Last week Lord Turner, chairman of the FSA, made some comments about free banking being bad for customers, which have been widely reported in the media. His argument was that free banking is a loss leader so bank are compelled to try and cross sell other products.
In fact the strategy of retail banks doesn’t seem to have changed very much over the past few years. As Lord Turner says it is to acquire current account customers and cross sell them other products. Lloyds Banking Group for example talks about its strategy being to “deliver deep and enduring customer relationships which deliver real value to customers”…it goes on “the strategy is based on a deep understanding of Retail’s customers and their needs”. The aim is for “customers [to] choose Retail’s brands for more of their financial needs”.
Yet most of the banks I’ve come across have been spectacularly unsuccessful in doing that, with an average product holding per customer hovering only just over one.
Why is this? Well for a start most financial institutions, like Lloyds above, talk about “building deep and lasting relationships with customers”. But I suspect that, like most people I am more interested in having “deep and lasting relationships” with my friends and family, not with my bank. All I ask of my bank is that it is efficient and good value. For most people banking is a utility more akin to the National Grid – I expect the ATM to give me the money I have in my account and for my card to work in shops (and of course for my money to be safe).
In fact banks seem to have done all they can not to build relationships with customers. Fundamentally people form relationships with people. But I don’t know the name of anybody at my bank. I can’t remember the last time I last spoke to somebody there. I tend to do all my banking online and I’ve not got round to setting up telephone banking. And its months since I last set foot in a branch.
No, my bank has forsaken personal relationships. My guess is that, like most other financial institutions it has given the job to a centralised “customer relationship management” team. These people use software to analyse customers and segment them to send them relevant and targeted offers. I don’t know how well this works, but all I ever get sent by my bank is details of a credit card that is a worse deal than the card I’ve already got (from another bank). Lets be honest here, CRM has got nothing to do with relationships.
Generally I’ve resisted writing about my employers in this blog. But last week I spent some time with the team at thinkbanking. Every thinkbanking customer has their own named banking manager here in Salford, who they can call on their direct line. But in fact customers are more likely to get a call from us. The manager’s job is to work with their customers to help them manage their money (and ensure that all their key bills are paid). Our software predicts customers’ balances into the future so if it looks like they are going to run out of money before a bill gets paid we can give the customer a call. On average customers talk to their manager about once a week and, yes, they do build up a relationship with them. As a result it is pretty common for banking managers to receive thank you notes, Christmas cards and so on from their customers.
What might interest Lord Turner about thinkbanking is that it isn’t free. The account costs £14.50 a month for a single account and £19.50 for a joint. But there are no nasty surprises like overdraft fees, returned items charges etc. It’s a clear, simple and transparent charge – and customers pay it because they get value from the service that we offer. Oh, and the charge means that thinkbanking is profitable for us to run in its own right, without us needing to cross sell.