The Relevant Bank concept challenges attempts to finish the roof before starting the foundations.
What does being The Relevant Bank actually mean? First and foremost, it means being relevant personally – offering products and services consumers want, at the moments and through the channels they prefer.
For some time, one of the bits of received wisdom in consumer banking circles has been that you focus on high value customers and endeavor to engage them with high value products and services. In itself, there is of course nothing wrong with that idea. In fact it makes perfect and pretty obvious commercial sense.
Where it falls down however is in the sequencing. It’s like trying to build a glittering golden dome on top of a building that doesn't yet have any foundations! The high value offers are the golden dome. The basic business of building trust and sustained customer satisfaction are the foundations, walls and cross-ties. The parts that make the building stand up.
Trust and lasting satisfaction come from some apparently ordinary – mundane even – sources. This is about the most basic and clear needs: managing accounts, safely holding cash, processing transactions, providing credit. Problem is, although they may be basic, they’re still not being delivered right, every time. Complaints data show that most banks still fail to satisfy these needs flawlessly. Yet they are the very foundation of relevance. And once they are solidly in place, the climb towards “pinnacle service” and high value, lasting relationships can begin.
Is it even feasible, let alone worthwhile, aspiring to pinnacle service levels?
It is certainly feasible. Banks that understand the concept and the importance of customer relevance can use strategy and technology to raise the consistency of their process. Predictable levels of first time satisfaction of basic customer needs go up.
It is also highly worthwhile. It’s significant that institutions with the highest investment levels in customer service are also the most profitable. Becoming relevant by earning customer trust and loyalty pays off. Customers are happier to have those high value conversations. But the Relevant Bank doesn't try to start at the top. It engages the customer from a solid base.
There is no doubt that bank customers are changing. They are applying the values and demands of their other consumer and brand relationships to their bank. Only the Relevant Bank can survive and exceed their expectations.
Comments
Great post Nic!
High net worth individuals(HNIs) will always be able to find the space and service they want, but what about those who are not yet HNI? For them, trust and service are the two basic needs and the Relevant Bank as you have stated , should be able to address those aspects. The points made by Martin and Alexander are also to be looked at in the context of an average customer who cares for his $100 savings than a HNI would do. As James says the SME Bank model should be the basis of the Relevant Bank.
I believe, what you said, is the most important thing in gaining and sustaining customers - top-notch customer service.
The ideas of an “ideal” bank and SDB are rather feasible from my enterprise-architect-point of view. I would start from some architectural basics including
Of course, those are just a few architectural views from usually about 15-20ones.
Thanks,
AS
The bank needs to be relevant to its customers - not the other way around. Most high nett worth individuals and mass affluent didn't get there without taking risks, yet risk aversion rather than risk management is still the perception of many retail banks. Many services that were historically the preserve of banks are moving to a white labelled utility model. The traditional lock in of salary account to mortgage is increasingly unsustainable and home ownership is an increasingly unstable metric in a range of future scenarios. The market perception of banks as trusted havens of stability over the long term who will be there for you from cradle to grave is long gone. Today clients take on risk when they choose the services of a specific bank, in some cases they may have to bail themselves out in their role as taxpayers. Increasingly potential clients are opting for same/similar service offerings from non-banks.
(How?) do banks relate their current perception of income statement and balance sheet to their target customers and their lifestyle? What are the implications for risk and how they are managed? I don't think the investment in regulatory compliance alone is going to enhance your bank's ability to manage the risks associated with your target customers.
For the past two decades business has been forcing capital out (and the associated assets) and shifting towards present and future cash flows. Business ownership of assets is less and less prevalent. We are now seeing a similar pattern amongst consumers who have worked in those businesses. More and more is spent on consumption of experience (real and virtual) with less and less spent on acquisition of physical assets. Without security in the form of ownership of physical assets or the guarantee of salaried income over multiple years (as flexibility in the workforce continues to grow), banks have limited options for managing their balance sheet whilst growing their client offering.
As Nic says, bank customers are changing. The change is fundamental and threatens the principles that underlie the traditional banking model basics of assets, liabilities, income and expense. That represents an enormous risk to be managed at a time when so much attention is focused upon the more immediate concern of risk and regulation. Some are addressing this new reality with an holistic approach (such as FIDOR for example), many are still tweaking the edges however without questioning fundamentals of how they measure their performance and the associated risks. Newcomers are unbundling "traditional" bank services then re-combining them with non-bank offerings - Robert's retailers who sell banking services for example.
James, I read your "The Hamilton Plan: SME Development Bank" It seems to be an idea which could be utilized and the structure could indeed be implemented if the political and banking community were to adapt the concept. It kind of reminds me of what the SBA and there loans were originally meant to provide, to some degree, for our country. I personally have seen that its original intent and practices have been lost over the years. It appears that the large banks may possibly now be interested in, thinking about functioning or helping, sectors of the markets you talk about in your article. However they are making much more relying on the Federal Reserves QE programs, and don't appear to be thinking of implementing such a practical solution. It do see a draw back with still having the Government as part of the plan, but since it originated as The Hamilton Plan, then making room for such a plan would be an improvement then how things are currently. My solution for fixing and improving matters where banks are involved or concerned is more geared in fixing the financial housing markets, which was part of the original problem that got us here, and fixing it so that it would not occur again, build real wealth for all involved, get the Government out of that business and having the people and the free market system be the investors and owners under a Covered Bond Banking System. I proposed it back in February of 2009. You can read it at www.thefhmsolution.com This has been rejected in its original form, for the same reasons that The Hamilton Plan would most likely be sidestepped and implemented with a similar but inferior plan. I encourage you to keep the proposal alive though. Good luck.
Great post...
banks need to evolve with the changing market and technological conditions...
its one thing to build a competitive capitalist enterprise
its somewhat a different task in using capital formation to fund development to resuscitate the economy
at the height of the global banking crisis i authored The Hamilton Plan to incubate SME manufactures
one of its key tenant was the pooling and recognition of all forms of capital....
encourage its formation as equal shareholder capital and focus its deployment....
your piece is spot on.... we need more relevant institutions...
and alternative forms of financial institutions are filling the void....
I just posted SME Development Bank to my Global Risk Community blog
The Hamilton Plan: SME Development Bank
I invite your comments and criticisms....
cheers, jbm
Excellent and relevant points about performance fundamentals, for individual clients.
I also recommend a shift in perspective. Consider the lesson of a GEICO. GEICO is not an insurer, it is a retailer which happens to sell insurance.
In the same way, a "relevant bank" is a retailer which happens to sell banking services. That makes all the difference, when the client is the focus.