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Deliver What Customers Want, Not What You Think They Need

Bankers sometimes tell me: "A customer like me wants…" But customers are not like you. Bankers are fascinated by accounts and transactions, and they plan ahead.  Customers are different.

Personal financial management software is a spectacular case in point, with 4% market penetration achieved after years of rip-roaring publicity, copious venture capital funding, chest thumping and hubbub. 

Everyone wants to set household budgets, compare spending with peers, monitor where the money goes, save for retirement, and apply trigonometry to his consolidated account data, right?

No, wrong. Loan underwriters and targeters of marketing messages will be delighted to use all this information—if anyone can sell and deliver it. The vast majority of customers don't want it, even for free. It's easy to see why.

Few want to be told that they're not saving enough for retirement—though according to experts, most of us aren't. Few want to be told that they're spending too much on fun (which they already know).

Struggling with expenses is not only painful, it's boring. It's like dieting.  Counting calories and scrimping on dollars don't make you feel good. Not too many people do this for long. Much more money's made selling yummy food than selling diets.

For every person paying for credit reports, there are 10 or 100 who don't want the information, even for free. A good business might be getting these people to pay to NOT be told about their credit. "Pay NOW to STOP me from sending you weekly credit updates." (But do it with greater finesse than that.) 

Serve revealed preferences, not asserted ones. The great majority are not interested in putting more time into finances. They'd prefer to spend fewer hours counting out pennies and focusing on problematic choices, such as today vs. 30 years from now. If you make it more convenient for them to get what they want fast, they'll reward you. 

That's why we see the billions of dollars in overdraft fees continuing despite new restrictive regulations. That's why customers don't flock to banks that send text messages and allow 24-hour grace periods to repay overdrafts. Consumers incurring overdrafts don't want to think about these dreary realities, much less have to do something about them.

What's the most successful, widely accepted and growing benefit that banks introduced in recent decades?  

Free PFM? No, rewards. And those are rewards for spending, not for scrimping. Reward people for doing what they want to do and will do anyway—not for doing what hurts, which they won't do. You'll even be helping our sick economy.

Furthermore, who'll be more profitable: The customers who watch every dollar—and tirelessly search for the cheapest checking account and card?  Or the customers who want to use their time earning and spending money, rather than analyzing, and who will pay for versatility and convenience?  Go on pursuing the spenders—there are far more of them. 

Not just the affluent. The "underserved" not only spend more money per transaction—they spend far more time. This isn't by choice. Offer efficiency, access, simplicity, and payment integration.

Not branches. At best, branches are inconvenient and annoying. Stand on line? That's out of date!

Offer broad and convenient immediate transaction capabilities. Let them send money electronically or by check and pay their bills, all this with phones that also accommodate remote deposit capture, or with a PC.  Link accounts so that the money and credit are always on tap. Boil it all down to a few bottom-line figures that are easy to understand. Offer immediate, personalized communication—voice or text—for which customers can pay when they need it. I don't see any banks doing all this yet.

Do we in the financial services industry want to influence our customers' financial behavior? Yes. We want to influence them to buy from us services that they'll appreciate and go on buying for years. 

But it ends there. Who are we to hint that a customer should alter his spending? Who are we to induce him to put more time into his finances? Who are we to say what he needs? Retail bankers sell, the same as all retailers sell: By honestly motivating spending. Nothing shameful in that.

I'm not cynical. I'd rather sell gratification than warnings and fear. At the end of the day or month—not at retirement, not at the end of their lives—customers pay us for increasing their satisfaction and reducing their frustration and effort.  Do that and prosper.  Or nag them, inculpate them, challenge them, confuse them … and lose them.

Andrew Kahr is a principal in Credit Builders LLC, a financial product development company, and was the founding chief executive of First Deposit, later known as Providian.


