Bain will soon publish the latest NPS for retail banks in North America. The situation is grim indeed. Large banks with national branch networks have now stumbled into negative NPS territory. Not surprisingly, those banks achieved absolutely no growth in deposits. Actually, this is quite surprising given the ocean of excess liquidity sloshing around the globe. Money is sitting on the sidelines awaiting some signal that it is safe to jump back into the stock market.
Why haven’t these banks received a share of these funds? The answer: customers don’t like the way they get treated at the banks.
Customer detractors complain about bad service and nuisance fees. This provides a classic illustration of the double-whammy effect of bad profits. The first-order effect is the direct impact on customers. Customers hit with fees resent them and become detractors. The second-order effect of bad profits is they demotivate employees. This second-order effect is often more powerful. That’s because, although only some customers get hit with fees, almost every employee cringes in humiliation when fees are levied or policies implemented they consider unfair or abusive. And they end up dealing with the complaining detractors, lowering motivation a notch further. When employees aren’t proud of the way customers are treated, they are not inspired to deliver great service.
The New York Times reported last month that a federal judge “ordered Wells Fargo to pay California customers $203 million in restitution for claims that it had manipulated transaction to maximize the overdraft fees it charged. Instead of processing transactions in the order in which they were received, Wells Fargo put through the largest to smallest. In a stinging 90-page opinion, United States District Judge William Alsup wrote that the practice was unfair and deceptive. The bank’s dominant, indeed sole, motive was to maximize the number of overdrafts and squeeze as much as possible out of customer who spent more than they had in their accounts…The judge also accused Wells Fargo of going to great lengths to hide these practices while promulgating a façade of phony disclosure. “
Of course it is completely unfair to pick on Well Fargo since most large banks have adopted this practice. But just because everyone is doing it does not make it right! Bad profit practices have convinced branch and phone personnel that no matter how loudly executives proclaim their commitment to ethical behavior and putting customer interests first, they have no intention of walking that talk. Management exhortations to branch staff to turn customers into promoters ring hollow when detractors are being generated by bad profits policies created by those very same executives.
Until leaders get serious about confronting bad profit policies and beginning to wean their firms off this ugly addiction, they cannot earn the loyalty of their employees. And without employee loyalty, there will be little customer loyalty. Today, large US banks have more detractors than promoters. Something has to change. A good place to start would be to begin lining up those bad profit policies against a wall, and blasting them into oblivion. Otherwise, it will be the banks themselves headed toward that fate.