Tailoring Payments for Small Business Clients

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Financial service firms tend to focus their products and services on large companies, ignoring the small and medium-sized businesses (SMBs) that make up 99.9% of all businesses in the US.

These businesses are significant players in the economy, driving growth and operating across all industries. While their impact is huge, the financial needs of SMBs are different from big businesses. There is a growing demand for financial institutions to deliver customized and cost-effective digital solutions for these businesses and their customers. A financial institution that succeeds in meeting SMB needs will increase customer retention, attract new clients and strengthen their reputation.

Many financial institutions serve SMB customers through business banking, savings accounts or business loans. Partnering with a vendor to offer payment processing solutions is a low-risk way that banks can provide added value for their business customers, without incurring additional costs. A payment solutions partner can provide end-to-end service — from sales to account management — while the financial institution focuses on its core business. When a customer has multiple services from one institution, that relationship elevates from a transactional one to a trusted, long-term partnership.

Additionally, a merchant services partner may enhance a financial institution’s reputation in areas such as digital technology or diversity, equity and inclusion (DEI). For example, a financial institution may highlight its own interest in supporting diverse businesses by choosing a merchant services processor with similar values, attracting new clients seeking a more progressive approach.

One of the biggest challenges faced by SMBs is keeping up with rapid technological changes to meet their own customers’ demands. This is especially true in the payment space, where many customers prefer contactless payment methods. Contactless transactions in the U.S. increased by 150% between 2019 and 2020 and is only expected to grow. Customers want convenience, speed, and choice when they buy. Even as a consumer or business client of an SMB, they are still used to the level of service they get from large companies. Barriers at the checkout level can impact customer satisfaction and loyalty. SMBs risk losing clients if there is an easier way to do business just down the street or on a competitor’s website. Customers may also expect merchants to accept mobile wallets, offer buy now, pay later or point-of-sale lending options and accept cryptocurrency as payment. Unfortunately, SMBs often lack the resources — such as capital, infrastructure, technology and staff — to offer the latest payment options to their customers and run their operations in the most efficient manner.

But a payment partnership allows banks to offer a slew of services to help business customers optimize their time, save money and improve customer satisfaction. For example, SMBs can benefit from an all-in-one, point-of-sale system that accepts multiple payment types, such as contactless, and includes features such as digital invoicing, inventory management, online ordering, gift cards, staffing, reporting and more. It can also give business customers access to real-time payments, seven days a week, that can improve their cash flow efficiency and avoid cash-flow lags — a major concern for many SMBs.

Small and medium businesses represent an untapped market for many financial institutions. If a financial institution starts to offer tailored payment solutions and services that help SMBs overcome their unique challenges, they can unlock significant, new opportunities in the small business segment.

How to Attract Consumers in the Face of a Recession

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Fears of a recession in the United States have been growing.

For the first time since 2020, gross domestic product shrank in the first quarter according to the advance estimate released by the Bureau of Economic Analysis. Ongoing supply chain issues have caused shortages of retail goods and basic necessities. According to a recent CNBC survey, 81% of Americans believe a recession is coming this year, with 76% worrying that continuous price hikes will force them to “rethink their financial choices.”

With a potential recession looming over the country’s shoulders, a shift in consumer psychology may be in play. U.S. consumer confidence edged lower in April, which could signal a dip in purchasing intention.

Bank leaders should proactively work with their marketing teams now to address and minimize the effect a recession could have on customers. Even in times of economic uncertainty, it’s possible to retain and build consumer confidence. Below are three questions that bank leaders should be asking themselves.

1. Do our current customers rate us highly?
Customers may be less optimistic about their financial situations during a recession. Whether and how much a bank can help them during this time may parlay into the institution’s Net Promoter Score (NPS).

NPS surveys help banks understand the sentiment behind their most meaningful customer experiences, such as opening new accounts or resolving problems with customer service. Marketing teams can use NPS to inform future customer retention strategies.

NPS surveys can also help banks identify potential brand advocates. Customers that rate banks highly may be more likely to refer family and friends, acting as a potential acquisition channel.

