Everyone hates their bank. We all have a relationship with one and yet we don't trust them. Why is this? It's obvious. They were responsible for the biggest financial collapse ever; they are addicted to an obscene bonus culture, and too many individual bankers are unspeakably arrogant. They have also been shown to have acted dishonestly, while hoovering up our hard-earned cash to gamble away on dodgy derivatives or, in the case of RBS, allegedly forcing viable businesses with short-term cash-flow problems into its corporate-restructuring arm in the hope that it could foreclose and then sell off the property assets at a healthy profit. Even when conducting the most mundane of banking tasks they are slow, cumbersome and bogged down with outdated systems that stop us readily accessing our own money. Yet we stick with them. Why, when we have come to expect fast personalised service in so many areas of our life, do we tolerate such poor behaviour in the financial services that we use? And tolerate it we do. Account holders will stay with their bank on average for 17 years.
A friend of mine recently received a lengthy questionnaire from his bank asking him to fill in details of his domestic expenditure, direct debits, utility bills and the like. All this information was required, it said, to ascertain whether he was eligible to renew his overdraft facility. Since he had been banking with them for over 20 years he reasonably expected them to be thoroughly familiar with his spending habits. However, by sending him this intrusive and unnecessary enquiry the bank made it clear that it saw him as a potential credit risk rather than as a valued customer. Needless to say he plans to move his account. But where to? All the banks appear to be the same.
Despite the millions spent on advertising themselves as 'there for the moments that matter' (Lloyds) or 'we are here for you' (RBS), they continue to treat us, their customers, as the potential fraudsters, while they are the ones that are actually cheating us by mis-selling products such as PPI. Barclays admitted rigging Libor and Euribor and thus ripping off every one of us who has a mortgage, a credit card or a student loan. Research published last year demonstrated that the bankers' business model actually promotes and rewards dishonest behaviour. The disconnect between what banks pretend to be and what they actually do is mind-boggling.
In no other area of our lives would we tolerate a service provider treating us with such contempt. Whether it is booking a taxi with one click through Uber, shopping for gifts through Amazon, or finding something to watch on Netflix, the best service providers understand what we are trying to achieve and work to make it happen for us. Even when they are not cheating us, the big high street banks provide minimal service, expecting us to do everything for ourselves. They send out statements for us to interpret rather than texting us to point out unusual transactions or to inform us when we have spent more than last month. They expect us to open a savings account instead of helping us save for a holiday; they ask for sort codes and account numbers rather than enabling us to get our money to where we want it to go.
The super-rich, of course, have a very different experience. They have wealth managers and personal bankers who discuss their requirements over lunch or at networking dinners. The rest of us are treated as mass-market consumers to be sold 'products' we don't need and that don't deliver the promised returns. Remember the scandal of mortgage endowments that paid out peanuts when they matured, pensions mis-selling or more recently interest-rate swaps sold to small businesses.
The old infrastructure of branch networks and creaking computer systems that regularly break down, together with old ways of thinking about customer service, are major barriers to change. But change is coming to shake us out of our inertia: competition is arriving. It is estimated that there are some 25 challenger banks waiting in the wings for regulatory approval. Some like Metro and Virgin Money have already appeared but these are based on the same old traditional banking stereotype.
We have to move away from this model and harness new technologies to revolutionise behaviours and attitudes to customers. Personal banking is not complicated. There are really only three basic banking functions: payments, storing money and transferring funds between consumers. Placing these on a digital platform delivering speed, reliability and security, and using big data and technology to increase back-office efficiency will lead to ease of access and low cost to customers. The algorithm replaces the clunky call centre.
I know that one of the new banks is building the capacity to meet this challenge and I am looking forward to working with the young creative thinkers who understand what a modern bank needs to be.
Baroness Kingsmill is a non-executive director of various British, European and US boards. She can be contacted on firstname.lastname@example.org.
Follow her on Twitter: @denisekingsmill