Big banks still need to streamline their operations
Big money-center banks’ value proposition has been to provide for all your financial services needs throughout your entire financial life. However, on the way to fulfilling this “vision,” at least one such bank stumbled — on delivery, on integration and, most critically, on training their employees.
I cite my own recent experience of these stumbles by my bank (one of the largest East Coast global consumer banks, which will go nameless) because they should serve as a warning that big is not always better. More specifically, it should serve as a warning that fintechs — typically much smaller and nimbler — are aiming to compete for their customers, while unencumbered by old business models and decades of unintegrated legacy systems. Fintechs are likely to succeed unless the largest institutions change their ways.
In fact, I would wager that almost all of these big lumbering banks are encumbered — based on my many years advising financial institutions on the factory floor and in the boardroom. They foster reliance on a self-contained business unit revenue and profit model built around individual products. This management philosophy leaves their operating plants with unintegrated silos of underinvested technology and undertrained employees. Startups have an opportunity to build integrated solutions at the factory floor and up to the customer-facing front end and win over these banks’ customers.
My own recent experience underscores this threat. My family’s online services and all of our currently linked products had been seamlessly organized over the years. But with major new tax legislation coming into effect, I began to strategize in early 2018 the new products and services I would need. On April 15, with taxes due for 2017, IRA contributions were to be made and new tax strategies allowed by the tax law were to be put in place. We began early in the year setting up some new accounts — a simplified employee pension IRA, a traditional IRA and a Roth IRA. We anticipated that we could link all these accounts to our existing online services.
Our first surprise was that personal help was not available at the branch anymore. You could have a nice chat with friendly product sales people, but for service you were given a phone number to call. A sales person volunteered to print out the form and send it through the internal pouch-mail system.
The form got lost in internal mail. An online form was emailed to me, which I promptly filled out and returned. I was to follow up via telephone to get the new account number. Progress, or so I thought.
Calling a number at “the processing center” is like entering a black hole — easy to get in, never to get back out. Long wait times, endless music loops, repetitive option menus and multiple transfers to the “right person” who had to verify my identity each time. I finally got to the right person and received my new account number, the one that would hold my IRA contribution.
I deposited a check at the branch just in time to meet the IRA’s April 15 deadline. Then, to my surprise, the lost internal mail pouch with the forms for an automatic transfer from my checking account got triggered, placing a duplicate amount of the 2017 contribution into the IRA account for 2018.
Things deteriorated further. I needed to open a Roth IRA, convert the traditional IRA balance to it and invest the Roth IRA balance in the stock market. Besides encountering more telephone black holes, two additional issues arose. The amount had to be transferred first to a Roth IRA in a different part of the bank — the “retirement department” — then to be contributed to a new Roth IRA to be opened in the “securities” part of the bank. Each new account needed to be set up with a new set of forms, with mostly the same information.
All along the way I encountered staff that expressed confidence as they smiled through the phone line. Their customer handling skills were well tuned — although their processing knowledge left much to be desired. For example, one staff member insisted that functionality existed to make Roth IRA transfers directly from my checking account. Unfortunately, it was within the bank’s internal system, not in the customer-facing online system.
The online system had allowed me to link accounts myself so I could view them on the same screen and execute transfers and investment transactions. However, IRA and other retirement accounts must be linked through contacting the processing center. Finding this out took many phone calls and much wasted time.
Finally, in trying to set up an SEP (an IRA-like account for self-employed individuals), I passed through the same black holes, but now encountering people who lacked domain knowledge. Months went by until I found the person who understood the SEP process at the bank and identified the right set of forms.
A final annoyance occurred when I went online to invest my SEP balance. The screen showed my investable balance at approximately 5% less than my account balance. After many calls and consultations, and alternate possible explanations offered by bank personnel, all of which proved wrong, a formal referral to the technology department was made. Finally, we were informed that the bank's system does not allow more than 95% of the balance to be invested online directly, a call to the “black hole” was required to invest the remaining 5%.
The legacy technology that the bank uses and the many silo business units that so many customers are forced to deal with is hindering their ability to serve us well. Without technology integration and the training of client-facing employees on process and domain knowledge, the quality of service will never meet clients’ expectations. Banks need to wake up and realize: Fintech companies will exploit these big-bank weaknesses and find profitable business opportunities around their failures.