There is general agreement that much has gone wrong with banking culture over many years, generating the behaviours that led to:
- The banking crisis in 2008;
- Mis-selling scandals including PPI, investment products, packaged bank accounts and interest rate hedging products; and
- Rate-rigging in relation to both LIBOR and foreign exchange.
Bank CEOs have acknowledged publicly the need for banking culture to change and for customers to be put at the heart of a bank’s business.
The Consumer Panel wanted to explore how much customers were aware of their banks’ cultural failings. We commissioned research by the Personal Finance Research Centre at Bristol University to find out how individual bank customers and micro-enterprises defined a good banking culture, and whether they thought banks had delivered on their promise to change.
We found that bank staff are less and less accessible, and don’t have the flexibility to personalise their service. For much of the time this doesn’t matter, but as soon as a customer has a problem these are real issues. Unless the problem “fits” the bank’s script, bank staff members can’t help, and the onus falls on the customer to try to sort it out themselves.
Our research also found that bank customers feel their needs come a distant second to making a profit. Micro-enterprise customers felt this most keenly, with many saying they were receiving a more and more impersonal service, leaving them feeling that their custom is not valued. In view of the crucial importance of small businesses to the UK economy, this is something that should concern us all.
Most customers said they believed that their banks were far more interested in attracting new customers than looking after existing ones. We have long been concerned about the treatment of long-standing customers; the FCA’s “treating customers fairly” principle simply doesn’t go far enough to ensure banks put their customers’ interests first. Lip service to this principle means customers enduring unfair treatment at the hands of their financial services provider. We are calling again for a change in the law, to provide for a duty of care to be owed by all financial institutions to their customers. This would mean front line staff stopping and thinking about whether they were putting the customer’s interest first, in much the same way as a doctor or solicitor must. It would go a long way to ensuring fairer treatment for consumers of financial services.
Our research includes a series of metrics, suggested by consumers, which could be used to measure the extent to which bank culture is improving in the interests of their customers. We would like to see the Banking Standards Board encourage banks to adopt such metrics as an objective measure of how their culture is improving in the interests of their customers. Banks may think the standard measures they use, such as Net Promoter Scores, give them an insight into their customers’ needs. They do not: loyalty is not the same thing as well-served. As we found out, many customers feel trapped in poor relationships. Banks now need to look for themselves at how their culture manifests itself to their customers.