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Is banks' recent customer focus beginning to slip?

In April, after the UK’s largest banks had published their financial results for last year, the professional services firm KPMG summarised the results. KPMG’s head of banking audit, Pamela McIntyre, commented on the tension between profitability and the proclaimed focus on customer service:

“Banks have reshaped their balance sheets and are on course to meet their targets for capital, leverage and liquidity. The unanimous commitment to improve customer service also featured in the annual reports. However, ultimately one of the key measures of success is return on equity, which is still unsustainably below the banks’ cost of capital. Cost-cutting will continue. However banks must use new technologies to increase returns from their customer and cost reduction activities.”

KPMG, April 2015

The banks appear to have taken this on board. The BSA has commissioned Canadean Consumer, a survey company, to track customer service at banks and building societies each quarter for almost two years. Some of these results indicate that, despite the banks’ stated intentions to put customers at the centre of their business, this is not being reflected in measures of customer service.

Building societies have consistently scored better than banks in customer service surveys, but the difference appears to have grown in some important areas over the last year. Certainly the gap is widening among customers who agree that they feel valued as a customer, treated as an individual, and more recently, whether they would recommend their provider to friends or family.

Why might building societies have higher standards of customer service than banks? In short, because ownership matters. Building societies are owned by their customers rather than shareholders, so they are more inherently focused on serving customers. Though banks have in recent years tried to make customers more central to their operations, their ownership structure can get in the way: the interests of customers still have to be weighed against the interests of shareholders.

The BSA’s survey backs this up, showing a large difference between bank and building society customers in terms of influence over the direction of the business: 50% of bank customers said that they had a say over how the bank was run, at building societies it was 75%. And 86% of building society customers agreed that any comments or feedback that they gave would be listened to and acted upon, compared to just 71% of bank customers.

A focus on customer service can yield improvements for as long it receives senior management attention, but for the improvement to be sustained it has to be embedded in an organisation and its culture. Building societies do not always get it right, but their ownership structure can help to ensure they are more consistently pushing in the right direction. Other statistics also indicate the deeper differences in how customers are treated: banks continue to be subject to regulatory fines while there have been none on building societies in 2015, and societies get a much smaller proportion of complaints than their share of their product markets.

New technologies offer opportunities to serve customers in different ways, but how organisations go about integrating these in coming years will depend on whose interests they are ultimately looking to progress.

Come the reporting of 2015 results in Spring, it will be interesting to see whether banks are still putting their customers quite as central to their strategies as they claimed at the start of this year.

Canadean Consumer survey 2,000 adults every quarter for the BSA. The latest fieldwork was undertaken between 26 – 29 November 2015. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).

Posted by Andrew Gall on 16 December 2015