To get ahead of an economic slowdown, banks should act in response to results of NPS surveys. They can minimize attrition by having customer service teams reach out to those that rated 0 to 6. Respondents that scored higher (9 to 10) may be more suited for a customer referral program that rewards them when family and friends sign up.

2. Are we building brand equity from our customer satisfaction?
Banks must protect the brand equity they’ve built over the years. A two-pronged brand advocacy strategy can build customer confidence by rewarding customers with high-rated NPS response when they refer individual family and friends, as well as influencers who refer followers at a massive scale.

Satisfied customers and influencer partners can be mobilized through:

Customer reviews: Because nearly 50% of people trust reviews as much as recommendations from family, these can serve as a tipping point that turns window-shoppers into customers.

Trackable customer referrals: Banks can leverage unique affiliate tracking codes to track new applications by source, which helps identify their most effective brand advocates.

3. What problems could our customers face in a recession?
Banks vying to attract new customers during a recession must ensure their offerings address unique customer needs. Economic downturn affects customers in a variety of ways; banks that anticipate those problems can proactively address them before they turn into financial difficulties.

Insights from brand advocates can be especially helpful. For instance, a mommy blogger’s high referral rate may suggest that marketing should focus on millennials with kids. If affiliate links from the short video platform TikTok are a leading source of new customers, marketing teams should ramp up campaigns to reach Gen Z. Below are examples of how banks can act on insights about their unique customer cohorts.

Address Gen Z’s fear of making incorrect financial decisions: According to a Deloitte study, Gen Z fears committing to purchases and losing out on more competitive options. Bank marketers can encourage their influencer partners to create objective product comparison video content about their products.

Offer realistic home-buying advice to millennials: Millennials that were previously held back by student debt may be at the point in their lives where their greatest barrier to home ownership is easing. Banks can address their prospects for being approved for a mortgage, and how the federal interest rate hikes intersect with loan eligibility as well.

Engage Gen X and baby boomer customers about nest eggs:
Talks of recession may reignite fears from the financial crisis of 2007, where many saw their primary nest eggs – their homes — collapse in value. Banks can run campaigns to address these concerns and provide financial advice that protects these customers.

Banks executives watching for signs of a recession must not forget how the economic downturn impacts customer confidence. To minimize attrition, they should proactively focus on building up their brand integrity and leveraging advocacy from satisfied customers to grow customer confidence in their offerings.

How to Keep Existing Customers Happy

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Many consumers already have an established relationship with a trusted bank that provides familiarity and a sense of reliability. If they find value in the bank’s financial support, they tend to stick around.

That makes existing customers essential to a bank’s future growth. However, in today’s landscape, many financial institutions focus on acquiring new customers, rather than satisfying the needs of their existing customer base. Data shows that although existing customers make up 65% of a company’s business, 44% of companies focus on customer acquisition, while only 16% focus on retention.

While acquiring new customers is vital to the growth of a financial institution, it is crucial that the existing customers are not left behind. Nurturing these relationships can produce significant benefits for an organization; but those who struggle to manage what is in house already will only compound the issues when adding new customers.

While acquiring customers is important to growing portfolios, loyal customers generate more revenue every year they stay at a bank. New customers might be more cautious about purchasing new products until they are comfortable with the financial institution. Existing clients who are already familiar with the bank, and trust and value their products, tend to buy more over time. This plays out in other sectors as well: Existing customers are 50% more likely to try new products and spend 31% more, on average, compared to new customers, according to research cited by Forbes.

Existing customers are also less costly as they require less marketing efforts, which frees up resources, time, and costs. New customer acquisition costs have increased by almost 50% in the past five years, which means the cost of acquiring a new customer is about seven times that of maintaining an existing relationship.

Additionally, loyal customers act as mini marketers, referring others to their trusted institution and increasing profit margins without the bank having to advertise. According to data, 77% of customers would recommend a brand to a friend after a single positive experience. This word-of-mouth communication supplements bank marketing efforts, freeing up resources for the customer acquisition process.

So how can banks improve their customer retention rate?

