In the middle of a crisis, it’s human nature to deal with things day by day. But a new report from Forrester Research analyst Bill Doyle asks bankers to look ahead and consider what impact the global financial crisis will have on customer loyalty.
The report reveals customer advocacy scores for US banks have fallen to their lowest levels ever – bad news for banks seeking to retain customers in turbulent times.
Closer to home, business banking research house East & Partners has found promoters and advocates are virtually non-existent in business banking in Australia. Less than 1 per cent of all businesses are willing to recommend their bank to a friend or colleague.
Retaining customers will be critical for banks in 2009, and this means bankers are going to have to get better at convincing customers they care.
The financial crisis has driven a larger number of bank mergers, which can be tough on customers. Forrester argues Washington Mutual, Wachovia and Merrill Lynch customers are all likely to experience service hiccups as they are absorbed by their suitors, something which is likely to keep customer advocacy scores low. Westpac and the Commonwealth Bank will also have to work hard to retain St George and BankWest customers.
Customer decisions to switch banks are typically driven by a desire for better pricing (interest rates), lower fees, or better customer service.
Google Insights reveals since the credit crunch there has been an upward trend in the number of searches for “cheap banking”.
The report reveals customer advocacy scores for US banks have fallen to their lowest levels ever – bad news for banks seeking to retain customers in turbulent times.
Closer to home, business banking research house East & Partners has found promoters and advocates are virtually non-existent in business banking in Australia. Less than 1 per cent of all businesses are willing to recommend their bank to a friend or colleague.
Retaining customers will be critical for banks in 2009, and this means bankers are going to have to get better at convincing customers they care.
The financial crisis has driven a larger number of bank mergers, which can be tough on customers. Forrester argues Washington Mutual, Wachovia and Merrill Lynch customers are all likely to experience service hiccups as they are absorbed by their suitors, something which is likely to keep customer advocacy scores low. Westpac and the Commonwealth Bank will also have to work hard to retain St George and BankWest customers.
Customer decisions to switch banks are typically driven by a desire for better pricing (interest rates), lower fees, or better customer service.
Google Insights reveals since the credit crunch there has been an upward trend in the number of searches for “cheap banking”.
Source: Google Insights for Search
Forrester’s Doyle rightly points out “The direct banks’ products are simple and transparent, unlike the synthetic products that got us into the current mess”.
So what are the attributes that drive loyalty?
Forrester’s research has found three attributes which drive loyalty to smaller institutions over larger ones. They are:
1) “My banking institution always honours its promises or guarantees.”
2) “My banking institution offers the best prices, rates or fees.”
3) “Even if not regulated, my banking institution would do what’s right for the customer.”
Perhaps the best thing bankers can do now is try and underpromise and overdeliver?
4 comments:
Here's another reason why there's a crisis of customer loyalty:
I would be very interested to know whether other people in this fair city have experienced the home loan NIGHTMARE that myself and my husband have been going through for the last six weeks.
This is a tale of incompetence, unethical behaviour and general stuff-ups involving St George bank, Westpac, Commonwealth and the Office of State Revenue and it still isn't over.
It all began eight weeks ago. My husband and I weren't even seriously looking for an apartment to buy, but noticed that a 3 bedroom apartment was up for sale on our dream street in Queenscliff. Before we knew it, our offer had been accepted and we had exchanged contracts.
In the meantime we had met with a mortgage broker and decided that we wanted to go with St George. They had a great offer and both myself and my husband had been banking with them for many years. After pulling together more personal information than an aspiring spy would need to supply to ASIO, our application was in. This was where the fun began.
After being told that we were able to afford a mortgage many hundreds of thousands above what we were intending to borrow our affordability was suddenly an issue. St George had decided that since my husband was a sole trader and ran his own business, that our deposit that was sitting in his bank account wasn't genuine savings. Apparently what he should have done is pay himself a salary into a different account (something that is normally only required from companies, not sole traders). So suddenly, our hard-earned deposit didn't exist in the eyes of St George. As this bombshell was dropped on us two days before our cooling-off period was due to expire, we decided to extend it by another week, which the vendor happily accepted.
We then had to get a letter in writing from my parents saying that they were going to give us the deposit for the loan, despite the fact that they weren't, because we didn't need it, because the money was in our account, but according to St George that money didn't exist. Once we got over this little hurdle, we were assured that everything would be fine. The only thing that St George were now waiting on was the official 'Notice of Assessment' document to arrive from the tax office from my husband's tax return. They assured us that everything for the loan was fine. Our affordability was fine. They were happy to include the Lenders Mortgage Insurance (the extortionate amount that you, the lender, has to pay to insure your bank against you defaulting!) in the loan. All good. All they needed was the official document from the tax office.
As we had provided the tax assessment from our accountant to St George, and we knew the NOA would be identical, after speaking to our broker, we then went ahead and allowed the cooling-off period to expire, as we had been assured everything would be fine.
What happened next was UNBELIEVABLE.
The following Wednesday the NOA arrived from the tax office. As expected it was exactly the same as the assessment, to the cent in fact. What we didn't know, was that St George changed their credit policy over the weekend.
Normally when a bank changes its credit policy, it doesn't apply to loans in the system. The reason for this, is that these loans may have exchanged based on the info they've been given by their credit officer. If the rules suddenly all change, then you could be left unable to buy your property, and once you're out of a cooling off period, then if you pull out you'll be up for 10% of the purchase price, which is a LOT of money. To apply a credit policy change to a loan already in the system would be completely unethical, and not something your friendly neighbourhood bank would do. Right?
