What Bank Customers Want And Why They Don't Get It

There's a lot of talk about 'restoring responsibility to banking', and 'returning banking to its sober Quaker roots', 'removing the casino culture', 'getting banks lending again' and so on.

But all these soundbites are focused on the activity of banking.

Nobody, except banks, engages in "banking". We may use a bank's service, but only in the context of a much wider activity, such as buying a house or a birthday present on the way to a party, or getting clothing made in China to sell over here. "Banking" is only what banks think customers are doing, because banks only view the world through the lens of their own products and not customers' activities. Which is why bank products are inherently designed to make money for banks and not to benefit customers (and why they fiddled 'Liebor').

All bank customers want is what the customers of any supplier wants - solutions to their own day-to-day problems rather than those of the supplier.

But if you believe banks are capable of aligning with their customers' activities any time soon - you're flogging a dead horse.

Back in 2009 and again in 2010, there was a lot of discussion about whether the role of social media would ever play a role in consumer finance. Typically, the banks claimed that using Twitter to communicate with customers was a publicity stunt - making the almighty assumption that Twitter is somehow divisible from the vast entanglement of services that make up the social media. They said online peer-to-peer finance platforms wouldn't scale. In 2011 that sort of discussion wasn't repeated. Why? Because even banks realised it was rubbish - just as it proved to be in the markets for retail services, music, entertainment, travel, politics, newspapers, television and so on, where online 'facilitators' have hacked great chunks out of the market shares of once dominant, sleepy, 'traditional' institutions that were not aligned with their customers' day-to-day activities.

But the banks have not been 'Googled'... yet. 

Why not? Comparisons between the rise of facilitators in other retail markets are not apt because there was no regulatory regime that protected high street stores from online competition. There were no tax incentives to persuade consumers it's safer to buy their music on CDs rather than download it. No compensation scheme for advertisers who don't get the return they want on their advertising spend in the newspaper or on TV, leaving online advertisers to fend for themselves. No taxpayer guarantee that allows high street electronics retailers to spend whatever it takes to maintain market share against online marketplaces.

Banks, on the other hand, rejoice in all that protection against innovation and competition.

In these circumstances, it is unrealistic to assume that new business models will thrive without some alteration to the regulatory framework.

Fortunately, change seems to be on its way.