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Is service irrelevant in banking?

We work in a zero fault tolerance industry.

The latest example of zero fault tolerance is Bank of America, whose website went down over the weekend.

For a major bank website to go down for even part of a busy workday is bad. For that website to be Bank of America’s, used by 29 million people, was headline news.

And no, it wasn’t anything to do with Wikileaks!

The key is that this illustrates how essential it is for a bank to be 100% available, 100% reliable and 100% accessible.

It is the reason why a bank has huge issues if their ATM network can’t be used for half a day; or their POS systems go down so merchants can’t process payments; or their payments transactions are incorrect; or …

The bottom line is that banking is a business that people expect reliability and accuracy and, in fact, take it for granted.

Checking your online statement, how many people notice or thank a bank for processing all of their payments automatically and accurately?


How many notice when one transaction or charge is applied?


And the point here is that banks primarily exist as record keepers and transaction processors.

The hygiene factor for a bank is to be able to process accurately on time, every time, and to keep a record to that transaction.

The banks that don’t are the ones that get the complaints.

This is illustrated well in the UK by the arrival of Santander, which has been getting huge levels of complaints:

“Santander has emerged as the bank with the highest proportion of customer complaints in the UK, with gripes about its banking service flooding in at the rate of one every minute during the first half of this year.

“The Spanish-owned bank received 216,158 complaints in the six months, making it the institution with the highest ratio of complaints to the number of customer accounts. Barclays was next with 195,956 …

“Complaints about banking services made up the vast majority of consumer grievances. They ranged from minor issues such as chequebooks not arriving and long queues in branches, to more complex problems such as international payments not arriving on time.”

These levels of complaints did little to stifle business however, with market share in bank accounts and mortgages rising steadily throughout the last two years.

So maybe there is some fault tolerance.

Fault tolerance over small things, like chequebook delays and branch queuing, but no fault tolerance over bad behaviour that impacts customer funds.

So I guess there are some big questions here, such as:

  • What would make a customer walk?
  • What does it take for a customer to switch their main bank account?
  • What disaster would the bank have caused to befall the customer to make them walk?
  • Or, more importantly, what would a competitor bank have to offer the customer to encourage them to switch?
  • Is it just a rate churn … or does transaction processing and service make a difference?

These questions have not been addressed adequately, but there have been some attempts to analyse the issue of switching accounts.

For example, an excellent report was produced by Consumer Focus, a UK governmental organisation, in autumn 2010.

What this found is that most people don’t think about switching bank accounts, with three quarters of consumers never thinking of switching and just 7% who did in the last two years.

Compare that with other industries. For example, 31% of consumers switched energy supplier in the past two years, 26% their telecoms provider and 22% their home insurance company.

What is it about banking that causes people to never move their account?

Most of it appears to be related to the fact that consumers think it’s too much of a hassle to change and, if they did, that the other providers are just the same.

So there is no perceived competition in the industry and, if there is, that it’s too difficult to take advantage of these competitive offers.

Much of this is just in people’s minds, as it is actually quite easy to switch, but consumers just do not see a strong enough reason to switch.

For example, of the 7% who did switch, most were mainly motivated by a better deal (58%), rather than bad service (47%) or charges (36%).

So the real fault tolerance in banking is that you have a service where 93% of consumers will tolerate almost anything, as long as the bank is generally reliable.

3.5% will walk each year (7% over two years), and less than 2% will walk because the service or charges are bad.

Hmmm … no wonder most banks don’t care too much about competing on service.


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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  • “banks primarily exist as record keepers and transaction processors…the hygiene factor for a bank is to be able to process accurately on time, every time, and to keep a record to that transaction.”
    Yep. And this is one big reason why I’m not betting that firms like Apple will do very well in the world of mobile payments. They have no idea how to do transaction processing and billing.
    The telcos, on the other hand, do an absolutely terrible job of billing. So they’re entry into mobile payments isn’t going to be a picnic for consumers.

  • Chris Barry

    “Hmmm … no wonder most banks don’t care too much about competing on service.”
    Yet customer service is the number one claim to fame and the thing that all banks claim is their biggest competitive advantage.