Stop fadding about!

c-13.2I honestly don’t know an industry more obsessed with fads than banking. Maybe it’s because this is such a follow-the-leader industry. Perhaps it’s because banking is a very me-too business with few (if any) real brand distinctions. Or is it simply that senior management is so obsessed with the needs of one stakeholder group – shareholders – that they are blind to the needs of what should be their first priority: customers?

Whatever the reason, fads are not the way forward. And here’s the evidence…

a. Call centres outsourced to India

During the 80s and 90s, outsourcing was hailed as banking’s cost-cutting salvation. And it’s easy to see why…

Although it often raised a storm of protest over the loss of UK jobs, the strategy had huge appeal in the Boardroom. The logic of off-shoring to off-load and reduce costs had all the hallmarks of a sure-fire winner. The snag is, logic is not an infallible litmus test for success. And, in this case, language and process problems soon derailed the strategy.

There is no doubting that the people who answered the phones in Mumbai and Delhi were charming, very polite and often extremely well educated. However, strong accents and an often poor command of idiomatic English made communication frustratingly difficult.

However, the really fundamental problem was the rote-style response process. Overseas call centre workers were given a series of tightly scripted responses designed to answer any possible customer enquiry. They didn’t!  They proved to be an inflexible and often infuriating obstacle to understanding.

Faced with a growing backlash from customers, the banks had to bury their embarrassment, bring the call centres back to Britain and accept that outsourcing in this case had been a costly mistake.

b. Higher saving rates for new customers – but not for existing loyal customers

In a market-grabbing bid to win new customers, banks reached for an ever-popular sales ploy: the cash incentive. Higher interest rates to attract new savers. A great idea – with one giant flaw: existing customers were deliberately excluded from the deal!

Coming at a time when banks were running costly advertising campaigns extolling the importance of customer loyalty, such myopic thinking is hard to credit. Certainly customers found it very hard to swallow and they soon voted with their feet. As fast as new customers were walking in the front door, loyal customers were stampeding out of the back!

An ill-considered customer acquisition tactic had suddenly become a customer retention crisis.

Banks were shame-facedly forced to extend their special rates to all customers or to offer even higher rates to existing customers!

c. Bank staff incentivised to sell insurance-type products to borrowers.
Well we all know how this little initiative turned out. So far, it has cost banks tens of billions and the meter is still running! Every major bank is in full reverse on this initiative – desperately fighting a damage limitation strategy whilst huge numbers of staff (and consultants) are dedicated to the clean-up. What a mess!
d. Structured mortgage products.

We’d all like to meet the genius who dreamt up this product!

These were the financial instruments that nearly destroyed every global bank and crippled the economies of numerous countries. Complex, dangerously opaque products matched by a woeful lack of governance.

But has banking finally put its own house in order? Many highly respected observers fear not. They point to various commissions that still cannot decide whether clearing banks should divest their investment banking arms. While the debate rolls on and politicians dither, the risk remains – will we ever learn?

e. The path to prosperity lies in banking mergers.
Banking mergers are not a one-way street to success. As the Lloyds/HBOS debacle proves, they can be the road to near ruin. Especially when a bank ignores all the prudent safeguards of due diligence and rushes into an ill-conceived and ill-fated take-over. Ultimately, this merger had to be rescued by a £37billion banking rescue plan – grudgingly underwritten by every UK tax-payer.
f. The best way to serve customers is to stuff loads of terminals into a branch (the latest fad)

I am a technologist so you might imagine I would be happy with this strategy. Well, I’m not. So let me tell you why…

If these terminals were multi-purpose, multi-tasking service facilities – just like humans – then I would have no problem. But they’re not. They are mostly one-trick ponies. We have one machine for putting cash in… another for taking it out… yet another for depositing cheques (as well as a letter box for cheques)… and yet a further one for statements.

These terminals are simply not fit for purpose. And if you need proof, walk into your local branch and count the number of people queuing for an intelligent human teller. I bet you that queue will be many times longer than any line for a terminal.

And while you’re pondering this point, consider this demographic fact…

In every developed country in the world, the population is getting older. And which age group tends to use branches the most and terminals (with their fancy apps) the least? You’ve got it!

Can you see the familiar pattern?

All of the ‘initiatives’ I have cited were either designed to save the banks money or make them more money. In reality they all lost the banks a fortune… damaged brands…harmed reputations… and alienated customers.

Is it any wonder that our banks have some of the lowest Net Promoter Scores (NPS) across all industries?

But – and this is the key message – it doesn’t have to be this way. Banks could do things very differently. And, believe me, the answer is surprisingly simple…

Recruit customers to the sales force.

Quite seriously, customers want to be involved. They want to share their thoughts. They want to shape their bank. They are also very willing guinea pigs providing – and this is the critical proviso – banks listen and act upon their feedback.

If banks get this right they can turn customers into an (unpaid) extension of their sales force. And that’s a proven fact. This approach has been tested in other industries and, right now, it looks as though Barclays is taking the first tentative steps towards adopting this strategy.

So stop fadding about. If you really want to know what your customers want, don’t guess – ask them! Because without customers you won’t have shareholders.

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