Why banks need to be more human

As the recent travails of Natwest and Barclays rumble on, banks continue to have bad press. And their automated processes are hurting their customers even more. It’s time for them to ditch their systems and answer the phone once in a while, argues member in practice Dawn Clarkson FMAAT

Banks, hardly the flavour of the month, are being told to support businesses and start lending. This development is supposed to be good news. And it is – as long as the terms are right. Often, they aren’t.

A client called me recently with the ‘good news’ that a high street bank would consolidate his overdraft and convert it to a loan. The not-so-good news was that the interest rate would be more than 30%. It is hard to see how loans of this nature help business.

As someone who once worked for a bank, I can attest that lenders often get it badly wrong. One of banks’ most infuriating and counterproductive practices is withdrawing a firm’s overdraft facility overnight. Aside from the lack of customer-care or empathy, such a move can ruin an otherwise viable business by crunching its cash flow. In that case, both business owner and lender lose.

In other cases, banks seem to have lost the ability to apply discretion and logic to loan applications, relying too heavily on inflexible, automated systems.

Another client reported that he secured a loan to purchase some capital equipment that was needed to carry out work on a major contract – developing a prestigious golf course. My client was the definition of a sound investment – he had already secured a lucrative contract for 12 months’ work. But the bank’s computer said ‘no’.

As his contract was in the construction sector – which has had a tough time in recent years – the bank told him it was unlikely it would lend him the money. The absurdities stacked up: if my client hired the equipment instead of purchasing it, it would cost more over the 12 months, and he’d have no asset at the end of the contract.

In the end, my client got the loan by making a case that his business was related – albeit marginally – to the agricultural sector. The computer saw this industry as safer and approved the loan.

In the old paper-based days, this approach used to be lampooned as, ‘When the form don’t fi t, change the form.’ Banks have merely computerised that preposterous process. Lenders have to realise that sometimes it is good to follow their instincts and lend money to good projects, even when their computers say no.

But even when banks do apply discretion, they still make clunking errors. When I was working for the bank, a local mini-supermarket owner requested a loan to purchase a further shop. I can still hear the words of the bank manager as the supermarket owner marched out of the office. ‘You are taking it a step too far,’ he said. ‘The warning lights are flashing.’

The supermarket owner borrowed the money from a competitor bank and developed his business to build a chain of supermarkets. Twenty years later he sold his business to one of the major supermarkets for several million pounds. Whoops.

Not everything the banks do is wrong, but what does seem to have taken a nosedive across the board – and what has undoubtedly contributed to some of the lousy decision-making I cite – is the quality of customer service.

When I started in the bank in the 1980s, customer service was front and centre of what we did. In those days you could phone your bank and speak to someone you knew. Now, unless you somehow stumble across a gold-plated phone number that gets you to a real bank manager in a real branch, you get the dreaded call centre. Here, staff read from scripts and pass you from pillar to post without ever handing you to a specialist or even anyone who knows your business and is abreast of your circumstances.

Things may change. Richard Branson has recently opened a retail bank. It will be interesting to see if he can change banking in the same way he has transformed airlines. If customer service is his main focus, discretion and logic might naturally follow. And then perhaps people and businesses will think better of the banks.

This article first appeared in the July/August 2012 edition of Accounting Technician, AAT’s member magazine.

Dawn Clarkson is a licensed accountant and MAAT.