Bank Watching Brief
Banks Need A Serious Watching Brief On Consumer Sentiments & Loyalty for Long-term Security
Note on Article Below I wrote this article about the banks on 1 February 2011.
On re-reading it, I decided to make some changes because it may have seemed too harsh.
Then on February 8th, two of the major banks announced enormous increases in profits, well above those of normal business returns, and within a relatively short period after the Global Financial Crisis.
I decided that the banks needed to be reminded that although they had a licensed position, they have an unusual responsibility to their clients and customer service, which seemed to be neglected in their quest for shareholder profits. It is not about restricting profits, but about ensuring that these do not come at the expense of customer service and responsive trading.
The Article
On December 23, 2010 Competitive Edge conducted our second national study on Consumer Sentiments, Emotions & Advocacy.
Conducted to 99% confidence level, this unique study found that a total of 86% of Australians felt that the banks had “far too much” to “too much” power at present. A further 57% of Australians felt the banks now have too much power.
The Bank of Scotland has just been fined 2.28 million pounds for its poor response to consumer complaints, and in Canada in recent days there has been a backlash against the Royal Bank of Canada by consumers online.
You can put this down to “bank bashing” which I’m sure the bank associations and PR experts would like to do, however bank complaints, and associated dissatisfaction with banks, is rising. In Australia and they have increased from 10% of the major sector complaints to 18% of those complaints, putting banks in second position behind telcos for customer complaints and dissatisfaction in the 15 month period since our national study in 2009.
Yesterday, the NAB went online using Twitter to explain their problems with their online banking system and then, probably as a result of this, the overloading of their facilities. This is not the first time the bank has had major computer problems, but it seems that when you have one of only four major licences, you develop a “Marie Antoinette culture” of “let them eat cake”.
It’s true that consumers in Australia, the UK and Canada, through their Reserve Bank “stability” are captive to four or six banks that have a low risk business model based on a licence to monopolise the banking and finance space as a result of government policy.
The “stability” comes from the fact that consumers cannot upset the market with brand switching, boycotting or defection to “near” financial institutions because, as we have seen with building societies and recently during the Global Financial Crisis, only the banks get support from the government and a guarantee of financial backing in the Australian market. “Stability” has its price and consumers always pay it via the government, or directly via their pocket in high fees and lack of choice.
Times, however, are changing. Governments will have to consider the rising tide of consumer sentiments in relation to banking. If the banks do not take the effort to treat their customers seriously and continue to make the assumption that they will always have a collective licence over market share, and be the only game in town, then governments may be forced, including the Australian Government, to make serious choices, which may compromise the established banking position, especially in Canada, UK and Australia.
The bank customer service and complaint handling culture has to change and be more about relationships than processes that have consumers queuing to be heard and emerging from the queue dissatisfied. It has to be about retention of customers as an essential ingredient in the business model, and a renewed view of consumers who can be “lost” to the established banking system in the long term if this licence-driven high-handed approach continues.
Wake up, banks. We need you, but you can be re-invented in another format in a time that is emerging too quickly for you to defend.
The chart second below shows that 78% of the national respondents would like to see more second tier banks, not developed for future takeover by the Big 4 banks. Only 7% said that they would not like this to happen, and 15% were undecided.
Do you feel that the banks have too much power, especially since the Global Financial Crisis?
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Would you like to see the growth of more second tier banks that cannot be absorbed or taken over by the “Big 4” banks?
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Banks have the power at present, but if government listens to business and consumers in this country, then they should be worried and less dogmatic about how they will control interest rates even beyond the discretion of the RBA and Treasury.
There may be changes in the wind, but in the meantime we can expect “bank bashing” to become a national sport with an extra large fan base, given our survey results and overall consumer dissatisfaction with current performance, choice and service.
Ref: By: David Higginbottom
Competitive Edge
Date: February 1, 2011
Reference: www.consumersentiments.com.au
Ref: Senti Banks watching brief 1-2-11
