“Why do banks lock their pens to the desk? if I'm trusting you with my money, don't you think you can trust me with your pen?”
anon.
The tragedy of Afghanistan has eclipsed all else over the past three weeks, and anyone could be forgiven for not exploring the money pages deep in the newspapers. The media is also not good at highlighting chronic problems without a singular point of focus.
Saturday’s Times, however, found one such in its headline on page 65: ‘HSBC hits National Trust Group with bank charges after 40 years’: just one aspect of the fast deteriorating standard of service from High Street banks.
So, in this commentary we look at the cocktail of challenges for banking services affecting huge numbers of personal customers, as branches close and the banks retreat behind their digital firewalls.
The digital revolution is the key ingredient behind the collapse of banking service, and its long-term macroeconomic impact has been felt principally through rock-bottom inflation and interest rates. As we have argued for several years, technology has de-monetised demand and introduced huge scalability in supply: thereby removing any scope for higher interest rates. Indeed, some 2-3 years ago we were teetering on the edge of negative interest rates in the UK, and even the recent resurgence of activity after 18 months of pandemic shut-downs has not lifted expectations much higher.
Banking profits have historically relied on a vibrant interest rate regime, but this has disappeared. It's therefore not surprising that they should seek to introduce charges and reduce costs wherever possible. That's the backdrop against which we should measure their current behaviour.
But unfortunately the impact of the digital revolution on banks hasn't stopped there. Instead, the absence of a coherent retail strategy has led to at least three malevolent influences flexing their muscles independently to compound their retreat from proper customer service.
Branch closures have now been going on for several years as banks have sought to reduce costs and increase digital penetration. In the old days, branch managers and staff knew their customers and could vouch not only for their credit-worthiness but also their identity. Levels of fraud were negligible in comparison to today, and transaction values well above today's online and telephone banking thresholds could be handled with confidence. Now, unless you have a passport or driving licence, forget it.
Cheques remain one of the only ways of making unrestricted payments: they’re widely used by charities and older folk. But with the imposition of charges, ceasing the use of pre-printed cheques and other constraints the banks are trying their best to squeeze them out of the system. A recent situation occurred where the same cheque was cleared twice, once digitally and once by physical presentation: so check your bank statements carefully!
Digital fraud has changed everything. The standard methods of online ID verification are all that stands between the banks and the fraudsters, who are legion in this new world of technology; and this has resulted in the banks taking more interest in their own safety than that of their customers. Thresholds are imposed to provide a degree of protection. They may cater for everyday spending, but they are hopeless for investment transfers. The banks compliance departments are in over-drive, and customer experience is the major loser.
The pandemic has accentuated both these trends, and turned a bad situation even worse. While other businesses have re-established service levels swiftly, the banks are still pushing out recorded pandemic excuses for ridiculously long wait times on telephone help, as well as closing down these services wherever possible. Perhaps they are trying to take a leaf out of Facebook's faceless customer service.
Where will all this lead? Digital functionality has some real strengths, but in so many areas its convenience seems to be primarily in the interest of business executives and not customers, as personal service is avoided at all costs.
Personal customers must have a ‘seat at the table’ in order for their voice to be heard; however capital markets have worshipped the cult of the institution so much that this is ignored. For the large digital businesses fuelled by advertising, the personal customer/user is little more than a grain of sand, and this perspective is certainly feeding into banking services.
It is for this reason that we argue so strongly for dis-intermediated individual customer share ownership: the place to start is with the tech giants, and the gateway for that is through ‘shares for data’. There is no doubt, however, that the banks could also do with a substantial increase in their customer share ownership in order to focus senior executives on the things that matter to the people they are supposed to serve.
No business can afford to rest on its laurels in the fast-moving world of technology, and there have been many High Street examples of failures to adapt. But adaptation without taking into account the interests and needs of personal customers can also lead to failure.
Perhaps it's time for the banks to take more survey soundings from their customers in order to see what they think, rather than bombarding them with yet more terms and conditions and price rises.
Gavin Oldham OBE
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