Big Retail Banks Make Little Effort To Correct Failings

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Retail banks are failing their customers - and making little real effort to improve. So said Walter Merricks, who was head of the Financial Ombudsman Service until 2009. Mr Merricks spoke forcibly and engagingly about the attitude of retail banks at an industry meeting sponsored by TripleIC and arranged by the Financial Services Forum.

The National Banking Survey conducted by TripleIC was used by Hedley Basford to set the scene for the speakers and subsequent discussion Nearly 70 percent of respondents expressed doubts whether the standing of retail banks would improve in the near future. In the case of one well-known bank 18 percent of its customers said they would like to leave.

Mr Merricks illustrated how dire the situation had become. It is getting worse each year. The complaints made to the Financial Ombudsman Service had grown from 25,000 in 2000 to 150,000 in 2009 and were expected to approach or even top 300,000 this year. No one much seems to be learning anything. The proportion of complaints upheld remains very high as well, in some cases over half - although a couple of the major banks do seem to be leading the way down.

'The inescapable conclusion to be drawn', said Merricks, 'is that the FSA's pressure on the subject of "treating customers fairly" has, in practice, not resulted in much in the way of serious attempts to resolve customer complaints.' No one seems to be learning.

To help move the debate to action Merricks proposed six steps for the banks to take.

First, show your loyal customers that you want and appreciate their continued custom. Reward and recognise longevity.

Second, don't abuse customers' loyalty - demonstrate by what you do and how you do it that you want to keep them. Using products that have a high introductory rates for new customers causes them to move or be upset when the rate drops and also upsets long term customers too who feel ingored or taken advantage of. It does not build long term happy customers.

Third, a customers' charter. For example one was introduced by Australian insurer AAMI some 16 years ago. It now includes eleven service standard commitments. To show it has teeth customers have the right to an automatic $30 penalty payment if it is broken and the charter is audited externally.

Fourth, take complaints seriously. Give it some beef by appointing a senior exec with the task and power to aim to be the lowest/ best in all complaints league tables. It's an independent assessment and so valuable. Look at the league tables on the FOS website. In the top financial groups we see Lloyds TSB Bank 63% upheld; HBOS, Barclays, RBS and Santander all around 44%. But how come HSBC can manage 20% and Nationwide 14%?

Fifth - remove the shutters over your pricing methods, make it crystal clear how you make your money - it helps build trust. The Independent Commission on Banking discussed mechanisms to bring transparency to current account pricing including calculating notional lost interest on credit balances. That seems to be a start, but a rather technical solution. People are capable of understanding that you get nothing for nothing, They just want to know how it is done, so explain; ensure your customers know what the deal is.

Sixth, compete on service. Build a service ethos throughout the bank by making policies and procedures match that end. Criticise competitors for unfriendly products and unhelpful services

Now you can be a confident expert on Big Retail Banks Make Little Effort To Correct Failings. OK, maybe not an expert. But you should have something to bring to the table next time you join a discussion on Big Retail Banks Make Little Effort To Correct Failings.