Be proactive. Banks have more than enough data they can use to anticipate the needs of existing customers. Those that see this data as an opportunity can gain a more holistic view into their existing client base and unlock opportunities that boost retention rates. For instance, lenders can use data like relative active credit lines, income, spending patterns and life stages to cultivate a premium user experience through personalized offers that are guaranteed and readily available. A proactive approach eliminates the potential of an existing customer being rejected for a loan — which happens 21% of the time — and allows them to shop with confidence.

Promote financial wellness. Having this insight into customers also allows banks to boost retention rates through financial wellness programs that help equip them with opportunities to enjoy financial competency and stability. Did they move to a new state? Did they have a baby? Do they have a child going off to college? Banks can acknowledge these milestones in their customers’ financial lives and tailor communication and relevant recommendations that show their support, create long-lasting and trusting relationships, and help the bank become top of wallet when the customer purchases a product or service.

Put the customer in the driver’s seat. Banks can present existing customers with a menu of products and services immediately after they log onto their online banking portal. Customers can weigh a range of attractive capabilities and select what they want, rather than receive a single product that was offered to tens of thousands of prospects with hopes they are in the market. This removes the fear of rejection and confusion that can occur when applying through a traditional lending solution.

Be a true lending center. If banks want to distinguish their online and mobile banking platform as more than a place to make transfers and check balances, they must provide branch and call center staff with the tools to evolve into a true lending center for customers. Existing customers should be able to find support and guidance inside their online banking accounts, apply for and receive appropriate products, make deposits, and so much more from the palm of their hand.

To remain a standard in their communities, banks must recognize the true value behind customer retention. This can help banks not only secure a prime spot in its customers’ financial lives but grow loan portfolio, boost engagement and gain or retain a strong competitive edge.

Three Ways to Lower Customer Effort and Increase Loyalty

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I often talk to bank and credit union executives and the topic of increasing the loyalty of customers/members frequently comes up.

The typical reasoning is that increasing customer satisfaction by going above and beyond leads to increased loyalty. While it certainly makes sense, especially in a highly regulated vertical like financial services, it is not always the best area to focus on. Indeed, a different measure has been steadily gaining popularity and is often a better fit for banks: customer effort. If customers encounter difficultly in resolving their issue, they are much more likely to look for solutions from different institutions. On the other hand, if it’s easy to resolve their issue, they will appreciate the financial institution more. This, in turn, leads to increased wallet share and overall loyalty.

Customer effort, or CE, can be measured through survey results like customer satisfaction or net promoter score asking customers if they agree or disagree with the following statement: “[The institution] made it easy for me to handle my issue.” Customers score their effort on a range from 1 if they strongly disagree to 7 if they strongly agree. The individual scores are averaged to get the overall institution average; an average score of 4 or less is considered poor, and scores of 5 and higher are considered good. The advantage of CE score as compared to customer satisfaction and net promotor score is that it can be used to measure the experience as a whole, but can also focus on specific experiences: the usability of a specific page on the company website or interactive voice response that prompts customers to speak to an automated phone system.

The insights gleaned from deploying CE scoring can be quite interesting. For most customers, banking is a necessity and there are a plethora of institutions to choose from offering a similar range of products and services. This implies they choose who they bank with partially based on the perceived effort needed to use the services. Traditionally, this meant choosing the bank with conveniently located branches; increasingly, it means choosing institutions with robust online and self-service offering. The expectation is that banks should do simple things well and make things easy. When there is a problem, helping customers solve it quickly and easily is key.

Here are five insights from institutions employing CE scores:

  1. Customers dislike having to contact the bank multiple times and needing to answer repetitive questions multiple times. They also don’t like switching from one service channel to another to get their problem resolved.
  2. Majority of customers will start with lower effort channels — online and self-service — and only opt for phone service when needed. Calling is seen as a higher level effort.
  3. Customers are willing to put in more effort when there is a perception of increased value for the effort, like driving to a branch to discuss important life events. But as customer effort increases, so do their expectations.
  4. Experiencing complications in resolving their issues makes it hard for customers to believe they are getting value for their money. They will be more likely to consider products from other competitors.
  5. Negative outcomes of high-effort experiences significantly outweigh any benefits of easy or low-effort experiences. In other words, customers who perceive their bank is making things “difficult” are more likely to leave than customers who are “dissatisfied” according to an NPS or CSAT score.

