I often hear the cry that "all banks are the same". It is true that many banks appear to have little differentiation. They are all as good or bad as each other, they all appear to compete on rates and rate churn, and they all have little service or product delineation. As soon as one bank brings out a new variation of an old product, it’s copied. The only real difference therefore is the culture of the bank, as you cannot copy a culture. But even then, most banks have the same attitude of little empowerment.
So it got me to thinking about what other industry suffers from the same issues and how do they compete and differentiate? An easy answer appears to be the airline industry … or maybe this just came to mind because I’m flying out of the country and am stuck at the airport.
As I drove to the airport, there were lots of signs for this bank and that bank, and they all seemed the same. "6x interest", "Sale: 5.9% over three years", "6.9% for the life of your loan" and so on. There were also lots of signs for airlines, with smiling and attractive hostesses photographed in nice, comfortable business class sections, welcoming and beckoning.
Again, they all seemed the same.
So, some would say that airlines are just like banks: they are all the same. They are completely commoditised and just compete on price.
Certainly, from the airlines view, if you go to Travelsupermarket, Expedia or similar travel websites, you could think that way. These sites come up with all the options, and then you take the cheapest. I want the direct, premium, non-flexible flight from A to B and “ta-da”, they come back with 50 or more options. You then take the cheapest or the one at the time that suits you.
In a similar way, Moneysupermarket, Confused and others do the same. I want a long-term, non-flexible mortgage for X, and “ta-da” … get lost, they say, you are one of those subprime scum we don’t deal with. Sorry, that’s my brother. “Ta-da” they say, and they all come back with the options and conditions. You take the one that suits you and off you go, assuming you fulfil all the lending criteria.
Yet, they all compete on price and are commoditised?
For example, I prefer to fly Singapore Airlines rather than British Airways. Why? Because the service is better, in my view. It is subtle but little nuances, such as bending down to speak with the passenger at eye level, make the difference. That’s cultural and you can’t copy a culture.
Then there’s things like the product. For example, I prefer to fly Emirates than British Airways. This is because Emirates offer 500 entertainment channels on demand from every seat, whilst BA only offer a few. So, if the two fares are on offer, I will take the Emirates fare.
Meanwhile, when flying to the USA, I prefer BA over United. This is because the seats are the same-ish, but the crew are more attentive and the inflight entertainment is better.
So yes, the airlines are different and you can tell the difference … but maybe only if you are a frequent flyer. And this is also true in banking, with the banks being highly differentiated for the frequent bank user.
If I want really good service at eye level, then maybe I want my private Swiss bank.
If I want good service with lots of choices, maybe I want my corporate bank.
If I want a basic deposit account that is efficient, I get my general bank.
So banks are like airlines and, like airlines, they are trusted as long as they don’t crash! Seriously though, you get what you pay for.
The fact that most customers cannot see the difference in pricing for the bank that has the comfy flat beds versus the 500 entertainment channels versus the dedicated first and business class cabins versus the cheap no-frills, is the bank’s fault for not making this clear.
This is where banks do have a lot of work to do, as it is rarely clear how they are differentiated from an external and general view. It is only when you are the frequent bank user that you really find out how they are different.
Therefore, expect banks to start working hard at showing you how they are different in the future, and expect to see more banks showing their true colours and class.