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Does customer service in banking matter?

When talking with bankers, they refer to banking as "a utility".

It’s just something that’s there, like gas and electricity. It’s not valuable or differentiated and no-one wakes up wondering how their payment will take place. That’s why it’s not priced or serviced as something of value, but just thrown out there and use it or don’t, we don’t care.

I say this because customers don’t switch banks because they see it as just a utility, and bankers know this so they don't try to compete on customer service as they can make money regardless.

Even though it’s easy to change bank accounts and the European commission is making it even easier, banks know customers can’t be bothered changing because they think they’re all as bad as each other.

For example, Santander took over Abbey and now Abbey get awful customer reviews. If you go by the surveys, Abbey are the worst bank in Britain for customer service. And yet their actual customer numbers, announced last week, show a massive spike in customer growth.

If they’re known to be the worst bank in Britain for service , how come their business is growing?

Because customers don’t care.

Abbey offer better loan and savings rates, and customer flock in their hoards to the bank.

Meanwhile, the Co-operative Bank is a lovely cuddly bank. They’re known to be eco-friendly and nice. If you call them, their customer service and call centre staff are fantastic. Nothing is off-shore and it’s all very personality driven and friendly. Their internet site, Smile, is regularly voted as the best in Britain and their overall bank service comes top of most people’s lists.

But have they gained significant market share?

No.

They haven’t bought customers with good rates and so the customers have not followed.

So banks don’t need to care a jot about good customer service because it makes not a jot of difference. I mean Wachovia were known as the best bank in America for customer satisfaction, according to the American customer satisfaction index, and look what happened to them (bust if you didn't notice).

Added to which good service costs, and banks don’t want that overhead.

So do everything as cheaply as possible, don’t bother giving good service and just ensure your utility works.

Like gas and electricity, just make sure it works and be the lowest cost provider.

Then a little bird starts tweeting in my head: what if we made our bank the best it could possibly be?

What if we broke this utility mould and focused upon being exceptional?

What if we got customers to pay an annual fee, and then told them they would get the best of everything?

What if we bundled all the bells and whistles on the account, and gave them birthday cards and Christmas gifts?

What if we met with them once a year for a chat, called them with reminders of key things happening with their account, alerted them to better interest rates and deals whenever we released a new product ….

What if, what if, what if …

The what if’s are endless but, you know what, all of the above are available, have been tried and, you know what, the customers didn’t care.

They didn’t come, they didn’t pay, they didn’t want it.

Customers just want utility banking and bankers have become meshed in providing just a basic banking service.

Can this mutual apathy ever be broken I wonder?

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About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Greate article. And you are probably right – extraordinary customer service doesn’t pay. At least not in the short run… What about in the long run? And what level of customer service is need to not scare of the customers? No matter how cheap – will the customer really stay when the experience and service are bad? How bad?

  • Philip Janssens

    What you say about customers not caring for great service from their bank may be true for retail customers. In the end most retail domestic transactions are fully STP so don’t require any additional support in the first place. However you’ll hear a totally different story from corporate customers. They DO care for the level of support they get and have specific requirements, which a bank would be stupid to ignore…

  • Chris Skinner

    @Preben
    Long run? As long as the service is hygenic, it will work, e.g. base level secure transaction processing is the core.
    @Philip
    Yes and no. Corporate customers care, but it’s all a matter of size. SMEs get the same service as retail customers, so you have to be a mid or large cap to get real service attention. And a mid-cap should work with a mid-size banks; a large-cap with a universal bank.
    Strangely enough, that’s pretty much how it is. Big banks have big corporates; smaller banks have smaller corporates; and very small businesses and consumers have a basic service with little focus on delivering a great service …
    … except a few banks who have customers migrate to them because those customers care enough to seek them out.
    Chris

  • Customer service, as part of the global customer experience(!), does matter in banking (and in the back of his mind I believe Chris agrees – watch his future blogs :-).
    As it matters in utility spaces as electricity and gas. Even if price comparison is fairly easy and supported by national instances (http://www.vreg.be/en/index.asp for example in Belgium), the low price providers basically fail to gain market share due to a lack of quality of service.
    As it matters in banking. Last week I met friends who spent a while ago 2 hours at their main bank explaining their personal situation and plans to get a clear and tax optimized mortgage and insurance offer. After having received a 10 lines non-sense e-mail 2 weeks later which supposed to answer their questions, the decision was quickly made: insurances have been renewed elsewhere in the mean time; the banking stuff will follow once they have decided where to take the mortgage loan. (Unless their current bank will finally offer a far better mortgage rate of course 🙂
    PS: In its campaigns, this bank positions itself as “putting people first” / “come and meet us, because talking helps” … It surely did …

  • Good customer service in banks does matter. The key risk for the banks which do not provide a good service is that they would only retain the part of the clients’ business which is the most difficult to move i.e. current accounts. Arguably these accounts cost the most to manage and do not bring much revenue if not sold in conjunction with other products, thereby affecting the overall profitability of the bank.

  • Dan

    What if you DIDN’T get customers to pay an annual fee, but still delivered the best of everything? Wouldn’t that bring the customers flocking? The reason that the mutual apathy hasn’t been broken is because banks have a short sighted approach with only one goal: PROFIT.

  • Do customers really want utility banking? For some aspects like payments, I would say yes. You don’t need to go to a bank to make a payment these days. The payment space is really becoming a utility based service and there, quality of service and price are key differentiators. Consumers just want this to work and to be cheap.
    However for other aspects in (retail) banking, the key is for banks to realise that they are retail organisations that happen to sell financial products. Innovation should be customer driven and IT enabled and not the other way around as it very often is. Sales and customer service organisations within banks should be tightly coupled, for example linking customer service performance to sales success.
    The customer has changed, is more savvy, listens to his peers, … But he/she is still out there, ready to consume, and with a little bit of love, will be happy to buy from you.

  • Do customers really want utility banking? For some aspects like payments, I would say yes. You don’t need to go to a bank to make a payment these days. The payment space is really becoming a utility based service and there, quality of service and price are key differentiators. Consumers just want this to work and to be cheap.
    However for other aspects in (retail) banking, the key is for banks to realise that they are retail organisations that happen to sell financial products. Innovation should be customer driven and IT enabled and not the other way around as it very often is. Sales and customer service organisations within banks should be tightly coupled, for example linking customer service performance to sales success.
    The customer has changed, is more savvy, listens to his peers, … But he/she is still out there, ready to consume, and with a little bit of love, will be happy to buy from you.

  • Sandeep

    Great article…..I guess the key drivers of new customer acquistion might well be Attractive rates and promotions. However, for customer retention and repurchase, banks will have to focus on a combination of the offer itself and the customer experience. Inertia sure works in favour of the bank that already “has” the customer but will they get more of the wallet with indifferent service?
    Finally, good service from a customer perspective might be different from how the banks views it!

  • Sandeep

    Great article…..I guess the key drivers of new customer acquistion might well be Attractive rates and promotions. However, for customer retention and repurchase, banks will have to focus on a combination of the offer itself and the customer experience. Inertia sure works in favour of the bank that already “has” the customer but will they get more of the wallet with indifferent service?
    Finally, good service from a customer perspective might be different from how the banks views it!