After many years in banking, we have heard every kind of criticism leveled at banks by angry consumers and politically inspired public servants. Most recently, Wells Fargo & Co.’s cross-sell scandal threw another log on the fire of contempt that many consumers have for banks. Despite a few very bad ethical lapses, it is always shocking how many banks get painted as bad actors when consumers and communities benefit directly from their business models. This benefit is not limited to the beloved stories of the community bank setting up a scholarship fund or a day of caring painting crew, or even the billions of dollars committed to Community Reinvestment Act activities by the industry. As noble as those efforts are, they pale in comparison to what banks really do.
Millions of consumers use the banking payments rails for free. Keeping a very small amount of money in a checking account can allow a consumer to reap the benefits of direct payroll deposit, free bill pay, free remote deposit capture and free ATM access in their bank’s network. Amazingly, should the consumer face a loss of funds due to hacking, the bank (which is not being paid for this service) often makes the consumer whole. The day-to-day systems that most consumers use are remarkably affordable.
Still most Americans do not trust banks. The most frequent complaints tend to fall in one of three areas: a lack of transparency; slow and difficult user experiences; and the promotion of products that do not fit the need of that particular individual. There are ways technology can combat these common complaints and even help ameliorate the ethical lapses that have tarnished banking.
Paperless application and smart data technology can make the application easier and more convenient for consumers and businesses alike. They can also speed up the time that is required for approval. It is often the credit activities that get banks tarred and feathered. It is understood that consumers and businesses turned down for requested credit will feel the sting of that rejection—particularly when the banks takes an inordinate amount of time to deliver its decision. More prompt decision making is helpful for all consumers.
Sophisticated data and AI systems could be built into the technology that would guide bankers to a right-sized product offering in real time. They can even enable online comparisons of products that gives the consumer a better idea of the available options and how well they fit with the consumers’ long-term goals. A few rogue bank models worked better for the bank if the customer failed than if they succeeded have given consumers the right to question if the advice that is offered by their bank is in their best interest. Recently a bank CEO, off the record, compared that experience of some bank customers to his experience buying a cellular data plan for his family. “I kept on wondering it the plan [the salesman] was touting was the best for the phone company or for his commission or actually for me. Banking can’t be like that; we have to make this better.” Fortunately, there is technology that is already making it easier for banks to understand what their customers need and to serve that need more transparently.
Transparency is going to be key. Having a customer click the “I have read this box” will not work in the long term. Online tools including the use of video, chatbots and embedded quizzes can make disclosure easier for consumers.
Regulatory technology is just developing, but there is the possibility that regtech will lower compliance costs and streamline disclosure. Some of the new technologies will provide internal bumpers that can help prevent rogue behavior from an employee. What a bank has for its regulators it will also have for its internal risk management team. Detecting ethical breaches before they become systematic or catastrophic will be more possible.
Several banks are going a step further towards building consumer trust. They are using their online platforms to support their customers financial health. Bank of America Corp. just rolled out a spending aggregation tool that allows consumers to see where their money goes and budget for the future. It even allows consumers to add data from non-Bank of America accounts. It is a smart way for Bank of America to get a better understanding of their customers while providing a useful tool that requires no effort to use.
It is easy to see fintech providers as competitors. Looking at online lenders and digital investing platforms as the enemy because they compete directly with banks is a common perspective. It is also possible to think of these companies as innovators that will help us rethink how to make our customers trust us again. Many of these fintech innovators are eager to work with banks that want to provide better banking experiences. These innovations may be the way banks return to delighting their customers and building loyalty.