Banking and Death by a “Thousand Cuts”

It is far easier to destroy a good brand than to build a good brand!

Brand reputation can add, or subtract, significantly to share price.  Consider the brand power of Apple as depicted in this simple graph on global PC sales and profitability.  Now that’s what I call brand power!

Apple brand

Apple guards its brand fervently, with strict guidelines as to what can and cannot be done.  And brand is much more than just a logo, which is the visual image of the brand.  The real power and value of a brand lies in the customer experience.  And brand integrity is the relationship between what the company says about itself and what the customer actually experiences.

In the case of strong brands, there is great alignment and integrity between words and actions.  In weak brands, just the opposite.

The easiest way to kill a strong brand is to fail to deliver on the brand promise.

Such is the case with global banking over the past several decades.

Reach back into the early 1960s and you will find that many large banks had a Barclays adgreat deal of integrity between what they advertised and what they delivered.  The brand of banking then was built around the concepts of security, safety, prudence, stewardship of other people’s money, sound professional advice, and knowing and servicing customers with a win-win relationship. The branch manager was one of the most important people in town and often served on numerous local committees and charities.  Reputation was vital for customer trust. And customers trusted their banks.

Fast forward to the 21st Century and trust in banking is at an all time low. Trust_Banks_TRUKBIvsMPBANK_SOC_2007-07--2012-09_labeled-clipped While much of this fall in trust and the lack of respect for banking has come about from the “casino-like” behavior of profit-making, mega-bonuses and high-pressure tactics which resulted in the massive bailout of the “too-big-to-fail” banks in 2008, there is another set of brand-killing behaviors that has contributed significantly to the mistrust of banks and the entire financial services industry.

Ancillary Fees: Death by a Thousand Cuts

That is charging for ancillary services which were once part of normal banking way of doing business.  Charging fees for ancillary services like printing checks, retrieving your banking records, having a credit card, converting foreign currency, using your bank card overseas, is pure and simply a way of making more money!  It’s not value-added service! There is no value add when you are charged 2-3% of the value of the purchase for using your bankcard overseas or a charge of $25-50 for owning a credit card that carries an already exorbitant interest rate.  Many customers vehemently oppose the charging of fees for using ATM machines when it actually is less costly for the banks than withdrawing money using human tellers.

The list of ancillary fees at banks are not only numerous, but also deeply hidden in the fine print of their websites and contracts. And it’s now standard industry practice.

A recent report from the Federal Reserve Bank of New York estimates that between 1/3 and 2/5 of the combined operating revenue of the twenty-five largest bank holding companies come from ancillary (fees and non-interest) income!

Another industry who has tarnished its brand value through onerous and frequent ancillary charges is the airline industry.  $50 to excess baggage, carry-on baggage fees, charging for reserved seating, charging for snacks and meals. Forgot to print your boarding pass before a Ryanair flight? £60 please.

Airplane travel is no fun anymore!  Neither is banking! Banking is ripe for disruption from a new business model that gives customers what they want, trusted and professional banking with excellent customer service.

If you run a good bank you should be able to make money through using customer’s money for loans and business investments, not on charging customers ancillary fees for doing more business with you.

John R Childress

Author of LEVERAGE: The CEO’s Guide to Corporate Culture

About johnrchildress

John Childress is currently Visiting Professor in Strategy and Culture at IE Business School in Madrid and a pioneer in the field of strategy execution, culture change, executive leadership and organization effectiveness, author of several books and numerous articles on leadership, an effective public speaker and workshop facilitator for Boards and senior executive teams. In 1978 John co-founded The Senn-Delaney Leadership Consulting Group, the first international consulting firm to focus exclusively on culture change, leadership development and senior team alignment. Between 1978 and 2000 he served as its President and CEO and guided the international expansion of the company. His work with senior leadership teams has included companies in crisis (GPU Nuclear – owner of the Three Mile Island Nuclear Plants following the accident), deregulated industries (natural gas pipelines, telecommunications and the breakup of The Bell Telephone Companies), mergers and acquisitions and classic business turnaround scenarios with global organizations from the Fortune 500 and FTSE 250 ranks. He has designed and conducted consulting engagements in the US, UK, Europe, Middle East, Africa, China and Asia. Currently John is an independent advisor to CEO’s, Boards, management teams and organisations on strategy execution, corporate culture, leadership team effectiveness, business performance and executive development. John was born in the Cascade Mountains of Oregon and eventually moved to Carmel Highlands, California during most of his business career. John is a Phi Beta Kappa scholar with a BA degree (Magna cum Laude) from the University of California, a Masters Degree from Harvard University and was a PhD candidate at the University of Hawaii before deciding on a career as a business entrepreneur in the mid-70s. In 1968-69 he attended the American University of Beirut and it was there that his interest in cultures, leadership and group dynamics began to take shape. John Childress resides in London and the south of France with his family and is an avid flyfisherman, with recent trips to Alaska, the Amazon River, Tierra del Fuego, and Kamchatka in the far east of Russia. He is a trustee for Young Virtuosi, a foundation to support talented young musicians. You can reach John at john@johnrchildress.com or john.childress@theprincipiagroup.com
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