Here are my top three suggestions for prioritizing changes that can reduce customer effort:

  1. Invest in self-service solutions. Analyze feedback on CE surveys to identify specific experiences on websites and apps that could be improved with self-service.
  2. Adopt an asynchronous service model. Asynchronous service solutions that do not require customers to actively wait or demand their full attention throughout the interaction, like messaging and call back functionally, can significantly reduce a customer’s perception of effort.
  3. Use video calls. Video calls can provide many benefits of in-branch visits but require less physical effort from customers, lowering expectations on the institution.

There is significant overlap in the above suggestions and suggestions on how banks can save customers time. That’s because an investment of time is just one dimension of a customer’s effort.

Measuring customer effort can provide actionable insights into specific process and service improvements and should be a part of any bank’s customer success story. Customer perception of a difficult interaction is a good predictor of customer churn; investing in more easy experiences can improve both share of wallet and long-term loyalty.

Data is the Secret Weapon for Successful M&A

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The topic of data and analytics at financial institutions typically focuses on how data can be used to enhance the consumer experience. As the volume of M&A in the banking industry intensifies to 180 deals this year, first-party data is a critical asset that can be leveraged to model and optimize M&A decisions.

There are more than 10,000 financial institutions in the U.S., split in half between banks and credit unions. That’s a lot of targets for potential acquirers to sift through, and it can be difficult to determine the right potential targets. That’s where a bank’s own first-party data can come in handy. Sean Ryan, principal content manager for banking and specialty finance at FactSet, notes that “calculating overlap among branch networks is simple, but calculating overlap among customer bases is more valuable — though it requires much more data and analysis.” Here are two examples of how that data can be used to model and select the right targets:

  • Geographic footprint. There are two primary camps for considering footprint from an M&A perspective: grabbing new territory or doubling down on existing serving areas. Banks can use customer data to help determine the optimal targets for both of these objectives, like using spend data to understand where consumers work and shop to indicate where they should locate new branches and ATMs.
  • Customer segmentation. Banks often look to capturing market share from consumer segments they are not currently serving, or acquire more consumers similar to their existing base. They should use data to help drive decision-making, whether their focus is on finding competitive or synergistic customer bases. Analyzing first-party transaction data from a core processor can indicate the volume of consumers making payments or transfers to a competitor bank, providing insights into which might be the best targets for acquisition. If the strategy is to gain market share by going after direct competitors, a competitive insight report can provide the details on exactly how many payments are being made to a competitor and who is making them.

The work isn’t done when a bank identifies the right M&A target and signs a deal. “When companies merge, they embark on seemingly minor changes that can make a big difference to customers, causing even the most loyal to reevaluate their relationship with the company,” writes Laura Miles and Ted Rouse of Bain & Co. With the right data, it is possible that the newly merged institution minimizes those challenges and creates a path to success. Some examples include:

  • Product rationalization. After a bank completes a merger, executives should analyze specific product utilization at an individual consumer or household level, but understanding consumer behavior at a more granular level will provide even greater insights. For example, knowing that a certain threshold of consumers are making competitive mortgage payments could determine which mortgage products the bank should offer and which it should sunset. Understanding which business customers are using Square for merchant processing can identify how the bank can make merchant solutions more competitive and which to retain post-merger. Additionally, modeling the take rate, product profitability and potential adoption of the examples above can provide executives with the final details to help them make the right product decisions.
  • Customer retention. Merger analysis often indicates that customer communication and retention was either not enough of a focus or was not properly managed, resulting in significant attrition for the proforma bank. FactSet’s Ryan points out that “too frequently, banks have been so focused on hitting their cost save targets that they took actions that drove up customer attrition, so that in the end, while the buyer hit the mark on cost reductions, they missed on actual earnings.” Executives must understand the demographic profiles of their consumers, like the home improver or an outdoor enthusiast, along with the life events they are experiencing, like a new baby, kids headed off to college or in the market for a loan, to drive communications. The focus must be on retaining accountholders. Banks can use predictive attrition models to identify customers at greatest risk of leaving and deploy cross-sell models for relationships that could benefit from additional products and services.