(9) Comments



Comments (9)
I have thought for years, why do banks always bundle the services for accounts and products so Consumers have no choice. I wonder the response Consumers would have to a bank that would allow the Consumer to choose the services they want to pay for their banking needs? Should a consumer be able to walk into a bank branch or bank online, and choose from a list of offerings that are priced individually for their banking needs. An a la Carte menu. Are we listeng to Consumers as individuals as to their banking needs? How would Consumers react to the question, "What do you need"? I think a change is due in our banking industry to become more "personalized" in the product offering to consumers. Consumers are telling banks today, you are not meeting our needs, by the $billions of dollars spent by Consumers outside of banks.
Posted by Diane B. | Thursday, October 11 2012 at 9:13AM ET
What Andy has advocated makes a lot of business sense--Banks exist because of customers---and meeting their needs should be the mantra if they have to grow successfully A banker has to play a role of cosultative sale professional
Posted by zaidi | Thursday, October 11 2012 at 3:18AM ET
Andy I really enjoy your articles. Your premise is right on the money, while we are professional bankers with knowledge of products and services, advanced degrees,, who really knows exactly what our customers want? It's our job to listen, listen and listen. Then function with a consultative approach. That has worked for us for 50 years and loyalty and relationships have thrived.
Posted by Tmcgraw | Wednesday, October 10 2012 at 1:42PM ET
I agree wholeheartedly with the comments from mdillon. The notion that financial institutions should seek profit by encouraging ill-informed customers to make financially destructive choices is appalling. It is an argument which I'm sure will resonate with the executives of tobacco companies who still try to make themselves feel good about going to work every day hoping more people choose to poison themselves with their brand of cigarette. I truly hope that Mr. Kahr does not take himself seriously. Certainly, those who rail against the CFPB as an unnecessary intrusion into the pure and holy marketplace must believe him to be a harmless crank.
Posted by TJR Easton | Wednesday, October 10 2012 at 5:58AM ET
Bankers have a major influence on the economy- good and bad. The author's thinking has translated into a mindset of entitlements from the middle class down. Easy credit only makes the creditor rich in the short run and it makes the borrower poorer. Then the borrower needs "entitlements" to sustain their lifestyle. And who pays for entitlements - people reading and commenting on BankThink!

I salute the bank loan officers with the ability to say No when it is needed. While it may seem paternalistic, it is no different than a doctor reminding us to stop obesity or smoking.
Posted by frankarauscher | Tuesday, October 09 2012 at 3:33PM ET
I gather Andy is getting too old and tired to do what professionals of any kind are driven to do - counsel their clients on how to become successfully in life. Instead, he would have us stop thinking at the 5th grade, become clerks, and just give everyone what they want as easily and conveniently as possible. So much for the "informed opinion" at Bank Think. I believe the last time someone had such an uninformed opinion was expressed by the immortal words: "Let them eat cake!" Shortly after, that empty-headed opinion was lost.
Posted by mdillon | Tuesday, October 09 2012 at 2:57PM ET
The Consumer Financial Protection Bureau needs to monitor the three credit reporting agencies so we don't need a cottage industry to 'fix' what they don't care about: the consumer! As a mortgage broker, I referred clients whose credit was beyond my time available to a 'credit builder' or counselor. My reward? I am cut off from running reports from the three bureaus who blackballed me ala Senator McCarthy era due to 'excessive paperwork, disputes and corrections' requested by the consumers. Ken Markus, Enforcement Director for the CFPB is my targeted remedy to come down on Equifax for the egregious blackballing. So how does Credit Builders LLC get their reports? It is against the three-bureaus' rules because they don't care.
Posted by overregulated | Tuesday, October 09 2012 at 2:46PM ET
Running a bank on "trial and error" seems like a pretty expensive and antiquated way to go. Listening to consumers would be much more successful, and there are many ways to hear what consumers want today but it requires inovative thinking, which banks don't exhibit anymore. Walmart and other non-banks listen and consumers are looking outside the traditional bank for that reason.
Posted by EFB | Tuesday, October 09 2012 at 1:50PM ET
I hope that the headline to this piece becomes the motto of the new federal consumer Bureau. The successful bankers, those successful over time, are the ones who identify what their customers really need and then provide it in a way that their customers want, demonstrated by what their customers actually do. How do banks achieve that? Mostly by trial and error. You can plan and survey all you want, but the most successful product survey is how your customers actually respond to your products and services, and you don't know that until you try them out. Equally important with that is recognizing that the market test will also reveal that there are multiple answers to the question, what do customers really want? There is likely no majority answer to a financial services customer demand than there is for customer demand and taste in clothes, cars, or music. A successful bank needs to please enough customers for its particular service option. Even more successful banks will have a menu of options in order to meet the variety of needs and interests of its customers, again identified mostly by trial and error. Will the new consumer Bureau tolerate a bank wishing to offer a variety of answers to financial service products, identified by trial and error? That is not the way that bureaucracies work.
Posted by WayneAbernathy | Tuesday, October 09 2012 at 1:25PM ET
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