Research Topic Contract

All the recent upheaval in the financial markets got me thinking about how the customer has been impacted due to the failure of proper control system and extremely bad decisions made by banking executives. Initially I thought that I would look at retail banks and how they treat customers now that it seems like they need us more than ever. Before really putting any thought into it I first assumed that customer service should be significantly improved in the recent past, but then thinking about it a little more it dawned on me that this is exactly the opposite of what is happening. In fact after the meltdown, customer service has been getting worse and worse. I think this is partially because some banks have no idea if they will be around tomorrow so making investments in customer service which is more of a long term investment do not make economic sense when you are just trying to survive. Another reason is that banks don’t know which customers they can trust and it is easier for them not to trust anyone. When I say trust I mean more which customers they can count on to be good paying customers and not just customers that will increase their liabilities without offering a return on their investment. Then as I thought more and more about how recent events would have likely decreased the customer service offered, I realized that the retail banking experience has been changing for a very long time. It is not just what has currently happened that has made the customer experience progressively worse, but the experience has been continually worsening for as long as I can remember. Though the financial meltdown gave me the idea for the topic, banks have been moving further and further away from a customer-centric model for years. I think this is an extremely important part of the business and something that has been ignored by many banks.


In this report I hope to focus principally on how a bank looks at its retail customers and how customers feel they are treated by banks. To be clear, a retail customer will be defined as a depositor and/or credit card holder. Because there are so many services major banks offer I wanted to focus on a large business of theirs which generally required a relatively large level of customer interaction, while not getting too broad and making the paper extremely vague.

Some of the main questions I want answered are:
1) How is a customer really viewed by banks?
- Do they have any interest in what the customer needs from the bank or just how much they will deposit?

2) Is there a different level of customer service given to walk in clients vs. online clients?
- Everything is moving to a more online experience, and many banks offer better rates and service for online clients, but what do you give up for these “better services”?

3) How does a bank determine the value of each individual client, or do they even determine who is valuable and how is not?
- Cell phone companies and many other highly customer-centric services have complicated software packages that value clients and their lifetime value to the company, do banks do this?

4) With so many new regulations coming their way, do banks look at their customers strictly by numbers or do they understand specifics about each customer?
- Each customer is an individual, obviously, but do the banks or the representatives you work with actually take the time to understand your needs or just sell you what they get the best commission on?

This topic is extremely interesting to me because banks are an industry that almost everyone has some sort of interaction with. Many people have very superficial relationships with banks, and many have very strong relationships. It has always seemed to me that the level of your relationship is directly inversely related to the amount of services offered and size of the banks. What I mean by this is the smaller banks and credit unions don’t have the ability to do the same kinds of things that large multinational banks can, but you get a very personal experience with many times a single banker who is always the one for you. Conversely the large banks offer a multitude of service, you are essentially a number.

I think its these small banks that see the value of gaining insights into who their customers are, and it’s the large banks which just try to be big an necessary to attract clients. Customer service if studied and offered appropriately could really change the way these guys do business.

Somewhat recently there has been a bank which has been extensively advertising how its different from all the other banks by essentially offering better customer service. The bank I am referring to is Ally, I personally have no experience with it, but it looks to me like they have done some research into what their target customers want and targeted those wants, customer service being one of those. I recently read an article on bankrate.com which talked about how it seems that everything in a bank is driven by a culture of sales. They don’t really offer you anything you need, all they want to do is sell you something to make a commission. This article is available at: http://www.bankrate.com/brm/news/bank/20051024a1.asp

What I found really interesting about this article is that it was written in 2005, many years before the meltdown, which supports my assertion that customer service has little importance to most banks. This is the exact problem I would like to learn more about.