Why Banks Lose Money by Ignoring Customer Experience
Previous: The Hyperconnected Consumer
Book: Bank 3.0: Why Banking Is No Longer Somewhere You Go But Something You Do
Author: Brett King
ISBN: 978-1-118-58963-2
Chapter 2: The ROI of Great Customer Experience
500 Digital Interactions vs. 2 Branch Visits
King opens Chapter 2 with a projection that should make every branch-obsessed banker uncomfortable. By 2016, the average retail banking customer would interact with their bank roughly 500 times a year through mobile, web, tablet, and ATM. They would speak to an actual human fewer than five times. They would visit a branch maybe twice.
If your entire customer experience strategy hinges on those two branch visits, King says you are “absolutely screwed.” And honestly, it is hard to argue with that math. A competitor with a strong digital messaging strategy touches the customer ten times a week. You get two shots a year. That is not a fair fight.
The problem is that banks kept measuring customer satisfaction through branch surveys and mystery shopping. They added call center feedback later. Maybe some KPIs tied to those numbers. But the core assumption stayed the same: the branch is the center of the relationship. That assumption stopped being true a long time ago.
The Silo Problem That Costs Real Money
King tells a story from his own experience as a customer of a retail bank in Hong Kong. He had a Gold Visa card and received a pre-approved offer to upgrade to Platinum. Before he could send back the form, the bank called about a suspicious purchase on his Gold card. They offered to reissue a new Gold card for security reasons.
Simple enough. He asked if they could just issue the Platinum card instead, since he had the pre-approval letter right there. The response: “I’m very sorry sir, the Platinum Visa Credit Card department is a separate profit centre within the bank. We are not related.”
He asked if the rep could call the Platinum department. The answer: “I wouldn’t even know who to call. I don’t even know if they are in our building.”
This is the silo problem in action. The Gold card team would actually be penalized for recommending the Platinum upgrade because their numbers would take a hit. Their incentive was to retain customers within their product silo, regardless of what was best for the customer. The business literally rewarded isolating customers.
The same thing happens across channels. Call center teams do not talk to internet teams. Branch teams do not talk to call center teams. IT, PR, and marketing fight over who controls the website. Email campaigns and mobile push notifications happen independently, so nobody owns the total message reaching the customer. Legal and compliance block channel teams from simplifying processes because of how things have always been done.
King puts it plainly: if the institution stepped back and looked at how a customer actually interacts with them, they would realize the customer is totally agnostic about products, processes, and channels. Customers just want to get their banking task done.
The Organization Chart Is Upside Down
Here is where King gets into the structural absurdity. In most banks, the Head of Branch Network reports directly to the CEO or is second only to the Head of Retail. The person managing internet banking sits under IT or marketing, three or four levels below. So 90 percent of daily transactions flow through channels managed by people with almost no organizational influence. The person with the CEO’s ear oversees 5 to 10 percent of traffic.
Most banks at the time did not even have a Head of Mobile role. Half their customers were on Facebook and Twitter, and there was no Head of Social Media. The org chart reflected priorities from a different era.
The standard defense is “the branch generates all the revenue.” King dismantles this. Take credit card acquisitions. The marketing happens through direct mail, web, newspaper ads. The customer calls the call center or fills out the form online. But the call center sends them to the branch for identity verification and a signature. The branch records the revenue. It had practically zero involvement in the actual sale but gets credit because it handled the compliance step.
Banks like HSBC and Bank of America each spent over a billion dollars on branch networks but roughly $50 million on web and mobile. King argues the split should be more like $500 million on branches and $250 million on digital, at minimum. The actual spending did not match how customers behaved at all.
Bank Transfer Day and the Cost of Not Caring
Chapter 2 also covers the fallout from the 2008 financial crisis and how it deepened the divide between banks and customers. Banks received bailout funds meant to restart lending. Instead of lending to small businesses and individuals, many banks invested the money, made healthy returns through margin trading, and then paid themselves bonuses for the “hard work.”
Customers noticed.
Anti-bank blogs increased by 400 percent. The “Move Your Money” campaign encouraged people to leave big banks for credit unions. Then in 2011, a gallery owner in Los Angeles named Kristen Christian got fed up with Bank of America’s fees and created “Bank Transfer Day” on Facebook. Between September 29 and November 5, credit unions gained $4.5 billion in new deposits and 440,000 to 650,000 new customers. That was a 50 percent increase in new accounts.
Bill Gates said it back in 1994: “Banking is necessary, but banks are not.” King uses this quote to drive home that the functions banks perform can be handled by many different types of organizations. And when banks behave badly, customers now have the tools and alternatives to leave.
Inertia Is the Real Enemy
The second half of the chapter focuses on what King calls banking inertia, and he makes a compelling case that inertia equals friction. Friction gives disruptors their opening.
He uses a brilliant thought experiment about paper bank statements. Imagine you lived in a world where all statements were electronic. Now someone walks into the compliance department and proposes printing transaction details on paper, putting the customer’s name and address on it, stuffing it in an unsecured envelope, and mailing it through a system where a dozen strangers handle it. The compliance officer would reject it immediately. It is insecure, expensive, and leaves no audit trail.
But because paper statements already exist, nobody questions them. That is inertia. Banks maintain processes not because they are good, but because they are familiar. Signature cards that regulators have not required since 2001. Asking customers who already have an account to bring in bank statements to qualify for a loan at the same bank. The language itself is stuck in another century: “telegraphic transfers” when no telegraph is involved, “drafts” that are not first editions of documents.
King points out that 70 percent of consumers were willing to go paperless as of 2008. They just had not been pushed. If banks told customers they were switching to e-statements and would charge $2.50 monthly for paper, most would let the switch happen automatically.
Every piece of friction in the system is an opportunity for a startup to step in and do it better. Startups have no legacy processes, no inertia, and no fear of breaking tradition.
Which Channel for Which Product?
King addresses the debate about which banking products can actually be sold online versus which need face-to-face interaction. Google research showed 88 percent of customers started their financial product search online. For mortgages, 62 percent of total research was done digitally, averaging over 11 hours before settling on a product. 77 percent did not even know about the product they chose before starting.
But an EFMA/McKinsey study claimed 80 percent of consumers applied for mortgages through branches. King calls the study significantly flawed because it only measured where the final compliance step happened, not the full customer journey. Someone who spent 11 hours researching online and then walked into a branch to sign a form gets counted as a “branch sale.”
The real insight: banks need to measure the total journey, not just the last step. And for simpler products like credit cards, personal loans, and deposit accounts, the shift to digital channels was already well underway. The products that still needed face-to-face were the complex ones like investment products and some insurance. But even there, the customer had often made all the key decisions online before ever meeting an advisor.
My Take
This chapter is basically a long argument that banks are structured to serve themselves, not their customers. And that this structural problem costs them real money through lost customers, missed cross-sell opportunities, and an inability to compete with digital-first alternatives.
What I find most striking is the org chart problem. It sounds so basic, but it explains so much. When the person running your most-used channels reports four levels below the person running your least-used channel, your priorities are backwards. Every decision flows from that structure. Budget allocation, talent investment, innovation speed.
King’s paper statement thought experiment is the most memorable part of the chapter. It perfectly captures how inertia makes obviously bad practices invisible. Every industry has its version of the paper statement. The trick is recognizing it and having the will to change.
The core lesson: customer experience is not a branch problem. It is a brand problem. And your brand is defined by every touchpoint, the vast majority of which are now digital. If you spend 95 percent of your channel budget on the channel that handles 5 percent of interactions, do not be surprised when someone else builds a better experience and takes your customers.