Banks and Customers: Why Many Banks Still Just Don’t Get It!

Banks and Customers: Why Many Banks Still Just Don’t Get It! 

It has been an interesting period for me. One of the things about being a consultant is that you can’t really discuss what you do for a living in any great detail.

However, once in a while, you spot issues within your customer base that seem to be shared. Further, when you begin to get into a specific industry, those “problems” seem to become even more commonplace.

In 2011 Ernst and Young’s Annual Global Banking Survey was entitled “A New Era of Customer Expectation”. Three years later, the consulting firm harks back to the same topic, with the 2014 Global Survey entitled “Winning through Customer Experience”.

In 2012 McKinsey’s EMEA practice chided banks for their apparent difficulty to become more customer-centric in a report called “Banking on customer centricity – Transforming banks into customer-centric organizations”, and suggested some steps banks needed to take in order to transform themselves.

Given how much most banks actually know about their customers (after all, they handle our money) this may appear to be a somewhat puzzling situation. But dig a little deeper…

Banks have long lived in a world in which they behaved as if their customers needed them, and not the other way around. This perception has led to an almost unreal degree of arrogance in processes and also amongst many bankers. Customers are routinely submitted to interrogations and inquisitions that would make McCarthy or the Spanish proud. And customers are supposed to feel grateful that they have been granted a loan. That’s like GM expecting me to be grateful because they sold me an automobile.

Even as a known, existing customer, one European bank will still ask you how much you spend weekly on petrol before considering your mortgage request. The old adage about bankers being bad umbrella salespeople is not completely without merit many people seem to feel.

Over the last five or six years, I have been invited to spend time with a number of different banks in Europe and Africa, researching and sharing ideas on customer centricity. Almost all of these are facing similar challenges with regards to customers and segmentation, regardless of geographic location. Perhaps the key difference is that in most emerging markets, banks generally have a good reputation, whereas bank credibility in the world’s more developed economies has taken quite a hit (according to Ernst and Young) as a result of recent debacles and high bonus payments to losers (i.e. Co-Operative Bank).

The response to this situation so far has been mixed at best, some banks trying to redesign the traditional model, at least superficially (Virgin Money), others to re-define their focus (ING) or others working upon killer implementation in customer orientation (Garanti Bank).

During a recent stint with the senior management of a major European bank, the CEO turned to me and asked two questions. The first, was what did I think was preventing his bank from moving forward with respect to customer centricity. The second question, perhaps to be expected, was what did I think was needed to help transform the organization? In recent years I have had several opportunities to interact with this bank and indeed have been involved in training some of their high potential younger executives.

As I thought through my response, I realized that some of these issues while obviously specific to this particular organization, might also be resonating in other historically product or technology driven companies.

The following issues came to mind:

The research is fairly damning: most people do not like banks. While bankers often act surprised when they hear this, I think most of them know this to be true. This is one of the reasons they don’t always connect well with their clients. It is not a relationship of equals.

Customer centricity has not been a serious management agenda issue in many banks as evidenced in the McKinsey and Ernst and Young research. It has been talked about, but the requisite modifications in processes and procedures have often been lacking.

There is a significant cultural reticence within the organization with respect to moving in a new direction. The move towards customer centricity for many people represents a major shift in focus after years, if not in some cases a century or more, of being a predominantly product driven organization.

As one of the managers of a major bank mentioned to me, there is “a certain amount of arrogance within the banking industry that is often reflected in the DNA of the organizational culture”. The idea seems to be that the customers need the bank and not the other way around. He mentioned a bank document which when granting a mortgage to a customer stated that the customer would now be “allowed” to buy his or her house. Some banks don’t even realize how offensive their SOPs are often perceived.

There does not appear to be a sense of urgency with respect to the issue of customer centricity. One bank that I know of has been talking about the issue for over a decade without having made any serious or significant organizational modifications.

Perhaps the lack of urgency also stems from the fact that there is often no clear plan to address the issue of customer centricity and by that I mean clear timetables and deadlines, allocation of resources and accountability. Several of the banks I met had myriad projects running throughout the different SBUs (which give the impression that a lot is happening) but with no central co-ordination or “red thread” tying initiatives together.

In some cases you also have the wrong horses running the wrong courses. One of my customers referred to “culture killers” within his organization that were a break upon moving the bank forward. However when examined a little more closely, it became clear that these so-called “culture killers” were actually products of the organizational culture itself. Ouch.

Customer centricity revolves around three key issues - people, processes and technology. Some banks have a number of different systems operating within their internal networks and this has sometimes been an impediment to the implementation of a company wide, system wide, information platform that would allow common access to common customer data as needed by employees. Related to this is also the difficulty and cost impediment of full CRM implementation throughout the organization

And finally, perhaps some people just really don't know what to do. They have been operating in a culture of SOP for so long that perhaps there is a need to educate them and to provide them with the tools to deal with a new reality.

The second question, obviously the money question, was what was needed to try and transform the organization.

Recent, and indeed earlier research suggests that the major determinant of people's behavior within an organization is company culture. Therefore it's pretty clear that a major internal cultural shift may need to be orchestrated.

There is also a need to focus on customer metrics as business drivers: customer satisfaction is a key driver of financial return.

The organization requires unfiltered voice of customer input to top management. Some organizations achieve this by rotating top management into customer service jobs. As I like to say, if you want to sell bananas to monkeys, you need to swing with them in the trees. You can't sit on the floor of the rain forest expecting them to come to you.

A clear vision and a clear plan to move forward as mentioned earlier with specific timetables and deliverables is essential. There is a need to move beyond what I call corporate theology, to implementation.

For many organizations, business process reengineering (BPR) is an essential part of the mix. If you want something you haven't had before, chances are you will have to do something you have never done before. Customer based process design is key.

In many large banks there is a need for technology review and a potential overhaul of existing systems. There is often a plethora of competing systems within different SBUs of the same bank. There is a need to pull it all together. In one company I researched, a given customer representative needed to consult nine different screens in order to view the totality of the customer's holdings within the company.

An extension of this is the need to make sure that technology experts are included at top level when customer decisions are made. Some research that I did with HP some years back, suggested that the older the manager, the less conversant they were with emerging technologies. Of course, many remain current, but research suggests they may be the exception rather than the rule. I often refer to this need in my lectures as what I like to call “reverse mentoring”.  Get younger execs working with their older colleagues.

So what’s the bottom line?

Money is a high involvement product, and people are loathe to take chances with their customer’s cash. Traditionally, banks were the custodians of capital, and this is the relatively fat cushion upon which most banks have traditionally resided. Capital was in short supply and lending it was a risky business to be left to professionals.

However, some banks need a reality check and a serious kick in the asset. This is no longer today’s reality. They are no longer the sole source of funding for companies or individuals. And as a private banker in Geneva said to me recently, “there is more money than there are good ideas.”

Discontent with banks has led people to create new models. Crowdsourcing and micro-financing are helping transform modern capitalism for better or for worse. Kickstarter and Kiva are just a couple of successful examples. And this is a new industry in the early phases of its growth.

New technology platforms allow private individuals to trade currencies and commodities from anywhere. E-banking capabilities mean that for many customers, less and less human intervention is needed, or in many cases even wanted.

Traditional banks need to re-make themselves in the image of their customers or face continuing incursions from new competitors who do a better job of generating value for customers, not just shareholders.

Take a look around and dare to be different. There are novel solutions out there for those tired of the same old run-around.

 #banks #customercentric #customers