Seeing The World As It Is

Several years ago I read a fascinating study by Greenwich Research. In it, the form surveyed bankers and small business bank customers, asking them the same questions: what matters to bank customers and where do they see value-added. The results were striking. Any similarity between the two sets of ten elements was purely coincidental. Bankers thought their small business customers were most sensitive to price and fees. Customers said: give me the same banker consistently, someone who knows me and can add value to my business through industry expertise, and I’ll be happy.

Recently, BAI conducted similar research on the consumer side. Again, striking disconnects appeared between customer attitudes and perceptions and bankers’ picture of customer wishes. The gap between industry perception and customer reality continues to widen. Retail customers are becoming increasingly less trusting of banks, and feel disconnected from their institution. Only a third of all respondents responded positively to the statement, “my bank understands my financial needs and goals”. A marginally higher percentage agreed that “my bank is concerned about me”. A mere 45% said “I am comfortable discussing my personal financial goals” with my banker.

While these numbers are slightly better than the response rates in August 2009, they are widely divergent from banker perceptions. Bankers responded that consumer confidence in the overall economy has improved over the past six months. Customer responses showed a slight decline in their confidence.

Bankers think consumer trust in their companies has improved over the past six months, and that they are doing a better job of understanding their retail customer needs. Consumers’ response trends indicate the opposite.

Consider the past 18 months. The industry has been brought back from the brink, yet every week more banks fail, up to a total of 286 at this writing. Surviving banks by and large feel stability has returned to their world, and that deterioration continues at a far lesser pace. Consumers don’t see this improvement. Their confidence in the system has been severely shaken, and the media, government and social media validate their concerns daily.

Banks are seeing marked deceleration of NPA creation and a slowdown in charge-offs. Consumers are seeing a slower economic recovery than expected, far tighter credit standards, and a financial system that has almost failed, was bailed by the government and is now under a well-deserved tighter regulatory scrutiny.

As always, there is a silver lining in this cloud. Community banks are NOT painted with their larger brethren in a single brush. Trust levels vary markedly, from 48% in large banks to 78% in community banks. 80% of consumers find community banks to be a warm and friendly place, while only 51% say large banks are so (generally a correct observation). Similarly, while only 46% say “my bank is concerned about me” when talking about their community banks, only 23% say so when talking about their mega-bank. Similar gaps exist between community and large banks across other consumer connection dimensions.

Both the Greenwich and BAI surveys lead me to the same conclusion: any successful bank starts with the customer reality. We should not believe our own press. Instead, ask your customers, both internal and external, what they see. Real or not, their perception IS the reality we all must deal with. It’s time to get closer to those we serve and understand better where THEIR value drivers are across all lines of business. Pre-crisis assumptions and the vague mantra of service don’t cut it in today’s uncertainties. Instead of looking ourselves in the mirror, let’s look the world in the eye, see it as it is, and go from there.