Commercial Loan Automation
Credit - Small Loans
BirdsEye Viewbusiness banking and the customer experience
Pascal Gamain owns a small chocolate shop in Paris. It is in a highly residential area off the beaten path, and many a kid drops by for a lollipop after school. We discovered his shop in our never-ending quest for new and exciting chocolate, and it didn’t disappoint. In fact, his fruit jellies enchanted Dick to an almost unhealthy level.
We started visiting the shop every time we were in town, and continued to buy huge amounts of stuff. We started discussing chocolate and other French sweet specialties with the owner, and in time became friend.
Pascal is the owner and sole operator of the shop. He is there every day from 10-8 except for Sunday and a half-day Monday. He works very hard, both manning the shop and discovering chocolatiers from all over France. I realized that he is not only incredibly knowledgeable about chocolate, but also an excellent business person. He knows the ebbs and flows of his business and controls inventory effectively. His wife helps him decorate for Easter, Christmas and Father’s Day. He is keenly aware of his cash flow and financial position. The shop is small, and yields a good but modest living. Pascal is the ideal small business owner for any bank: knowledgeable in his trade, a good business person and fully committed to the business success.
At a recent lunch at our Airbnb apartment (I made his favorite dish, Osso Bucco), Pascal told me he switched from his long-time bank to an online bank. While the new bank is in fact owned by his brick-and-mortar bank, that was not the motivation behind the switch.
I took out my laptop and started writing.
“Why did you change banks?”, I asked. Pascal reflected on the question. He has been a bank customer for twenty years. He knew people there, but the turnover was dreadful. Then the clerk (he didn’t call the person a “banker”) who provided the money counting service retired. Note that Pascal doesn’t accept checks anymore, but he does take cash. He had to count the cash several times to ensure correct count before going to the bank, where the clerk took his time counting after invariably keeping Pascal waiting for a spell.
Upon the clerk’s retirement Pascal had to use a machine for cash deposits. He was surprised to find that the machine was faster and more accurate. While he never complained about the lengthy process in the past, he was annoyed at the time he wasted counting the notes, writing the amounts on the wrapping paper etc. Now he didn’t have to any of that anymore.
Pascal didn’t initiate this change. He is in his mid-fifties and a traditionalist. He doesn’t have a smart phone, for example. This change was foisted upon him, but through the change he discovered the effectiveness, accuracy and efficiency of machines.
Pascal started thinking about online banking. He realized he doesn’t go to the bank much, and when he does, looking for advice or guidance from the bankers, one of three things happened often:
• The banker forgot the conversation and didn’t follow through
• The banker was not knowledgeable and couldn’t help
• The banker made a mistake
“And they make me wait a lot”, says Pascal.
Then Pascal found out that the bank has been charging him 40 euros a year for the use of his debit card. “It’s the most basic card”, said Pascal. It’s not gold or Premier. “The money I draw is my own. Why should I pay for that?”. This onerous charge was enough to push Pascal over the edge. He started researching online banks which didn’t charge for a debit card.
Pascal discovered several websites that provided advice on online bank selection. The criteria used were simple:
1. Rates (price of the product and deposit and loan rates)
2. Quality of service ( with special emphasis on problem resolution; what happens when something goes wrong)
Pascal found the criteria helpful, but his priorities were different. He didn’t mind paying a fair price for bank services, hence he didn’t select the lower cost provider. His main concern was the service. He was willing to pay a little more for better service. He has been burned in the past with mistakes that couldn’t be corrected and wanted to avoid that. He also wanted direct access to his accounts at all times and the ability to transfer money without anyone’s help. Pascal stopped using checked some time ago, and pays his bills, both business and personal, by transfer.
He found an online bank that gave him the value proposition he was looking for, and switched. The service further validated what he found with his previous bank – the humans were worse than the machines for all basic transactions: “I have to go to the bank, I have to ask, it takes longer, I get no additional value from the clerk, and I don’t feel valued by the clerk”, he says.
Now The Gamains are thinking of borrowing (refinancing his home). His first experience with a mortgage a decade ago was awful. “I had been a customer for 20 years and not a single problem, but I wasn’t confident they would lend me the money. They took much time to give me the money. When I finally got the offer the rate was higher than I could find at another bank, so we had to start again and discuss the rate to get a fair price”. Pascal didn’t feel respected or appreciated by the people who handled his transaction.
His online bank’s application was brief, and decisioning takes 24-48 hours online. “The loan application not difficult”, he says. “I also now understand that I don’t need a clerk to do many transactions, just like I don’t need a clerk to put cheese into my cart in the supermarket. The clerk doesn’t add any value to me and doesn’t offer any expertise to get this done.”
Are branches irrelevant to you, then? No, he said. As a small business owner I need a nearby branch to deposit money. As an individual, the branch location is irrelevant to me.
I asked one last question: What do you want from your bank? “An honest, fair price”, he said, “and the ability to do things on my own. The expertise to give me advice when I need it and make me feel appreciated”.
“How did you select your first bank?”, I asked. “When I opened the shop I visited three banks near the shop. The nearest branch had an unfriendly and authoritative banker. Pascal was turned off. “She was not welcoming”. The second branch had a manager who listened carefully to Pascal and was helpful to him. “He obviously trusted me. And said don’t worry, I will do all the administrative stuff. Go to your shop, do your job and I’ll do mine.” The third sent Pascal a lengthy document to fill with too many sheets, “so I gave up”.
Pascal’s story is not unique, and it is not statistically significant. But it is nevertheless instructive.
Here are several salient points:
• The customer didn’t feel appreciated or respected by the bank as represented by the people working there
• The customer was taught to trust machines more than people by being forced to use a machine for specific transactions
• The customer valued problem-resolution more than price of services
• The customer was willing to pay a fair price, but felt that, on occasion, the bank charged too much for services e.g. debit card or mortgage rate vs. market rate.
• The customer didn’t initiate any changes; but bank failure and use of automation taught him the utility of machines vs. humans
The airline industry employed effective tactics to socialize process automation and replacing people with technology several times. In each case they used people to show the customers how easy it was to use the technology to print boarding passes at a kiosk, for example, and deployed people to assist the customers in adapting to the change. Customers learned that machines were consistent, efficient and reliable for basic transactions, and that created value (time saved, anxiety reduced) for customers. They still needed experts to handle complex flight reservations or schedule changes, but did not need humans to print out luggage tags.
Banks need to focus on the basic needs of customers, especially business banking customers, and offer them automated solutions that are convenient, reliable and efficient while offering access to experts who can solve problems and offer advice.
Every single supercommunity bank executive I know names “service” as the main differentiator of their bank. Yet their definition of service remains static while the customers’ continues to evolve. We say the customer experience is at the center of our value proposition. Pascal’s story shows that it certainly isn’t the case for many traditional customers in traditional banks. It is time to better understand the core experiences and utilities expected from our business banking (and other segments) customers and redesign our product access and complexity to respond to those evolving needs.