Region’s Big Banks Still Haven’t Figured Out High Quality Customer Service
Now comes the news that three large regional banks in the Boston market ranked among the
10 worst in the nation in terms of complaints.
According to the US Public Interest Research Group, Boston-based Sovereign Bank has the
second most complaints, while RBS Citizens Bank of Providence ranked number
four, and TD Bank, whose US operations are headquartered in Portland, Maine,
US PIRG, considered a reliable research organization, released its rankings after
analyzing complaints filed with the US Consumer Finance Protection Bureau and is
readily available through the agency’s new database.
Most often, banking customers had problems with checking accounts, penalties for low
balances, and disputed ATM transactions and debit card fees.
These are failing grades for major banking institutions that have the financial and human resources available to keep customers satisfied.
The complaint numbers also present a strange paradox in that major banks continue to spend
millions on marketing activities (including expensive TV campaigns) and
millions opening new retail locations in the Metro Boston region.
With today’s sophisticated tracking and monitoring technology, as well as training
regiments available for employees, why are there so many complaints?
My hunch is this is a case of perception versus reality because the banks make assertions
and claims in their marketing narratives that are not fully meeting customer
needs. Big banks consistently over promise and under deliver.
A number of years ago, a senior bank executive was quoted in a national business
publication as saying, “B” level service is good enough.
Based on this most recent study, it appears that banks made a strategic business
decision that B level service is good enough despite nagging and long-standing
The large number of customer complaints is also juxtaposed against a new wave of spending
on brick-and-mortar branches. While customers conduct basic banking (such as
withdrawals and deposits) via ATM machines, most banks believe that fancy
branches are an important access point to move customers into more profitable
services such as wealth management, personal banking, and other products and
services they offer.
A great example can be found at the Bank of America branch in Boston’s Back Bay. Bank
employees walk around carrying tablet computers to immediately pull up customer
accounts and suggest new services.
Building new branch space is an expensive proposition that costs hundreds of thousands
of dollars per site. One wonders why the banks don’t spend some of that money
on systems and training employees to significantly reduce the number of customer
Suburban Banks Pose a Threat
Some irony can also be found in that large banks – the ones with all the complaints – have
seemingly been able to retain their market share in Massachusetts.
According to publicly available data on the Federal Deposit Insurance Corporation
website, Bank of America remains in the top spot with a 25% market share, while
RBS Citizens is second at 12% and Sovereign Bank third with 7%.
My view is that a good portion of this market share comes as a result of sheer size, not
great service. It stands to reason that if a bank has the capital to “put a
branch on every corner” it will attract more customers. Even though big banks
cut back on their number of branches after consolidation in the 1990s and
2000s, they still have the wherewithal to maintain multiple locations.
Another factor that plays into the equation is the complexity of switching accounts.
Big banks know this full well and impress on current customers that moving
their accounts might be more trouble than it’s worth.
Boston, in particular, is now experiencing more interest from a different breed: suburban
According to a recent report in the Boston Globe, banks based in Metro Boston such as Hingham, Wellesley, and Hanover are opening branches in the city. A good example is the
new Wellesley Bank branch opening in the Financial District.
Within the past two years, the Globe reported, five suburban banks have launched operations in Boston and at least one more is planned for October.
Some of this expansion is likely due to population growth in the city (now at 635,000
people) as banks try to lure the business of young workers attracted by
thriving industries such as biotechnology.
However, one can also conclude that certain customers with complaints will make the move
and switch accounts. This is where the opportunity lies for the smaller banks
hoping to capture new market share and take market share from larger
As technology levels the playing field and suburban banks have more storefronts in
the city, larger banks face their biggest challenge to date in keeping customers who have complaints or just don’t like doing business with large institutions.
It’s also likely that some resentment continues to exist among customers who are upset
that the government (the taxpayers) bailed out big banks, only to have the same banks regain profitability at the taxpayers’ expense. In many cases, to clean up their balance sheets, the banks initiated foreclosure proceedings on millions of those same taxpayers who funded the bailout.
One thing is certain: there are plenty of smaller banks just waiting to seize the
opportunity to service unhappy customers.
Joe M. Grillo, partner, contributed to this blog.
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