This multi-part series will explore why banks have not provided customers with a good experience under the financial supermarket model, and what they could do to improve customer relationships.
Don't Sell Products, Provide Service
Bankers and bank customers view their offerings in a different light, which can lead to troublesome disconnects. Recent news events have placed sales practices in the spotlight and shown that banks often view their different account types (checking, savings, mortgage, credit card, etc.) as products, and generally aim to sell as many products to their customers as they can. Customers however tend to view banks as service providers, in the vein of "you keep my money safe and I can access it anytime I need to". When comparison shopping, customers are more likely to behave similarly to when they are seeking out HVAC repairs or plumbers in that they want to hear from their peer groups about which provider has provided quality service. Furthermore, customers have been conditioned by modern consumer behavior to research products and services individually, and want the best of breed for each purchase. For example, a customer will most likely choose a credit card based on features such as the types of rewards that can be earned rather than a card issued by the institution where he or she has depository accounts.
It's Easy to Switch
Technology has made it easier than ever for customers to switch banks. With a phone call or a few taps on a smartphone screen a customer can become a former customer due to a bad customer experience event. Social media has also made it possible for customers to share bad experiences with the world at lightning speed leading to reputation risk. As the #AskJPM Twitter episode from a few years ago taught us, banks are highly susceptible to bad PR via social media. The speed at which customers can make a switching decision is now instantaneous, rendering customer second thoughts and the efforts of retention teams ineffective.
Financial Supermarkets Have Not Provided Value
The all things to all people model has not provided the value to bank investors or bank customers that management teams intended. The financial crises of 2008/2009 only reinforced to customers that diversification among financial institutions was in their best interests. Recent news involving a large global bank has shown us that aggressive cross-selling can cause behaviors that lead to regulatory, reputation, and performance risk. An aggressive cross-selling culture can also burn out employees, driving talent into the arms of competitors. The driving thought behind cross-selling has always been that customers will be more loyal to and profitable for the bank if they have numerous accounts and product types. Cross-selling initiatives have run in tandem with another desired behavior push however, since banks have been heavily incentivising customers out of physical branches and into digital channels. While the cost per transaction is lower in a digital channel, the opportunity cost is the missed person to person interaction. Customers cannot reasonably be expected to forge a deep and trusting relationship with a screen, when for decades they were conditioned to seeing familiar faces in their neighborhood bank branch. Even in the landscape of reduced physical transactions cross-selling initiatives have taken precedence over customer service. Chances are, when customers come into a branch to cash a check or put something in a safe deposit box, they are not in the right mindset to be discussing additional accounts such as credit cards or lines of credit. Conversely, tellers and CSRs trained in customer service most likely do not enjoy relentlessly pushing products. There is added risk in this practice since branch personnel cannot be experts in every type of deposit and credit account type. Putting customers into account types that may not be completely suitable for only invites increased regulatory scrutiny and customer dissatisfaction.
The next part of the series will explore what customers want out of a banking relationships.