M&A can be risky business in the best of circumstances — too often, a transaction results in the loss of customers, damaged reputations and a failure to deliver shareholder value. Using first-party data effectively to help drive better outcomes can ensure a win-win for all parties and customers being served.

Overcoming Cultural Challenges In M&A

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Culture is fundamental to the success of the deal, so it’s top of mind for bank leadership teams working with Richard Hall, managing director for banking and financial services at BKM Marketing. In this video, he explains why transparent, candid communication is key to retaining customers and employees, and shares his advice for post-pandemic strategic planning.

  • Ensuring a Successful Integration
  • Retaining Customers and Employees
  • Formulating a Strategy for 2021

No Time for Complacency

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valuation-1-31-18.pngThe bank industry is no stranger to change. In just the past few decades, deregulation, telephone banking, ATMs, the internet and mobile phones have all caused banks and bankers to adjust how they approach their trade. But while the fundamentals of banking have remained the same throughout all of this, with the changes confined largely to the way banking products are delivered, one gets a palatable sense from attendees at Bank Director’s Acquire or Be Acquired conference this year that the industry is on the verge of a more transformational realignment.

In the short-term, bankers are upbeat about last year’s historic tax cut. You have to go back to World War II to find the last time the corporate income tax rate was as low as 21 percent. Few industries will benefit more than banks from this reduction, as three out of the four biggest taxpayers on the S&P 500 are banks. The net result is that profitability in the industry, measured by return on assets, is expected to increase by 20 basis points in one fell swoop.

The benefit to banks from the tax cut won’t just be on the expense side. In an audience poll on the second day of the conference, 84 percent of attendees said that they expect small businesses to recycle tax savings into new investments, be it better technology or higher wages for their employees. If this comes to fruition, it would pour fuel on the economy, pushing up wages and accelerating inflation. The desire to keep price increases in check, would incentivize the Federal Reserve to raise rates more aggressively, thereby pushing up net interest margins and thus revenue and profits throughout the bank industry.

This is one of the reasons that bankers are so optimistic about 2018. Bank stocks have soared over the past 14 months, pushing valuations up to the highest level in a decade. Bankers who own stock in their banks have seen their balance sheets respond in kind. For banks that have considered a sale, this presents a previously unexpected opportunity to cash in by drawing a markedly higher price for their shareholders from a merger or acquisition.

Yet, there are two underlying currents of concern. The first is that the improved outlook will lull bankers into complacency. With profits up and shareholders feeling rich, investors fear that bankers will feel less urgency to change. But as Tom Brown, CEO of hedge fund Second Curve Capital, reminded attendees earlier in the conference, bankers should be careful not to confuse a bull market with brains.

Banks have survived countless innovations that have washed over the industry in the past by adapting to them and incorporating them into their existing business models, but the changes afoot now, be it big data or mobile banking, strike at the very heart of those business models themselves. In a separate poll of audience members at this year’s conference, 83.5 percent of attendees said that big data is the new oil. The implication is that it could usher in changes as significant as the industrial revolution.

This is a point that Dennis Hudson III, the chairman and CEO of Seacoast Bank, a $5.8 billion bank based in Stuart, Florida, drove home in an interview with Bank Director. Customers are becoming less sticky. Many customers no longer walk into branches and younger generations in particular now value banks less for the ability to store money and more as the means to facilitate secure, real-time payments. Banks that don’t adapt to these realities could find themselves in the same situation as horse buggy drivers who dismissed the automobile as a toy for hobbyists.

When you also factor in the maturity of the consolidation cycle, which could leave under-performing banks with few suitors and competing against bigger and more sophisticated rivals, this may be one of the worst times in the history of banking to grow complacent. Consistently throughout the conference there was talk of the haves and have nots. The haves are banks that earn industry-leading returns and thereby serve as attractive acquisition targets or are in a position to be serial acquirers in their own right. The have nots, on the other hand, are banks that lag the performance of their peers, lack the resources to devote to innovation and could thus find themselves standing alone when the proverbial music stops playing.

