Insights & Opinions

Breaking Up (with your Bank) is Not Hard to Do

Tue, 28 May 2024

Andrew Vorster Head of Growth The Banking Scene

Breaking up with your bank featured

Contrary to the lyrics of Neil Sedaka’s 1962 hit song, breaking up is NOT hard to do!

Well, breaking up with your bank if you’re in the UK that is - I can’t speak for the rest of the world.

Last week I divorced my bank after a 27-year rocky relationship, and it was surprisingly simple and not at all as traumatic as I thought it would be.

Banking relationships

For me, banking is all about relationships, and I think that relationships built on a solid foundation of mutual trust, anticipating your partner’s needs, and great communication, are more likely to stand the test of time.

I’m not saying I was 100% faithful throughout the relationship, and I briefly considered the “it’s not you, it’s me” viewpoint, but it’s them.

It’s definitely them.

I’ll admit I flirted with a few FinTechs that offered to satisfy my needs in new and exciting ways. I’m quite proud of the “user #132” badge I have from the fintech that was the talk of the UK financial services scene when they arrived back in 2015, all dressed up in a rather fetching coral colour scheme. And since I travel frequently and have global clients that pay me in different currencies, I think I was wise to have had something else on the side to satisfy my more exotic tastes.

Some of the flashy Fintech stuff was a real head-turner 10 years ago. From app-based card freezing (remember when that was considered an innovation?) to savings pots and personal financial management tools, the new kids on the block were really shining a light on how stuck in their ways the legacy banks were at the time.

But these were frivolous affairs and I remained true and faithful to my more mature, more than 300 year old, banking partner, who I knew would (and did) eventually catch up if I was patient enough.

But my patience finally ran out 2 weeks ago and it had nothing to do with anything new.

I’m not going to share all the sordid details but suffice it to say that mutual trust was never achieved, at no point did they anticipate my needs, despite having 27 years of data to work with, and lack of communication was my final trigger to switch.

Communication is key

During the early years, I was routinely called by a relationship manager, under the guise of satisfying my needs and meeting my expectations. Although they never really did either and I, rather cynically perhaps, felt these calls only took place when they had targets to meet, and they didn’t actually have my financial wellbeing in mind.

The calls were often painfully awkward – the relationship manager would ask if I was going to switch my mortgage to them and I would go through the ritual of asking their rate, which was normally double what I was already paying and I would say “maybe next time” – but since their rate hasn’t been competitive for the 27 years I’ve been a customer, we both knew that was never going to happen.

Then they would ask if was going to top up my ISA (Individual Savings Account) and we would go through the same rate dance again and their rate would be at least half of what the rest of the market was offering, so I’d politely decline and point out I had a better rate elsewhere.

Then they would ask for my feedback on their “exclusive bespoke offers” and I would take a few deep breaths to try and keep my cool before pointing out that their offers were neither exclusive, nor bespoke, and they were in fact completely generic and not even targeted at an identifiable segment.

They never once asked what other accounts I had and what needs I had they weren’t being satisfied by them …….

In an attempt to be helpful, I’d volunteer some constructive feedback on the features their online app lacked in comparison to their competitors and I’d ask what their future roadmap was. The response was always the same, the relationship manager said they would pass my feedback on to the product team but that they had zero visibility to the future roadmap.

Perhaps they had never read the McKinsey article quoting a CEO that said:

“It’s amazing the things you can do when you shut up and listen to your customers.”

Over time, the frequency of these calls decreased and finally stopped altogether.

Boring banking

The relationship fell into that boring but predictable phase where I knew what to expect from them and I had no real reason to switch, probably for the same reason why at first, so few customers switched banks when the Current Account Switching Service (CASS) service was initially launched in the UK back in 2013.

These days, for everyday banking accounts, there is very little to differentiate between them and for most people, the fear of what might go wrong in a switch (missed bill payments etc) outweighs the often marginal benefits of switching.

But many of the flashy FinTechs have now grown up and and for those that have been around for over 10 years, they are now fully fledged banks.

In doing so, they have realised that there are only a handful of ways a bank actually makes money and despite all the bells and whistles, customers need the “boring banking” bits, and so do they. They now compete on exactly the same turf occupied by the legacy players.

Meanwhile the legacy players have bought or partnered their way back into the game and form a product and offering perspective it’s (almost) a level playing field again. In fact I’d argue that some legacy players are even beginning to pull ahead when it comes to flashy product offerings.

A recent report commissioned by PayUK on the 10th anniversary of the CASS, explores the future of switching in the UK and reveals that most people open multiple accounts without ever closing their old ones. Unlike the common practise in the EU, most bank accounts in the UK are free and don’t incur annual account fees so there is no cost to holding multiple accounts.

The same report also indicates that the monthly volume of current account switching is increasing for a variety of reasons. Some of these resonated with me, but my personal, perhaps impulsive, decision to switch was more emotionally driven.

The break-up

After years of no personal contact, out of the blue I received an SMS from my bank asking me to set a date and time for an account review with a relationship manager.

Anticipating the old dance around products and rates, I took a good look at what my coral clad FinTech-now-proper-bank friend had to offer, and to my surprise they were substantially better on every single aspect that mattered to me.

But I was still nervous of walking away from an established 27-year relationship, so being the sentimental sap that I am, I duly made the appointment with my bank to give them a chance to redeem themselves.

The relationship manager never turned up for the appointment.

Nobody responded to my follow up enquiry as to why I was being “ghosted”.

And that was enough for me to finally press the button that said: “switch your current account”.

I know this is going to be a massive anti-climax to this story, but everything worked exactly as it was supposed to and 7 days later, my old account was automatically closed as part of the process.

“No muss, no fuss” as a friend of mine would say.

And still no call from my bank 2 weeks later – not even to ask why I left.

So what?

Why should banks care?

It’s not like I was a big deal or an important account, why shouldn’t we both just move on and forget about the last 27 years? After all, “there are plenty more fish in the sea” as the saying goes.

According to an article by McKinsey:

“To make up for the loss of one existing customer, companies have to acquire three new customers.”

And another article from The Financial Brand states:

“It can cost up to seven times more to acquire a new bank customer than it is to keep the current customers engaged.”

Customers in your region may not (yet) have the benefit of a service like CASS, but as open banking becomes more prevalent across the world, it will become easier and easier for customers to switch accounts.

This is compounded by the fact that younger generations are less loyal to banks and according to Kim Van Esbroeck, Chief Revenue Officer at Vodeno:

“Millennials and Gen Z are charting a new financial course, and increasingly relying on embedded finance products from their favoured brands for their banking needs.”

Which implies that it’s going to be even harder for my bank to find those three customers it needs to replace me!

As one final bit of food for thought, a speaker at The Banking Scene Conference Brussels on May 21 quoted a Forbes article saying:

“research shows that increasing customer retention rates by just 5% can lead to a 25% to 95% increase in profits”

And if that isn’t enough of a reason for banks to care, then I don’t know what is!

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