Banking commentators can wax lyrical about the marvels of internet and mobile banking, the wonders of social media and how they will transform the customer experience, but all of this is beside the point unless the underlying product and service level improve.
At a recent seminar I attended on social media, internet enthusiasts were trying to claim that these new technologies represent a complete paradigm shift (how often have we heard that before). They do in as much as they change the way that the product is delivered but they achieve nothing if the business model remains the same.
The great sin of banking past has been to churn out new products with teaser rates (both mortgages and savings) that attract an inflow of funds. On the basis that a certain proportion of these new customers fail to notice when the introductory rates expire, the bank makes a windfall profit. Or worse still, they offer new customers a deal unavailable to existing customers.
This approach means the onus is on the customer to be constantly monitoring all the deals in the market and then moving on whenever something better shows up. In short, a cynical provider produces a cynical customer and everyone is on a constant merry-go-round.
A bank can have all the bells and whistles it likes in terms of technology and, for sure, some customers will be attracted purely by the tech experience. But as long as the aforementioned approach is prevalent, eventually the customer discovers that they are not top of a bank’s priorities and they move on to a better offer.
To be fair, it not only banks that suffer from these failings. I have abandoned at least one online shopping site because it just could not deliver the goods in a reasonable time frame and coherent manner (it was less hassle to visit a store). Utilities need a reminder every now and then for customers to be sure they are on the best rate and, in the UK, they are starting to catch the attention of politicians. Labour leader Ed Miliband has vowed to get tough with them if he wins the next election and, for the first time for many years, it seems as if banks are no longer the politicians’ number one scapegoat for everything that is wrong with the world.
But back to banks, and there are signs that the message is getting through. Barclays has received a lot of attention for its admirable development of mobile payment service Pingit. Possibly more significant, however, is the news that the bank is reviewing its overdraft policy. It is already trialling a text alert system warning customers when they are about go overdrawn and incur a charge.
Another new service could be to allow customers with multiple accounts to offset funds in, for example, a savings account to stop them being overdrawn in a current account. Retail and business banking CEO Ashok Vaswani told the Daily Telegraph: "I firmly believe that once a customer has been given the opportunity to save £22 [in a penalty charge] they will say to themselves: ‘This bank is looking out for me’.”
The UK’s banks need to come up with a host of initiatives of this type if their parallel tech developments are really going to bear fruit.
Brian Caplen is the editor of The Banker
