While community banks already do a great job at building a culture that truly cares about the customer and a culture that does not open perverse incentives for unchecked account opening, that does not mean we can rest. There are some procedural changes we can make in our industry to further build trust. Trust, unfortunately, is what is lacking at banks as evidenced by a new study out by Ernst and Young that shows that banks with branches are falling further behind digital-only banks and fintech applications in some important areas. Below are three areas that traditional brick and mortar banks are losing the battle and some ways to change the trend.
Four Areas We Need To Get Right
Unbiased advice: Just 25% of consumers trusted their traditional brick-and-mortar banks to provide unbiased advice. We have the large banks to thank for that and it was surprising that digital-only banks and fintech firms scored higher. If our industry is going to keep our branch networks, then delivering unbiased financial advice must be a touchstone of our value proposition. Banks need to have a clear view of what advice they are willing to give and how they are going to give it. Further, like we learned from the Wells Fargo scandal, banks need to invest not only in the ethics of their culture but about creating a culture that honestly cares about the customer’s welfare.
Easy Advice: Not only do banks need to deliver unbiased advice, but they have to make the advice convenient. That means making sure bankers are available in the branches, via email, for a conference call, for a webinar for video conference (to include Facetime, Skype and Google Hangout) and, in the future, via chatbot (to include voice-enabled chatbots). In tests we have conducted, chatbots proved hundreds of times faster than a call center and almost five times faster than using an app. We predict chatbots will become the dominate way to render simple advice such as what CD to invest in, getting mortgage rates, health savings account questions, educational savings accounts, and many others.
Fee Transparency: This is an easy one to fix and one that we have been harping on. Banks make it too difficult to understand their fees. Just look at the average Schedule of Fees and you can see why the consumer is overwhelmed by having to look through the entire bank menu just to figure out what the combined balance limits are for their checking account charges. We are waiting for a bank to design a tab on their mobile application that clearly explains only the fees applicable to that product and that customer in plain English.
Recommending suitable products: Only 21% of customers at traditional banks had complete trust that their financial institution would recommend the best product for them. That is exceedingly low. Not only do bankers need to render unbiased advice that is easy to obtain, but they need to personalize the choice to make sure the product is applicable. More and more banks are making it a strategic imperative to leverage customer data to make sure not only can the right product be recommended, but there is an intelligent system that continues to verify if the product is being properly used. We do a lot of mystery shopping and now dozens of accounts still open with low balances. Not once has a bank ever suggested closing or consolidating accounts in order to save money. The main reason is not that community bankers don’t care, but that we don’t have the systems. This will change and when it does advice as to core banking, wealth management, mortgage and insurance will get more personalized and more relevant.
As banks become less transactional and more advisory, customers need to be trained that their bank is the first place they should go for financial advice. To do this, we need to build back the trust we used to have and figure out how to painlessly deliver personalized advice that is relevant and valuable. Technology has already made these efforts easier. However, we need to continue to make hiring, training, creating tools and developing a culture so our customers won’t want to go anywhere else.
Submitted by Chris Nichols on October 27, 2016