Tech Execs Look at the Big Picture
Why would top operations and product-management professionals from major banks share their thoughts and findings?
That's what a dozen such people - potential competitors for national business - did at a weekend retreat sponsored by National Data Corp., a vendor of bank services. I was invited to participate.
The members of this industry council talked about where such services are going and what can be done to perfect electronic data interchange, cash management techniques, image processing, and other technical projects.
But their discussions also ranged to customer service, corporate culture, and marketing issues.
Reasons to Cooperate
The barriers were lowered for several reasons.
First, bankers are realizing that their best business is with the local midmarket, not with giant nationwide companies that take their most profitable business to the capital and commercial-paper markets. From this perspective, another bank is really not so much of a competitor as it might otherwise appear.
Second, banks realize they need some uniformity in providing these technical services. A bank cannot afford to reinvent the wheel if working with others might save a lot of development expense. (National Data, the meeting's organizer and host, naturally hopes to serve as a bond in developing the services and networks that all banks want and need.)
Finally, banks have realized that the worst environment is one in which competitors don't know what their own costs are. If one bank gives away a service well below cost, others must go along or lose business.
So the bankers at this meeting put full energy into discussing what can be done to make bank services and products more rational and efficient.
What impressed me the most was that the operations managers' major concerns were not technical.
Rather, theirs were concerns that would have surfaced at a retreat of chief executive officers.
Of course, the conferees did complain that many banks are curbing expenditures in operations and technical services while asking these areas to provide more fee income.
But many of the complaints had more to do with marketing and customer service than with technical issues.
The Legacy of Regulation Q
"How can we get our bank to turn away from a Regulation Q mind-set?" one participant asked.
He meant that his shop and others still provide services for less than they are worth; the presumption is that the basic bank profit will come from underpaying for deposits, as when Regulation Q ceilings on interest rates were in effect.
Though deregulation came at the end of 1982, customers still think bank services should be given away rather than adequately priced.
Banks go along with this precept because other banks do.
Putting the Customer First
The conferees' No. 2 concern was using customer information to improve service.
These technical people share a complaint of CEOs and marketers: "We don't know who our best customers are."
"You call the hotel desk and the operator calls you by name," one of the conferees said. "Why can't we do this?"
The group felt that a customer profile should be available on electronic display right in front of any employee who is talking with a customer by phone or in person.
The profile should show the account history and be useful in making the relationship closer and more profitable.
The technology is there. What is needed is a feeling of urgency.
What particularly disturbed me was that almost every time we talked about paying a visit to solve the customer's problems or propose a new service, the reply was that the cost is too high.
"If we go out once to a small stationary store, for example, it uses up a full year's profit on the account" was the response.
Another problem: Most of these operations people felt that those in credit look on them as a necessary evil.
A 100-page plan reflecting months of labor is boiled down to three pages before top management sees it, they complained.
"When we submit a strategic plan, half the people don't believe it and the other half don't care," one participant said.
Another complaint was that in a bank merger, the surviving system is likely to be the acquiring bank's - even if that is second-best for customer service. The reason: To top management, speed of implementation and reduction of cost mean more than state-of-the-art service.
But there was general agreement that operations and customer service will have to get more attention. Banking is in trouble. Its public image is as poor as at anytime in the careers of these conferees. And nothing rebuilds a bank's public image more than useful, innovative products and services provided in a professional manner.
Mr. Nadler is a contributing editor of the American Banker and professor of finance at the Rutgers University Graduata School of Management.