You Can't Bank on Inconvenience

Banks pride themselves on customer loyalty. They brag that customers have stayed with them for years.

Market share data back this up. Despite all the advertising aimed at winning customers from competitors, a bank's percentage of a community's business is pretty static over time.

Exit interviews show that unless a bank is so insulting that customers finally realize it, they bail out only when they move away. And most bank marketers who will talk about the subject say wooing other banks' customers is just a matter of keeping the bank name in the public eye; the idea is that when customers are ready to switch banks, they'll think of the marketer's first.

Breaking Up Is Hard to Do

But maybe there is another reason that bank customers are so loyal: Switching banks is a pain in the neck.

First there is the question of credit references. We fear that if we move to another bank, it will not have enough credit history to give us a good reference or the money we want.

Other considerations that bankers might not think about are also important to the public.

Last month, for example, the thrift where one of my Rutgers colleagues banked was taken over, under the auspices of the Resolution Trust Corp., by a commercial bank. My friend didn't care -- until his first Rutgers paycheck was automatically deposited. The acquiring bank took a day more than the thrift had taken to credit him for the deposit, even though the bank is also the paying agent for Rutgers' payroll account.

Unable to talk to an officer, my friend finally had to settle for a clerk, who told him: "This is our bank's policy -- to take an extra day in giving credit for an automatic payroll deposit. That's it."

I asked, "Why didn't you close the account?"

"I had just paid to have 2,000 checks printed."

My friend's printing fees had made him a captive customer.

Primitive Processes

I have found another reason why it is difficult even to think about changing banks: At most of them, the process of opening a new account is something from the days of Charles Dickens and the quill pen.

My wife and I went to a new bank to open a custodian account for my son. We had to fill out six forms in front of the platform officer. It took well over an hour.

The next day, to add insult to injury, the bank called to say the supervisor back at headquarters had rejected my new account -- because I wanted power of attorney on a custodian account that had my wife as the custodian. "You can't do that," I was told.

Rising Expectations

When I replied that my other bank accepted this situation, the supervisor told me she would get back with me. Three days later, she called to tell me she had found that it was legal; the bank would now be gracious enough to hold my son's money and let me make deposits and withdrawals so that my wife needn't take time from her full-time job to do this little chore.

All I could think of was the comment of John Sculley, CEO of Apple Computer, who said at a recent forum I attended that the computer age has brought an end to the role of middle management. Efficiency, he said, demands that the first-line manager get information into computer-usable form right from the start so that we don't have to handle it manually afterward.

That's nothing like what happens at my local bank. In fact, my experience there has made me decide against opening an account there for another of my children. I just don't want to sit there filling out my name and address time after time.

As Barry Deutsch said in his monthly marketing newsletter, published out of Coral Springs, Fla.: "Veteran mutual fund buyers know how to use 800 numbers. They also have an established level of expectation about what will happen if they send money.

"Gone are the days when the operating guy could force the customer to show up at a branch and sign cards in front of an officer. Fidelity doesn't make you fly to Boston."

Customers Will Wise Up

So maybe we are so loyal to one bank because it is such a hassle to switch to another. But bankers who use this knowledge as an excuse for complacency are crazy.

Some banks have learned, and others are learning, that they can make switching accounts quick and painless.

As this improvement gets around, the losers will be banks that require six copies of a form and can't complete a transaction until some supervisor in headquarters has second-guessed the officer you dealt with on the platform.

Mr. Paul S. Nadler is a contributing editor of the American Banker and professor of finance at the Rutgers University Graduate School of Management.

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