BankThink

Small Banks' Protocol Mentality Keeps Them in the Dark Ages

When businesses are called upon to explain their reasons for engaging in arbitrary or even outright harmful practices, they tend to resort to the same defense: "It's protocol."

I was the unfortunate recipient of this response just a few weeks ago while visiting a photography studio. My assigned photographer said that although I only wanted professional headshots, and had arrived at the appointment wearing an outfit designed for above-the-waist pictures, it was protocol to take full-body photos. This may sound benign, but it would have been a waste of my time — and I felt that my needs were being disregarded. I took my business elsewhere.

Unfortunately, the "protocol mentality" transcends most industries — including community banking. This approach stifles creative thinking and compels employees to do things the way they have always been done. The mentality is most troubling when rigid or outdated ways negatively affect the consumer, ultimately draining profitability.

One example of the crippling protocol mentality is the way in which banks handle electronic fund transfer disputes. Some banks require customers to file disputes inside a branch, reasoning that a customer signature may be required under certain circumstances. However, this requirement ignores the reality that with modern-day technology, electronic signatures are not only possible but easy. Banks could also use this technology to help customers issue stop-payment orders remotely.

Allowing such needs to be handled over the phone creates a more positive customer experience and lightens the load for branch resources. It's a protocol update that's a win for everyone.

My colleague John Muell, senior advisor at Resurgent Performance, suggests that change-of-address requests can also be accommodated remotely. When patrons call asking to change their address, bank staff should ask them questions that confirm their identity. The bank should then follow up by sending a letter to both their old and new addresses informing the customer of the change and instructing them to contact the bank if it was in error. Sending out an automated letter, as opposed to inconveniencing customers and keeping countless logs of signatures on file, is obviously the better option for both bank and customer.

John also pointed out that signature logs are often only one of many that banks, especially smaller banks, keep on file. Credit-card logs, travelers' checks logs, night drop logs, and even a log of logs are all a part of severely archaic protocol.

These logs are futile, since other tracking and security measures are typically in place. (And if they're not, they should be.) Therefore the only real result of logging protocol is a negative impact on productivity. And when branch staff spend their time tallying needless information, customer service takes a hit too.

On top of unnecessary logging, community banks sometimes still rely on paper forms. A prime example of this would be the protocol for collecting the extra Bank Secrecy Act information that certain accounts require. Some banks use a separate written form to gather this information, rather than simply adding an optional section to the electronic account opening system. There's no reason for banks to avoid this time-saving, consumer-friendly option.

When banks are evaluating whether a current protocol is really best practice, John suggests that managers ask themselves how they would handle a given situation if they had no branch locations. This is sage advice in a rapidly evolving industry in which branch functionality continues to change.

If community banks are to remain relevant, they need to be forward-thinking and capitalize on technology while aligning services to ever-changing consumer needs. Banks have a huge opportunity to look at their protocols and procedures from a new vantage point and update their outdated ways before it is too late.

Natalie Brooke is vice president of client relationships for Resurgent Performance, a community bank advisory group.

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