Transaction Banking by D Sign
A Blog by Professor Michael Mainelli,
One Direction And 360 Degrees
A financial services company called this month about benchmarking their transaction services so they could evaluate their outsourcer. It was a long discussion. They wanted us to provide details on cost-per-transaction, staffing levels, automation percentages, and many other things. They expected us to deliver data about their competitors that they couldn’t provide about themselves. At no time in our conversation were they curious about what mattered - what their customers thought. When I raised this obvious point, it took an even longer time to get them to accept its importance.
In an era of 360 degree appraisals, where feedback from customers, suppliers, stakeholders, colleagues, subordinates, and others, complements feedback from superiors in order to evaluate a person’s performance, why don’t transaction bankers spend more time focused on customers? A compass may have 360 degrees but it is used to find one direction, and in transaction banking that direction must be the customer.
There are four generic purposes for benchmarking:
- to set direction – where are we going?
- to gain commitment – what targets should we set?
- to keep control – have we arrived where we wanted to be, e.g. ahead of our competition?
- to resolve uncertainty – can we direct our decisions to achieve our goals?
Customer discussions are fantastic tools for setting direction and gaining commitment. Ask yourself how much senior management time is really listening to customers, not just reading commissioned market research? How much freed-up time is used to increase customer interaction? How much are customers truly part of the community? There are some good excuses for avoiding customer feedback. “They will only complain about today’s systems, not the ones we are just about to deliver.” “Customers have no idea about the future needs in the market.” “If you had asked a customer about their stereo needs we would never have the Sony Walkman; if had you asked a customer about their Sony Walkman needs we would never have the iPod”. But these are just excuses. Customers are the biggest under-used source of free benchmarking information.
In preparation for this article, I read numerous recent studies on the future of transaction banking, and watched copious videos recommended to me on the future of the digital bank. Frankly, despite the range of consultants proffering advice, they were all dull and predictable. Digital banking is a tipping point. Customers expect excellent ICT systems. 24/7 anywhere is the future. Big data and predictive analytics will win the day. But dull and predictable advice isn’t necessarily wrong, or my weight would be under better control. The last excuse for not listening to customers is that it’s too hard. Actually, digital banking truly removes that barrier by providing so many ways to interact with customers in statistically meaningful and analysable ways.
A Tale Of Two Helplines And One Unhelpfulline
This article prompts me to share a story of a client organisation struggling with its helpline. In order to improve efficiency, their call-centre agents were given time targets, such as ‘so many minutes to be spent per customer query”. As bonuses were tied to the targets, the call-centre agents rapidly found they could hit the minutes-per-customer target fairly accurately. It didn’t matter that many of the big, profitable transactions, e.g. “I’m trying to ensure adequate cashflow in advance of an acquisition”, or the ones that matter to customers, e.g. “I need to change a standing payment”, took more than the allotted time because the call-centre agents mysteriously found that the call had come to an end on target. Of course, the poor customer would retry a few times before concluding that the one transaction that could occur within the narrow time window available was terminating his or her account.
So the financial services organisation noticed two things – first, its helpline volumes were rising rapidly and, second, that customers were leaving in droves. Of course action had to be taken. So a special, second helpline was set up to catch customers who made noises threatening to leave. As soon as customers threatened to leave, they were transferred to the special, second helpline. This second helpline was given two special powers. The first was a small amount of money to ‘grease’ the path for the customer back into their high quality service. And the second power? An unlimited amount of time to deal with the query. Of course, with much higher call volumes the regular agents were now stretched handling return phone calls from customers, so their available time per customer needed to be reduced. Strangely, while the special helpline was reasonably successful at retaining customers, the rate of customers threatening to leave increased even more rapidly.
Naturally, the loss of business had to be investigated further, so an ultra-special third helpline was set up to find out why customers were dissatisfied. This third helpline had one role, just to listen. Completely unlimited time to talk to customers. In a final ironic twist, the Chief Executive of this company was in the media talking about the need to “get close to the customer” and talking about special research he was commissioning. It doesn’t take a genius… Nevertheless, while this case was sorted out in a few weeks, why wasn’t listening to customers given the highest priority in the first place?
