Heidi Lemmetyinen // March 08 2019

Big US Retail Banks Are Awful. How Can They Get Better?

On a list of experiences I’d rather not have, calling my bank’s customer service line is somewhere between getting a root canal and being stuck in traffic.

I had a discussion about the current state of consumer banks with my colleagues who work at Service Design at Digitalist San Francisco. We concluded these are some of the biggest flaws that major US retail banks have in their CX.

People don’t trust them.  

Consumer trust in financial institutions plummeted during the 2008 financial crisis, and that trust has still not been regained. From Wells Fargo’s fake account scandal to Bank of America misusing its customers’ cash, consumer banks keep getting roiled by scandals.

But even if you don’t trust banks, you need banks. It’s no wonder that online banks and credit unions are gaining popularity. Many of them offer great customer service and a superior UX.

It is actually ironic that the only thing the large, established banks have over smaller financial startups is trust. If they lose this trust, they will free up even more space for startups with incredible CX.

They are losing a generation.

When young people get new bank accounts, they need basic financial advice on how to use them. Currently, they are not getting much of it.

It’s worth noting that this is also a generation that has never trusted banks, to begin with. Many of them think cryptocurrency is just as safe as banks. They might not fully understand crypto, but they don’t understand banks, either.

Banks should be working a lot harder to gain trust from a generation that thinks so little of them. They could start by providing better onboarding and some education on what banking and personal finance are.

Their usability is terrible.

The customer experience at most major banks is not great. If you have to visit a branch, you’ll be faced with long lines. If you call their customer service line, you’ll get to interact with annoying robots or get passed from one customer service rep to another.

Banks would like you to service yourself online, but their online experience seems to be stuck in a time warp somewhere in 1998.

Banks should look at the omnichannel experience consisting of online, phone and physical banks more carefully. They should be leveraging the huge amount of data they have on their customers and their behaviors to provide the best output.

They don’t know how to communicate.

There are a lot of financial products out there and different banks offer different things. If you want to make sense of what’s available, you have to do your own research and actively seek out alternatives.

The trouble is most people don’t know where to look or what they should be looking for. A lot of people don’t even understand where their money is coming from or where it’s going. Researching banks and accounts is very low on their priority list.

There’s a lot of great new technology out there that has the potential to make the banking experience less miserable. But what’s the use of facial recognition or contactless cards, if your bank is not telling you what to do with them?

Banks should become better at reaching out to their customers and giving them practical advice on what to do with their money.

They don’t offer personalized experiences.

The websites of major retail banks display generalized marketing targeted at all age groups. It’s actually a bit strange, given that they know just about everything about you, including your age, spending habits and what you can afford.

If you have millions of dollars on your bank account, you probably have a personal banker. With today’s technology and thanks to AI, you should be able to get that personalized experience with a lot less money.

Many banks are missing the opportunity to provide personalized experiences. Once again, startups are jumping at the chance to fill this gap. Take Albert, the personal finance app that connects to all of your accounts and helps you put your financial plan on auto-pilot.

They offer poor yields.

The average savings account has a 0.06% interest rate, and many of the biggest banks in the US pay rates as low as 0.01%. If you want a better yield for your investment, you’re better off with online banks. Because online banks don’t have to maintain branches, they offer high-interest savings paying upward of 2% APY.

Most brick and mortar banks don’t offer those rates because they don’t need to. In some ways, banking is almost like a religion. You start an account somewhere because your parents and grandparents had an account there. You stick with it, through better or for worse. Until you perhaps don’t.

What’s next for consumer banks?

Regulation has thus far saved the financial industry from a major disruption by creating barriers to entry for fintech companies. It’s not easy to obtain a charter to create a new bank, and startups often lack the patience to go through this process.

But there are new entrants targeting niche customer pain points and a very specific customer base. Venmo is a digital wallet that lets you make and share payments with friends, while the Twine app lets couples collaborate on their financial goals.

If banks wish to avoid getting disrupted, they should start looking at how to improve their CX right about now. Digitalist is doing some interesting work on this front with major financial institutions. We look forward to sharing more information on these projects in the near future!

 

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