Further underlining this point is that, for the first time, the nation’s biggest banks are growing customers organically, attracting them with simple and sophisticated mobile banking offerings and competing aggressively for consumer deposits as they comply with new liquidity requirements. This is a meaningful inflection point. Previously, community and regional banks benefited from the acquisitive ways of the biggest players in the industry, which shed customers as the banking behemoths worked to digest their acquisition targets. But now, with the three biggest banks in the country locked out of the acquisition game as a result of the 10 percent cap on deposits, they are focused inward, bringing them into more direct competition with smaller banks.

The overarching takeaways from this year’s gathering of over 1,000 bankers are accordingly twofold. The near-term looks promising for banks, with more money hitting the bottom line from the recent historic tax cut. But banks should use this to accelerate their transformation into the financial institutions of the future, not as an excuse to rest on their laurels and buy back stock.

The Perfect Complement: Community Banks and Alternative Lenders

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lenders-2-8-17.pngArmed with cost and process efficiency, greater transparency, and innovative underwriting processes, alternative lenders are determined to take the lending space by storm. Alternative small business lenders only originated $5 billion and had a 4.3 percent share of the small business lending market in the U.S. in 2015. By 2020, the market share of alternative lenders in small business lending in the U.S. is expected to reach 20.7 percent, according to Business Insider Intelligence, a research arm of the business publication.

Being able to understand customer-associated risk by relying on alternative data and sophisticated algorithms allowed alternative lenders to expand the borders of eligibility, whether for private clients or small businesses. In fact, a Federal Reserve survey of banks in 2015 suggests that online lenders approved a little over 70 percent of loan applications they received from small-business borrowers—the second-highest rate after small banks, which approved 76 percent, and much higher than the 58 percent approved by big banks.

Coming so close in approval rates to banks and having lent billions employing a different, more efficient business model inevitably created an interest from banks. Some of the largest institutions have been taking advantage of the online lenders’ technology, but community and regional banks are still in the early stages of exploring partnership opportunities. While concerns over those types of partnerships are understandable, there are also important positive implications, which we will explore further.

Cost-Efficient Capital Distribution Channel
Online marketplaces represent an additional, cost-efficient channel for capital distribution, expanding the potential customer base. An opportunity to grow loan portfolios with minimal overhead and without the need for adoption or development of resource-consuming technology, led to a partnership between Lending Club and BancAlliance, a nationwide network of about 200 community banks. The partnership allowed banks to have a chance at purchasing the loans originated by Lending Club, and, in case those loans did not meet the requirements, they were offered to a larger pool of investors. Banks also have an opportunity to finance loans from a wider Lending Club portfolio.

Examples of partnerships also include Prosper and the Western Independent Bankers. These partnerships give more banks an opportunity to offer credit to their customers, and more consumers access to affordable loans.

Portfolio Diversification and Customer Base Expansion
Alternatives lenders can offer an easy application process, a quick decision and rapid availability of funds due to an alternative approach to the underwriting process. Use of alternative data to assess creditworthiness is an inclusive approach to loan distribution. In 2015, in the U.S., there were 26 million credit invisible consumers. Moreover, the Consumer Financial Protection Bureau suggests that 8 percent of the adult population has credit records that you can’t score using a widely-used credit scoring model. Those records are almost evenly split between the 9.9 million that have an insufficient credit history and the 9.6 million that lack a recent credit history.

Paul Christensen, a clinical professor of finance at Northwestern University’s Kellogg School of Management, believes there are positive implications for companies leveraging alternative data to make a credit decision.

“For companies, alternative credit rating is about reducing transaction costs. It’s about figuring out how to make profitable loans that are also affordable for most people—not just business owners,” he said in a September 2015 article.

For community banks, as regulated institutions, partnerships with alternative lenders that extend credit to parts of the population perceived as not creditworthy is an opportunity to reach new consumer segments and contribute to inclusive growth and resilience of disadvantaged households.

Customer Loyalty
Two Federal Reserve researchers noted in a 2015 paper that community banks can increase customer loyalty by referring customers to alternative lenders when banks cannot offer a product that meets the customer’s needs. “By providing customers with viable alternatives? it is more likely that these customers will maintain deposit and other banking relationships with the bank and return to the bank for future lending needs,” the researchers emphasized.