Make Some Problems You Can Solve
It can be hard to listen to customers. It’s even harder to decide how to talk with them. But as they are the most important people, successful businesses work it out. My primary suggestion has always been to focus on whether and why customers will or won’t recommend you to others. Technical Assistance Research Programs, Inc is frequently mentioned for a large number of customer satisfaction studies over the past three decades in the USA. Headline numbers often read that, on average:
- a satisfied customer tells three other people they’re satisfied;
- a dissatisfied customer tells nine to ten other people - 13% tell 20 people or more;
- a satisfied complainer will tell 5 people they’re satisfied.
The implication of course is to trap complainers before they cause damage. This can be tough, as the same numbers point out that only 4% of dissatisfied customers complain - even those seriously wronged. In a different, but equally interesting case for me, one large hotel chain researched customer intentions after a visit to one of their hotels. They found that:
- for customers with no problems during their stay, 89% intended to use the chain again;
- for customers with a problem that had not been corrected, only 69% intended to use the chain again;
- for customers who experienced a problem that was resolved before they left the hotel, 94% intended to use the chain again.
The opportunity behind these numbers is interesting, and the temptation too hard to resist - you can take advantage of volatility in anticipation versus experience. If you genuinely have a low volatility, reliable service, you should create problems. Everybody should have a problem. In this real-life hotel case, the hotel guaranteed a problem, however small, for every guest. The hotel focused on catching all problems and solving them. The hotel generated a set of regular minor problems, perhaps even unnoticed, that would always be ‘caught’. For example, the maid appeared at the door with flowers a few moments after checking in - ‘oh my, did we overlook putting fresh flowers in your room on time?’’. Having delivered the flowers, the maid returns a few moments later with complimentary chocolates to ‘apologise’ for the hotel’s mistake. For a few months, returning customers were up nearly 5% and customer recommendations were 70% up. But all this needs to be done with a straight face. After a few months, keeping the system hidden from the staff affected morale - imagine a maid’s opinion of a hotel that always asks her to deliver flowers just after guests arrive.
One more quick case, if you order garden equipment via the internet from a certain online gardening shop, the online gardening shop’s call centre rings afterwards to tell you that sadly they’ve mispacked your order. By mistake they have included a tool you didn’t order which you are welcome to keep with their compliments. Meanwhile, they’re sending along now the one bit of the order they missed, gratis naturally, along with some free garden shears by way of compensation for your inconvenience. Now you move significantly up the scale of likely to re-order and likely to recommend. Moreover, many people probably tell their friends how they really gave the online garden store a hard time and through superior negotiating skills got free equipment. There are related cases in financial services, a mortgage provider I know, one niche credit card, and I have reasons to suspect several others.
Predictive, Not Predictable, Customer Experiences
Perhaps the biggest benchmarking opportunity using 360 degrees of appraisal is predicting customer experience. Some financial services firms are beginning to use approaches such as environmental consistency confidence. They are looking for inconsistencies in the environment to alert them to crucial changes in strategy. For example, one predicts in advance how satisfied specific customers will be, and then acts on the differences. They predict how long customers will be with them, and then act before they leave. They predict which customers will leave in the next period, and then call them in advance. For those who do leave, they predict the likelihood of re-engaging with them, and act on that. Whenever their predictions start to falter, they have emergency meetings to brainstorm possible causes of their declining prediction rates, and act on it.
So what’s the benchmark to use? In my opinion, it’s to benchmark anticipation against experience. To look at each new and existing customer and predict what their future interactions and satisfactions will be. Unless banks use the power of 360 degree systems to do this, they will be easy prey to the bogeymen those consultants kept mentioning, the big internet firms. These firms predict so well what their customers really want, because they have talked with their customers, and their customers have already told them.