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Banking basics for the digital age

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As I finished presenting at a recent conference, an audience member came up to me and said: “I guess you don’t like banks very much, do you?”

The question surprised me as I love banks.  I make my living from banks.  My only thought throughout each day is what’s next in banking.

I said this to the guy, and he said he was surprised how I spent most of my time on the blog, and in public speaking, openly criticising the banks for being slow, uncustomer focused and purely in it for the shareholder return.

“Ah”, I replied.  “You’re right there.  I don’t like the banks in that sense. But that is not disliking banks, that is disliking past bank thinking.”

He asked me to explain, and so here’s the thing.

When most of us remember the rose-tinted glasses of the vintage era of George Bailey – who I blogged about on Monday – we think of a tight human relationship between the bank and the customer.  The bank branch manager knew their customers intimately, both their personal and corporate customers.   They lived in harmony with their community and could name each and every individual by name.  They would know the exact level of expenditure and financial lifestyle of their customers, and whether they were good for the money.

This was a service industry and aimed to provide a great service by ensuring customers did not fall into debt, were supported in achieving their dreams and paid an honest dollar and cent for that service.

Over the years, four things happened to scupper that old George Bailey world.

The first is that the customer was ejected from the branch by technology.

The ATM, call centre and internet threw the human relationship directly with the branch manager out of the window.

This also meant that customers became account numbers, rather than names, and banks started treating them as such.

Second, banks introduced ‘free banking’.   Of course there is no such thing as a free lunch, so banks did not really offer free banking.  Instead, they offered banking for free for those who stayed in credit, cross-subsidised by charges to those who went overdrawn and through a focus on cross-selling.  This meant that customers began to be charged secretly for lots of transactions and services they never had before.  Pile ‘em high and sell ‘em cheap.  Charge a dollar for every mistake the customer makes.  Forget if they are good for the money and let’s just rape their pockets and purses.

Third, banks became geared to stock market expectations.  The managers were focused upon shareholder returns, because they were given share options.  The quarterly profit focus became a sales focus.  Banks brought in retailers and non-bank executives who could buck the stock price.  The bank management team became less focused upon risk management and more focused upon leverage, basis points and outdoing the competition.  Mergers and acquisitions became the name of the day, and few bank leaders paid credence to customer service as all banks were the same and customers couldn’t be bothered to switch their bank accounts anyway.

Finally, the customer lost sight of their bank and their money.  As the relationship and affordability focus disappeared from the bank side, the customer was weaned onto living on credit and leveraging their debts.  The customer also used technology but, as they stopped going into their bank branch, they could no longer keep track of their balances.  Until mobile banking came around, customers would only know their balance if they logged on in the morning or called their bank.  As a result, they could regularly fall into an overdraft state and get charged for it.

And charged they were. 

The American banks typified this loss of customer focus with Goldman Sachs referring to their customers as muppets, whilst retail banks began processing all the withdrawals at end of day before the deposits, thus pushing customers into overdraft and fees wherever possible.

That’s the recent bank thinking I dislike.

And what I really am trying to advocate, in my love of banking, is that we return to the good old days of George Bailey’s style banking through digital channels.

A good old bank relationship with a human remotely through digitised dialogue.

A digital bank relationship where you can feel through their apps, alerts, advice and attention that they really have your best interests at their heart.

A digital bank system that avoids unexpected fees, alerts before fees are applied, processes withdrawals and deposits in real-time as they occur and provides you with flexibility to be overdrawn for 24 hours at no charge.

A digital bank structure that charges a fee, as free banking is stupid.

A digital bank management team who really do place customer focus at the heart of building their bank.

And a digital bank service that makes me realise my deposits build other people’s houses and their deposits build mine.

In other words, a digital bank that is human and social, relevant and real.

No more faceless banking, but human relationships with finance through digital media.

That’s what I’m really talking about here.


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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, 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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