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Are 'customers' good for Retail Banks?

I’ve written and talked about this sort of thing before, but never blogged.  In the hope that the blogosphere offers a little more interactivity, I going to re-articulate some thoughts and sound out a reaction – hopefully it will be a bit like lighting the blue touchpaper…


Are Retail Banks that bad?

Retail banks are arguably easy targets when it comes to customer service and satisfaction; we love to hate ‘em!  And this is truer than ever post-crunch. It’s hard not to find grating the vanishing contrition and rapidly recovering executive pay and bonuses and yet little improvement to service.  We feel, I suspect, ‘a bit robbed’!

Frankly, there is no smoke without fire and there are plenty of stories on this site about customer service ‘let-downs’   Much of the malaise in my view is a result of several, inter-related factors.  First, banks for the most part are long-established institutions where a sense of tradition and therefore inertia is inevitable.  Retail banking has never been very ‘dynamic’ in the strategic sense of rapid rate of change in the market environment (mainly in fairness to the banks, because as customers we haven’t demanded or even needed much change or innovation). 

Second, this institutionalised inertia has reinforced an organizational structure in banks that is siloed, and introspective.   

But worse is the attitudinal aspect of retail banking culture– they seem wildly out of touch and they don’t seem to care enough to change.

If you think that is all a bit too strong just think about a few examples.



Banks have collectively invested billions on programmes that seek to ‘manage’ customers when mostly we don’t want managing.  A full picture of a customer in either a B2C or B2B context is laudable and the sought after ‘single customer view’ a healthy goal but I’d argue this has been done primarily to cross- and up-sell product rather than to offer me a better service or an overall richer ‘experience’.  Sure, for some, the outcome of a well-targeted campaign, perhaps driven by Real-time Offer Management and supported by honed predictive analytics might result in a better product mix or service, but I suspect this is the minority.  All I know is that every time I interact with my bank (actually banks), I’m always offered something and it is always the ‘next best offer’ the bank has to sell me, not the next best thing for me. I don’t think that is progress!


Product Centricity

I’ve not met a bank in the last 10 years that hasn’t proudly proclaimed to be ‘customer centric’ and yet when one looks over their organisational structure it is entirely built around product families and is heavily siloed – the ‘lending organisation’, the transactional business etc.  You can’t get less ‘customer centric’ than that!  Many of course have VOC processes, Customer Advocates, and even segment managers (but usually in marketing and usually not that senior) and one can make some progress in breaking down these silos with technology of course, but I’d argue the silos aren’t necessary in the first place.



Few, a handful maybe, of banks really reward loyalty.  That’s astounding, but check it out – Do you get better service, better rates, or lower fees from your bank as a long-standing customer than a ‘walk-in’?  I’d hazard a guess that 9 times out of 10 you do not. 


What’s the fix?

So what to do?  If I had a magic wand, I’d strike first at the culture of complacency, especially around the notion of ‘customer for life’.  If banks started to adopt a mindset that I might leave at the slightest issue, poor service experience or inconvenience, then I wouldn’t have to.  (In fact, it is becoming increasingly easy to move even primary financial relationships – but we perceive it will be hard and consequently we’re just not very good at voting with our feet when it comes to banking).

Actually, take the mindset shift one step further – treat me as a ‘consumer’ not a ‘customer’.  It’s not just semantics.  At the end of the day, I want to consume some banking services.  Generally, I have little interest in the underlying financial instrument anyway; it’s what it gives me that is important.  I want a car, I need a car loan, I want a house, I need a mortgage, I want convenience and a store of money, I need a current account etc. 

If I consume and I’m satisfied, then I’ll keep consuming – Most of us are happy to reward a good experience with loyalty.  Maybe then the bank has earned the right to treat me as a ‘customer’, but not until.

To be clear, this mindset shift doesn’t mean banks can’t charge the appropriate fee for the service, or they can’t offer me new products and services, it just means that they treat the relationship between us as more ‘fragile’, potentially more transient.

That’s why I think banks don’t need ‘customers’  – it has encouraged a cultural viewpoint within retail banks that is not healthy for either party.  It might seem counter-intuitive, but treating customers as consumers may be the way to get a radically different, and better, retail banking experience.





Comments: (4)

John Dring
John Dring - Intel Network Services - Swindon 14 February, 2011, 16:58Be the first to give this comment the thumbs up 0 likes

Interesting read. Mostly agree.

I think another problem is the monopoly of banking.  Banking acts as one and in reality all those separate institutions ack as a cartel.  There is not real competition - at least not visible to the consumer.

OK, so you get the occasional offer from one bank or another, but overall, they all offer the same things at the same rates (practically) and they all lock you in one way or another.  I tried to show my dissatisfaction with my 'lifelong' bank and switched - it was hard.  Moving DDs and other payments stuff.  In the end the new bank was worse, or at least as 'bad'.  Actually, neither is that bad, just after my money for every little thing.   Of course, I kept my first bank account open, so I suppose they didn't even notice my little protest - certainly nobody tried to tempt me back after 25 years. 

Summary - perhaps you are right - Banks don't 'need' customers, they just want transactions?  Maybe they should offer volume discount fees.

Gareth Jones
Gareth Jones - Ubiquiem - London 14 February, 2011, 18:10Be the first to give this comment the thumbs up 0 likes

John, I think you're right about the contributory factor of oligopolistic cartel behaviour.  It also doesn't help that the products we use are actually pretty commoditised - but that should only encourage differentiation by service surely?!

I'd actually not advocate that banks forsake service for transactional excellence or least-cost only provision - but a mindset change to not take things for granted!

Switching is getting easier I think - but your point is well made, it doesn't matter how slick a switch is if you swap rubbish for garbage!

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 16 February, 2011, 10:49Be the first to give this comment the thumbs up 0 likes

Personally, I appreciate my bank's efforts at upselling and cross-selling - after all, I'll feel bad if my bank introduced new products and services and never bothered to communicate them to me.

However, I've realized that many people seemingly don't and have read about complaints giving examples of thoughtless and irrelevant offers they've received from banks.

To put things in perspective, it might help if readers can highlight a few concrete examples of what they believe their banks can do to help them and a majority of their customer base without selling additional products / services. I've really not come across any such examples of what people think banks can do right.

Although bulk discounts for frequent users is a good example, I'm not sure if this benefit would apply to the broad base of banking customers since many basic banking services are free anyway in many countries. 

Gareth Jones
Gareth Jones - Ubiquiem - London 16 February, 2011, 11:14Be the first to give this comment the thumbs up 0 likes

good point - in part that was what I was trying to elicit with the post.

Here are some of the things I'd like to see-

Loyalty recognition - I do want better treatment for being with a bank for 25 years.  Sorry!  And not 'fake' loyalty by offering me 'premium' (or ego) banking for which I pay an extra monthly fee and for which I get a bundle of things like travel insurance, phone insurance, etc. that I may already have.

Better tie-ins.  As I said, we need banks as facilitators not for the products themselves - so tighter integration with what I use banking products to buy for example.

Not screwing up.  Because of the fiduciary duty, I do get it that banks need checks (no pun intended!)and balances (same!) but there is way too much bureaucracy and process complexity.  This paradoxically introduces higher opportunity for error.  Changing your primary address is hard to do at most banks - and often goes from point of capture to some back-office verification stage and involves mailings and so on.  There are slicker ways of doing this.

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