Access to Knowledge, Expertise and Technology
While the extent of integration may vary, one of the most important elements of partnerships that carry long-term organizational and industry benefits is mutual access to knowledge, expertise and technology. The combination of banks’ and alternative lenders’ different business models with an understanding of mutual strengths allows the whole industry to transform and provide the most efficient, consumer-facing model.

What Do Banks Need? More Loyalty

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customer-loyalty-6-1-16.pngWhat do some of the great companies that have disrupted entire industries have in common? Think about companies such as Zappos.com, an online shoe retailer that has grown to be one of the world’s largest shoe retailers, now owned by Amazon. How about Uber and Lyft? They’ve crushed the taxi business. How about Apple, with its legions of customers more than happy to pay two or three times what competitors charge for their products? Not only have these companies simplified the buying process, but they have generated something many companies lack: customer loyalty.

As part of his speech last week at Bank Director’s Growing the Bank conference, Joseph Bartolotta, an executive vice president at $9.6 billion asset Eastern Bank in Boston, Massachusetts, talked about these companies and the importance of loyalty. Loyalty will generate increased spending from your customers, make them less sensitive to price and more likely to refer other customers. Loyalty will also lower your costs and reduce customer turnover, he said.

What have companies like Uber and Zappos done to generate loyalty? Zappos has a 365-day return policy and will pay the costs of return shipping. Not only are Uber and Lyft generally cheaper to use than taxis, they have a payments experience that is extremely smooth precisely because there is no payments experience, Bartolotta pointed out. The companies send you a receipt via email after your ride is over, and there is nothing to sign or approve. Apple creates products that are expensive, but their loyal customers swear they are better than anything else.

Banking, with a few exceptions, doesn’t necessarily generate a lot of loyalty. In a Gallup poll in 2015, only 25 percent rated the honesty and ethics of bankers high or very high—behind funeral directors, accountants and journalists. (But don’t despair, bankers rated higher than real estate agents, stockbrokers and members of Congress.)

Bartolotta listed a couple of practices that he thinks have hurt the customer experience in banking. A common industry practice of ordering check and debit transactions from the highest dollar amount to the lowest generated a high level of overdraft fees in the years leading up to the financial crisis, but it led to widespread customer dissatisfaction. Customers revolted and filed class action lawsuits. Another is the practice of a continuous overdraft fee that occurs until the customer comes out of a negative balance.

Bartolotta also tries to steer away from the use of asterisks and fine print in company marketing materials and brochures. Bankers may say, for example, “Yes sir, we disclosed this to you at the time of the account opening. It was in the document you received.” Communication, including in such documents, should be in plain language, avoiding acronyms and industry lingo, such as “RDC” for “remote deposit capture.”

In addition, banks should do everything they can to avoid making customers jump through hoops. If you are contemplating a new product or service, bring a literal chair into the room where the discussion is taking place and label it “customer,” he said. Make sure, in other words, the customer is always a part of the discussions about any products and services you provide.

What banks generate loyalty as described? Columbus, Ohio-based Huntington Bancshares does with its bank’s asterisk-free checking account. The checking account for The Huntington National Bank is free with no minimum balances. Anyone who overdrafts the account gets a notice and a 24-hour grace period to right the error before being charged a fee.

Bartolotta used his own mutual as another example. Eastern Bank had been sending emails to customers who closed accounts asking them why they were leaving. They got back several responses from customers who said, ‘I didn’t close my account. You did.’” It turned out that Eastern Bank, like a lot of banks, was charging a recurring fee on inactive accounts and then closing those accounts when they ran a zero balance. Many customers never opened their account statements and didn’t know what was going on. To change this, Eastern Bank began warning customers when they were about to be charged an inactivity fee, and giving them options to avoid the fee and even close the account, if they chose. The helpfulness was a huge improvement.

There’s room for improvement in the reputation that the banking industry enjoys. A lot of small, community banks already follow these customer-friendly practices. It would helpful if the entire industry did.