Helping to Restore the Customer  Connection

By Michael Ruckman

Original article was published in BAI Banking Strategies on  August 1, 2010

Helping customers in the wake of the financial crisis.

The last few years have not been the best of times for financial institutions as they fought to survive the global credit and liquidity crisis that many believe they created. Inevitably, as these institutions turned inward to get their balance sheets back in order, they engaged in activities that further damaged the relationships they had with their customers.

At a time when “customer experience” is still an industry buzzword, who is really looking out for the customer?

Not the banks, it seems. In the wake of the financial meltdown in 2008-2009, credit limits were lowered and rates were raised, even on the customers who were not delinquent. Fees and penalties for those who were delinquent spun out of control. Staff cuts meant a downgrade in service quality and cost optimization generated new fees. Tactics used for collections became frantic and excessive. All this has created significant erosion in customer faith in financial institutions.

Yes, it has been a tough time to be a banker, for sure. But there is also opportunity for those institutions willing to seize it. In a market of financial turmoil, struggling competitors and a large portion of the population in need, why not step up and start to help people? What better way to build customer confidence and loyalty?

While some banks have gotten that message, most seem to lack an understanding of how to help in a way that will strengthen relationships with customers and position the institution for greater future success. Here are some thoughts for beginning that process.



In our view, the kind of help bankers need to extend to customers in the current environment can be placed into three categories: 1) Helping because I have to; 2)

Helping because it helps me; and 3) Helping because it is the right thing to do.  Helping because I have to inevitably requires discussion of government programs, such as the Home Affordable Modification Program (HAMP); new requirements for disclosing the proper calculations of interest that will be paid on credit cards; restrictions on overdraft programs; and the general regulatory crackdown on excessive fees. While such programs do help consumers, this has not always happened as quickly as some would prefer. The banks have not eagerly embraced more government regulation and bank customers, in some cases, have not been diligent about helping themselves.

For example, the relatively low rate of conversions from trial HAMP modifications to completed modifications is partly due to obstacles in receiving the necessary, completed documentation from the customers themselves. As a result, the Treasury’s program, designed to help modify between three and four million mortgages in three years, has only reached about 1% of that number in completed modifications.

The second form of helping customers involves self-interest on the part of banks. These are bank programs that are packaged and positioned as helping the customer.  This includes the various bank-sponsored loan modifications and conversions from revolving to installment balances, which truly help many people in financial trouble but also help the bank by stabilizing that debt and achieving a higher probability of repayment.

Unfortunately, such programs sometimes include hidden fees and many people who do not qualify because their debt is too high or their income is too low are left accumulating even more interest and penalties. And because most customers will not be given other options from their bank to resolve their repayment issues, we believe that these programs are more about helping the bank than helping the customers.

That brings us to the final category, helping customers because it’s the right thing to do, which we believe represents the best opportunity for creating loyalty and solid customer relationships. These are the efforts to educate consumers on how to resolve their financial issues, create proper budgets and plan for the future. This category also represents an excellent opportunity for banks to build more in-depth knowledge of their customers and to create a more stable credit portfolio as a result of that knowledge. This opportunity applies not only to those customers that are keeping up with payments today but also to those who really need help finding a solution to their debt problems.



Based on our belief that banks are focused almost entirely on the first two categories of helping customers, we believe that the time is right for a disruptive offering in the banking industry along the lines of the Apple iPod for the music industry or Skype for the telecoms industry. Considering the nature of what a customer seeks when they go to a bank, we detect a large gap between what customers truly desire from their bank and what is currently being offered.

What do people seek from their bank? Banks, of course, survey their customers all the time to answer that question, a process that has driven improvements to service quality, reduction of time spent in lines and different types of access through alternative channels. But have we really asked them what they hoped to get out of the banking relationship? What do they truly hope for as an outcome of having a relationship with a bank?

If we ask that question in the right way and sift through the customers that cannot articulate their answers because they cannot even imagine that a good relationship with their bank is possible, we will find room for a new role a bank can play in a person’s life. People will answer that question in ways that elicit their aspirations, such as receiving help in solving problems, improving their quality of life and in realizing their dreams.

In our opinion, the true test of generating loyal customer relationships should be a person’s ability to look back and say, “As a result of my relationship with my bank, I am much better off than I was before.” Considering results from the recent BAI and Finacle Index of Bank Consumer Sentiment, which found “a rising tide of customers losing trust in their primary bank,” not many customers are likely to say that right now.


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