time to move up the tech stack. 

This divide can deepen with the integration of generative AI into daily operations. Not every employee will be as adept at utilising new systems and processes. Therefore, HR teams will have a responsibility to prepare teams for ethical and secure AI adoption. With a structured approach to preparing the whole workforce, no employees will feel like they’re being left behind. 

Lack of recognition and career development

In many financial institutions, progression paths are unclear and feedback is infrequent. Without recognition or opportunities to grow, employees may feel undervalued, which affects morale and performance. Tackling this requires structured development plans and transparent career frameworks. This can be achieved through employing dedicated employee recognition software which helps you democratise and promote recognition schemes, and the implementation of a varied strategies to support employee progression. 

One major barrier is poor communication. Even when benefits exist, employees often don’t know about them. As Catherine Bennett, General Manager of Engage at The Access Group noted: 

“Communication is absolutely key… whilst 90% of employers think they do a fantastic job communicating their employee benefits, 50% of employees aren’t sure what their package looks like. So it just goes to show that actually there is a real sort of gap there.” 

Episode 7: Invest in your greatest asset – your people of our Do the Best Work of Your Life series 

Leadership commitment and cultural alignment are essential to improving employee engagement in financial services industry. When senior leaders prioritise employee wellbeing and connect it to customer outcomes, the impact is tangible. 

Invest in manager training and leadership development 

Managers play a critical role in shaping team culture. Training programmes that focus on communication, coaching, and emotional intelligence can help leaders inspire and support their teams more effectively. As a business, you can invest in your management teams and reap the benefits as effective management filters through into improved performance from your teams. Our guide to building leadership capability and empowering managers provides a structured framework and actionable strategies that can help identify and develop leaders within your organisation. 

Use technology to support hybrid and remote teams

Platforms like Asana and Microsoft Teams enable visibility, accountability, and collaboration across locations. These tools help remote employees stay connected and aligned with organisational goals. However, technology may not be enough to fully engage your remote employees. Ultimately, people seek human connection and that can be challenging to overcome in large, distributed organisations. We’ve compiled a guide on how to build and maintain a company culture in such environments, which provides practical advice to implement and engage remote employees. 

Dedicated employee engagement software can also help maintain morale and connection in distributed teams. 

Create recognition programmes that reflect financial sector values

Reward systems should be tailored to the industry. Recognising compliance excellence, customer service achievements, or ethical decision-making reinforces the behaviours that matter most. 

Align internal culture with customer promise

Employees should understand how their work contributes to the brand’s customer promise. When internal values mirror external messaging, it creates a unified experience for both staff and clients. Aligning internal values and culture requires your organisation to have a strong culture that your employees subscribe to across departments and locations. Financial institutions subscribe to the notion of aligning values and place them at the heart of operations, as HSBC Group Chief Executive Georges Elhedery notes: 

“A customer-centric, high-performance culture is the foundation of delivering exceptional outcomes for our customers. It builds trust, enhances experiences, and ensures customer satisfaction whilst empowering our colleagues to meet customer needs, drive innovation, and unlock new opportunities. This is vital to the long-term success of HSBC.” 

This can be difficult to achieve in large, distributed organisations, particularly in financial service businesses. Banking institutions will have 100s of branches across the UK. Therefore, it’s important to communicate company culture effectively and match it to your employee’s values. Our guide to building and maintaining such a culture offers practical strategies to help you make the required changes or develop on your existing values. 

There are tangible and intangible ways to measure the impact of engagement on loyalty. Metrics like NPS and eNPS are a tangible indicator of your company’s standing. But often, some of the most powerful metrics are simple word of mouth and improved relationships, which are hard to measure in numbers. However, these can have a positive impact on your bottom line. 

Key metrics to track 

Organisations can monitor Net Promoter Score (NPS), Employee Net Promoter Score (eNPS), retention rates, and customer satisfaction scores to assess the link between engagement and loyalty. 

• Net Promoter Score (NPS) measures how likely customers are to recommend a company to others. A high NPS often reflects positive customer experiences, which are frequently driven by engaged and motivated employees. 
• Employee Net Promoter Score (eNPS) gauges how likely employees are to recommend their workplace. A strong eNPS suggests a healthy internal culture, which typically translates into better customer service and stronger brand advocacy. 
• Retention rates show how well a company retains both staff and customers. High employee retention often leads to more consistent service delivery, while customer retention indicates satisfaction and trust - both of which are influenced by employee behaviour. 
• Customer satisfaction scores provide direct feedback on service quality. These scores tend to improve when employees are engaged, well-trained and empowered to meet customer needs effectively. 

A data-driven study in the World Journal of Advanced Research and Reviews found that companies in the top quartile for employee engagement are 21% more likely to provide excellent customer service, which contributes to higher satisfaction and loyalty. 

It’s important to note at this point that none of these metrics should be used in isolation; when used together, they provide a powerful framework for gauging the relationship between employee engagement and long-term customer/customer-brand loyalty. You can track these metrics and utilise AI integration to form better decision making with our HR software for financial services, which considers all relevant UK regulatory requirements. 

Feedback loops between staff and customers 

Regular surveys, focus groups, and cross-functional reviews help capture insights from both employees and customers. These feedback mechanisms inform strategy and highlight areas for improvement. 

Recent UK survey results from Nottingham Trent University suggest that organisations may benefit from more structured feedback mechanisms. Survey responses highlight specific factors affecting employee engagement: the national engagement index has stalled at 62%, and one in three workers report declining engagement due to financial stress.  

In the financial services sector, Culture Amp report that 68% of employees are considered engaged, indicating that there is room to improve engagement levels further. 

On the customer side, findings from the UK Customer Satisfaction Index suggest that consistent customer satisfaction may contribute to improved profitability and productivity. Meanwhile, a report by Baringa found that over a third of UK customers have switched banks in the past five years. Customers cited concerns about security, ethical practices, and service standards as reasons for switching. 

To respond to these trends, organisations can benefit from integrating regular surveys, focus groups, and cross-functional reviews. These tools help align employee feedback with customer expectations and allow firms to focus on specific operational areas, such as service responsiveness and staff training, that affect customer retention.

Case study frameworks for internal reporting

Large firms can build internal case studies to demonstrate the ROI of engagement initiatives. For example, linking improved eNPS scores to higher customer retention in a specific branch or department. 

According to the Incentive Research Foundation, Sears used engagement scores as a leading indicator of financial performance: a 5-point increase in engagement predicted a 0.5% rise in revenue, plus improvements in customer satisfaction. 

In financial services, customer loyalty often depends on more than just competitive pricing or advanced technology. Trust, consistent service, and a genuine understanding of customer needs are key factors that influence long-term relationships. 

These qualities are often shaped by employees who feel connected to their organisation’s goals and supported in their roles. When staff are engaged and motivated, it can have a noticeable impact on how customers experience your brand. 

If your current engagement strategy isn’t delivering the results you need, it may be time to reassess. Tools that support employee engagement can help improve communication, strengthen team morale, and contribute to a workplace culture that prioritises customer satisfaction. 

Explore our employee engagement solution to build loyalty in your teams or download our brochure.