Wrong.
St George aren't the friendly neighbourhood bank we thought they were. They left us up the proverbial creek without a paddle.
When we provided them with the NOA, they suddenly announced that they wouldn't be able to include the LMI in the loan, which meant we'd have to find another $12K. They also re-questioned every single inch of our application. They suddenly didn't believe that my husband would have enough running costs to support his business. My husband is a web designer. His business has no overheads. He designs a website. He charges his client. That's the end of it. St George weren't happy with this. They wanted to know when his costs would be leaving his account following a large deposit from a client the week before. There were no costs. He'd just received payment from a big job - something you'd expect a bank to be happy about just before you get a home loan. They weren't.
No matter how we explained it to them, they didn't get it. We then had to tell them that we'd be getting even more money from my parents to cover the non-existent 'running costs' for my husband's business.
Whilst all of this was going on, I noticed that a new account had popped-up when I logged onto my internet banking with St George. I didn't take much notice of it, as I assumed that it had something to do with home loan. After a few weeks however, as the month flicked over into March, I suddenly noticed that this new account had gone $7.00 into debit! I called St George's call centre and asked what the account was for, and why it had suddenly gone into debit, and was informed "It's coz of your broker". Apparently St George felt no need to call me to tell me that they'd opened a new account in my name, and despite the fact that my loan wouldn't be settling for another month, and therefore not used they had no problem charging me a $7 account-keeping fee. I'm not sure what account they were 'keeping' for me, as it HADN'T BEEN USED!
After being placed on hold for over 10 minutes, my lovely call centre assisstant came back on the line and grudgingly informed me that St George would refund the fee on this one occasion, but that it would get charged again on the first of the next month and the wouldn't refund that - despite the fact that I still would not have used the account by then.
At this point, we started to realise that even if we got the loan that we wanted and needed from St George, we probably didn't want to bank with them. Ever.
So, back to square one with only three weeks to go to settlement, and our broker recommended that we put in an application to Commonwealth. Yep, Commonwealth. The big, huge, ugly bank that everyone loves to hate vs. St George, the 'friendly neighbourhood bank', or so they claim.
Well big, ugly Commonwealth gave us pre-approval on our loan within 24 hours. I was asked to provide one additional piece of info a few days later, and then magically two weeks from our application being received, it was approved. They were happy to include the LMI in the loan. They had no problem with the fact that Tim was a sole trader and was going to use the money in his account. Not a problem. My broker happily hand-delivered the First Home Owner Grant documents on that Friday to ensure that Commonwelath would check everything before they were sent to the Office of State Revenue. I wondered whether we had left enough time for the FHOG approval, but no, I was assured that they always get turned around in 48 hours without a hitch. It wouldn't be a problem.
So, with smiles on our faces we start the downward run to settlement, which was due to happen at 2.30pm today - a Monday. My solicitor assured me that he'd have the final figures for settlement for us by the Wednesday before. Wednesday rolled around, no word. Thursday rolled around; a call from my solicitor... the FHOG hasn't been approved yet.
No explanation of why. Just that it hadn't been approved, but sure it would be approved by the following day. Friday rolls around, and still no approval, at which point it's time to ask Dad to lend me $14,000 for a few days so that we can actually settle on the Monday.
Monday morning rolls around and suddenly an explanation! despite the fact that Commonwealth had, had a soft copy of the FHOG documents for THREE WEEKS and the originals for over a week, it turns out that we hadn't had the ID certified correctly. Now, I'm no home loan expert. I've never done this before. But I would have hoped that SOMEONE between my broker, St George and Commonwealth would have picked up the fact that there was supposed to be a special statement for the Office of State Revenue on ID documents. Apparently it didn't matter that the documents had been certified by a bona fide JP in the manner of ALL OTHER LEGAL documents in the sodding legal system. No, apparently the Office of State Revenue needs something different.
No matter. Dad's lent us the $14,000. We're settling. We'll pay him back in a couple of days when the money comes through. We're settling. We're going to own a property before the day is out. We'll have water glimpses and a lockup garage. Life is good.
Settlement is booked for 2.30pm.
I'm expecting a jubilant call from my solicitor any minute.
2.45pm the phone rings.
It's my solicitor.
It's not good news.
We haven't settled.
Why not?
Because Westpac Bank - the vendor's bank - managed to turn up with the wrong title documents. Apparently there was another property settling in Manly (the next suburb) so an easy mistake to make. What? WHAT? I mean if a bank isn't capable of paying attention to detail, who is for god's sake?
The title documents for our property are apparently in Adelaide.
We move house on Wednesday.
Settlement is now booked for 3pm tomorrow, Tuesday.
God only knows whether we'll own our first home by the time the removalists arrive on Wednesday morning.
Hey,
I run the site BankVibe.com and was wondering if you would be interested in a link exchange. Let me know either way. Thanks!
Dan
Excellent read, I just passed this onto a colleague who was doing a little research on that. And he actually bought me lunch because I found it for him smile So let me rephrase that: Thanks for lunch!
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More that just banks should pay attention to this blog. How well customers are served and the atmosphere created are key to keeping current customers and expanding.
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