Even if you take for granted that the banks need to raise checking revenue, it’s hard to argue the way they’ve gone about doing it has been effective. To get some perspective on what banks should be doing instead, I spoke to John Tschohl, president of Service Quality Institute, a customer service consultancy that counts many banks among its clients. Here’s what he had to say.
What do you see as the mistakes banks have made selling their new pricing schemes and their new fees to customers?
Arrogance. They forgot that they were in the customer experience business. They forgot that the best way to keep customers and get new customers is to create value. I think they forgot that they were in the service business.
You say banks have failed to create value for customers. Can you elaborate on that a little bit?
Particularly talking about the large banks. It is not the small banks. It is not the credit unions. It is the large banks who think and act like a monopoly. When you forget about your customers and your goal is, “How do I rip you off? How do I skin you for more money?” Not from creating great value, but from saying “OK, I have to figure out how to increase more of my bottom line so I could pay bigger bonuses to my executive team.”
I think you lost your focus, you lost your message, and that is the problem with some of these larger banks that are acting like a monopoly. If they were in Canada, they could get away with it because there are only six banks in Canada. But in this country, you have 5,000 banks, plus probably another 5,000 credit unions — you have more competition in the United States.
So what could banks do better to deal with the new regulatory environment but still maintain their relationship with customers?
Take it back to focusing on the customer experience — providing a high level of customer service. That does not mean adding more people, it means having better hours. If I was one of these large banks, they have hours that are more convenient to banks. Their hours, I think, are not very conducive to the customer. Some of them have voice mail instead of talking to a live person.
I think you can grow your business faster by providing a better customer experience so you attract more customers, more money, more clients, more loans, more deposits. And I think their thought is, “How do I just extract more of what I have presently got without adding value?”
Say you’re a large bank and you have looked at your inflows and outflows, and you decide that you have to impose a new fee. How do you do that in a way that is not alienating customers?
I can impose a new fee, but I need to have a new service that will have value that somebody wants to pay for.
So if I, all of a sudden, want to charge $5 a month for somebody to use my checking account, and I have never charged before — why? because I just want more money? I do not think that is adding any value.
Do you think that is why a lot of bank customers have expressed frustration both by moving accounts and by speaking up?
I think so, and the best way the customer can react is when a bank starts to charge these fees, is just quickly switch banks. And when you close your account, make sure you tell the president of your bank why you closed it.
There are so many options, there are so many other small banks you could move to that do not have some of these crazy fees. You can also go to credit unions, which tend to be very conducive. Huge options in terms of where you can go.
U.S. Bank right now wants to charge a fee for having a checking account if you do not have $1,500 in the account. I told my son about it, and he said “No, my banker told me that it’s not going to happen.” Well, it is going to happen. I think that when you condone that type of behavior, you encourage them to do even more. I think the reason Bank of America folded on their fee for using a debit card is that they have a huge number of defections. There were people leaving Bank of America left and right.
So you think it is a problem of banks taking their customers for granted.
Taking them for granted and arrogance. See, it is the big banks that are doing this. It is not the small little banks. I believe that when you are paying people million-dollar salaries and all the people around are collecting huge amounts of income, they have no grasp of how 80 percent of their customers operate. They have lost touch with the customer.
So if tomorrow JP Morgan, Chase, or Bank of America, or some other of the top 10 banks in the United States came to you and asked, “How do we improve our customer experience?” can you offer any specific advice for them?
I would say to do several things. No. 1 is to get rid of any voice mail-activated system, IVR. Have humans. No. 2, change the hours that you are open to make it more conducive to the customer, instead of having banker hours. No. 3, train every single person in your company on the art of customer service with something new and fresh every four months.
No. 4, I would look at all the dumb rules and policies and procedures you have in place that piss off customers, that increase cost, that have no value and eliminate them. What happens is we increase the cost of operation because we put in place a lot of dumb rules and policies and procedures that have no value, and they dramatically increase the cost.
If you can change policies, rules and procedures, streamline things to shrink the time by 90 percent it takes to get things done, you save millions of dollars, particularly if you are a large bank, and your customers are happier.
So how did we get here, how did we get to a situation where the big banks customer care policies are so, in your view, out of whack?
Banks have notoriously had millions of dollars available for marketing — unlimited marketing money — and so it has been more of an acquisition mode. They just keep spending money on marketing and advertising, and they do not really track their defection rates. And the other banks have not been as customer-driven as they could be, so people think that all banks are the same.
TD Bank in the United States — they bought Commerce Bank in 2007. Commerce Bank in 2007 was the most customer-driven bank in the United States, and it has dramatically slid backward. They lost their whole focus on customer service.
So you think there is a wide variance in the customer experience in the banking industry.
Night and day. I would say that probably 95 percent of all banks in this country believe they are awesome at service. If you were talking to the CEO, 95 percent would believe that they are awesome at service. If you were to survey your customers, the readers, they would have trouble identifying 5 percent of banks that provide great service.
So my problem that I have is that when a guy thinks he is already perfect, and touches God every day, he really does not see the need to improve the customer experience.
I use a credit union here in Bloomington, Minn., called Star Choice, and the credit union here is unbelievably good. I will just give you an example of the customer experience. I drove up to the bank; it was 7:15 in the morning. I did not know what time the bank opened up, so I was the first person there. An employee drove up, I got out of my car and asked what time the bank opened up. The girl said, “Mr. Tschohl, the drive-up opens at 7:30; the bank opens at 9. If you will wait just a minute, I will go into the bank and open up the front door for you.”
So you want to bank at places that provide great service, and not every bank does that. Credit unions tend to be better, but not all of them are great.
Follow me on Twitter: @ClaesBell.