The customer centric approach, more than a marketing gimmick?

‘I’m afraid I can’t do that for you today, sir’ is a line that branch customers are tired of hearing and equally branch staff are tired of saying. It’s a deeply frustrating experience for all involved and highlights the inefficiencies of modern banking. It is upon that frustration, and a generational willingness to trust technology, that a host of challenger banks have filled holes in the market.

But are the Monzos and Starlings and Atom banks more than their fancy apps? Is there more behind the thin veneer of coding and sparkly interfaces that legacy banks simply cannot replicate? What is the trade off between back end efficiency and front end consumer convenience? It’s all very nice to have a real-time bank statement on our smartphones, but is their substance to meet the style?

Whilst these questions tend to be commonplace in the head of a fintech journalist, they were prompted to be fleshed out by a series of experiences. For reasons of impartiality and anonymity the banks providing those experiences have been prescribed generic names: Challenger App Bank, Legacy Bank A and Legacy Bank B.

If ever there were a perfect anecdote for PSD2, it would be this.

The first experience came from setting up the Challenger App Bank account. Legacy Bank A, the author’s current account provider, was used to top-up the Challenger App Bank’s prepaid card. This presumably contravened Legacy Bank A’s scenario-based rules or machine learnt parameters and flagged the activity on the current account as fraudulent and blocked the card. In line with the bank’s ‘trendy’ multi-channel, digital banking initiative a text and email was sent asking to phone a number.

Half an hour on hold prompted the author to sacrifice a Saturday morning lie in in order to visit the local branch. After 20 minutes in the queue the author was greeted with “I can’t do that for you today, sir, but I can set you up on a call” – so much for omni-channel banking. A subsequent 40 minutes on hold, still nothing and a Saturday to get on with. The same afternoon and 20 minutes on hold again the author was finally through! At last. He explained the problem and the tired response was “I have authenticated this for you, sir”. Authentication process time: 1 hour, thirty minutes spread over 48 inefficient hours. Authentication execution: 20 seconds.

Now before anyone bemoans the author for impatience or for disregarding the importance and complexity of fraud detection, where prepaid cards are rightly flagged up, it nevertheless seems petulant that the well-known challenger bank’s prepaid cards aren’t on the green list. It is the ultimate reluctance to collaboration, some may say.

In terms of impatience, and again bemoan the author as a proponent of the Right-Now economy, the frustration and inefficiency with this banking experience was made more keenly unjust by a similar experience, when the Challenger App Bank’s system had a hiccup and a payment went missing.

It was certainly a bigger mess than Legacy Bank A’s, but Alert-to-Resolution took twenty minutes following an easy in-app message to their customer support. One message from the author’s end to prove he had in fact double paid for some toothpaste, a reply five minutes later to say it had been reviewed, a message of thanks from a relieved customer, and the final message wishing the customer a good day and noting the bargain deal on the toothpaste; no automated responses here.

Common sense vs protocol

Another experience happened when the author withdrew cash for the first time in a month. The cashpoint ejected the right amount of money but swallowed the card. Fortunately, the cashpoint was attached to a branch of Legacy bank B. He walked in to report a swallowed card as much to save others from a faulty cashpoint than any real hope of seeing the card again.

A quick word with one of the tellers and they were inspecting the offending cashpoint. “Wait here”, the teller beckoned and hurried to find a superior. The teller returned a little while later to inform the author that the card’s frayed edge had become stuck. The teller asked what colour the card was, the author answered and provided his driving licence. The teller disappeared again and emerged with the author’s bank card. Had the author so wished, he could have gone about his day as if nothing had happened.

But having been to a conference on the dangers of ATM skimming the week before, the author decided it best to be on the safe side and went to Legacy Bank A to have his card cancelled and a new one issued. The teller at Legacy Bank A was surprised to see the author produced the supposedly swallowed card. Half an hour after, and a sigh of relief that no more time or headache would be lost, the swallowed, frayed card was destroyed and a new one issued.

Admittedly, this was a very unorthodox situation and the bank teller at Legacy Bank B broke protocols and procedures that were put in place to combat inside card pedalling and the like. However, something can be said for the bank teller using their common sense and applying some critical and contextual problem solving.

By asking the right questions in-person and being allowed some autonomy to retrieve the card from the machine, the bank teller was able to save the customer a massive inconvenience. It goes to show how for all the in-app messages or queued telephone calls, sometimes a human teller can weigh up risk, act accordingly and bypass a lot of operational hoops.

Technology vs red tape

What do these experiences tell us?

Is it a newly acquired culture of impatience enabled by the technological revolution? No, the efficiency bar has been set, and the way the markets will innovate and improve society is by the consumer base expecting and demanding a standard of service. The trouble is, can that standard of service be provided securely by challenger banks?

It’s clear that two camps emerge: those who are happy to sacrifice a modicum of ‘beta’ inconsistency for improved convenience and efficiency and those who will tolerate absolutely no inconsistency or risk, even if that means relying on slow and red taped customer service. For instance, where the Legacy Bank A’s card would have taken a long phone call and a week for a replacement card, Challenger App Bank’s card can be frozen and ordered in-app within moments of the card being swallowed.

The future and good old PSD2

PSD2 sets to shake things up, accelerating the relatively reluctant and costly ‘innovation culture’ that legacy banks have had to implement. Of course, some legacy banks fare better than others in the forward-thinking department. The future proofing advisory boards of other banks have looked to outsource innovation through accelerators and selecting the best of startup tech ‘add-ons’. The challenger banks, who’ve spent the last five years building digital native banks, can cut down on human resource costs (thanks to improved technology) and provide a more up to date and trending solution for the retail banking market.

For the challenger banks, their relatively simple premise in a real-time and portable bank statement has opened up a new realm of retail banking. They’ll continue to push legacy banks to snap up the various fintech startups where and when they appear with a good idea and the expertise necessary to execute it. One can’t help but feel they’ll reach a rung on the ascendancy to significant market share and realise scaling up will have an impact on the efficiency of their operations and they’ll face the same problems as legacy banks.

Where does that leave legacy banks, who for far too long have enjoyed all too easy customer retention simply for lack of market options? PSD2 will happen and it will change things. Maybe not instantly, maybe not in a year, but as sharing financial data becomes normalised in the consumer base, the financial sector will shift.

Legacy banks need to embrace that collaborative change, they need to get on board with the fundamental PSD2 philosophy. They need to open up their APIs; that is where the future business will be. The legacy bank with the most accessible API will become the frontrunner as add-on fintechs flock to an easy to work with system. It is only with open collaboration with budding fintech actors can legacy banks survive, thrive and not break the bank in the process. It will be a hybrid version of challenger and legacy, with a compromise between the two: bolt-on challenger innovation backed up with good, legacy resources and clientbase. This is what will draw the customers.

So, the question is, will the author stop using Legacy Bank A’s services in light of these poor customer experiences? No, probably not.

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