Bank Marketers Dubious Exaggerations Are Undermining Loyalty

During a time when consumers are looking for ways to simplify their lives, improve their financial position, and partner with organizations that align with their beliefs, banks and credit unions are scurrying to meet or exceed customer expectations. The problem is … many organizations are exaggerating or being deceptive in a quest to acquire or keep customers.

Exaggerations for an easy profit may seem harmless, except that, in an increasingly digital world, fact-checking is fast and easy. Most of the deceptions I have encountered would not catch the eye of regulators or internal compliance officers. That is not to say that the words, “caveat emptor” (let the buyer beware) should not be a label placed on claims and marketing communication from the majority of financial institutions. This type of behavior has a short-term effect of frustrating customers and prospects, and the potential long-term impact of destroying trust and customer loyalty.

“In business, the lines between acceptable deception and dishonesty aren’t always that easy to define,” states research of the subject by the Chicago Booth Review. Often, it is a function of individual consumer perception, and the impact the deception may have had on the consumer either financially or emotionally. While most consumers may expect some level of exaggeration, strategic omission or other tactics that might be classified as vaguely deceptive, what is considered going “too far”?

Misleading a consumer about the cost of a service, hiding “gotcha” clauses in the terms and conditions, or making false claims about a product or service could lead to lawsuits. While not as severe, many financial institutions are not living up to the claims they are making around their ability to deliver digital functionality, or supporting a customer’s financial goals, at a time when trust may be more highly valued than ever.

So how do financial institutions deceive consumers? Here are a few recent examples from my life since COVID. I would love it if others would share their examples. (Send an email to [email protected].) I may expand my list.

1. “We Support Your Financial Future.”

There are so many versions of this claim by financial institutions, I have lost count. For a financial institution to say they will know their customer, look out for their customer, and reward their customer has been part of the marketing language of banks and credit unions since far before I worked for a bank as my first job out of college. The gist of this claim is that the financial institution puts the customer first. BS.

My favorite recent example is with the credit union that had my mortgage for the past ten years. They are a fine institution, and they often claimed they were always looking out for their members. The problem is, they NEVER offered to proceed with a refinance as rates headed lower. This would have kept me as a customer and most likely resulted in more business being done with this institution. But they didn’t.

To make matters worse, when we applied at another financial institution for a refinance of our mortgage, our credit union bombarded my wife and I with more than ten different communications (email, direct mail, phone calls, etc.) stating their desire to refinance our loan. Too much, too late. Interestingly, when we refinanced, we took out a larger loan than the existing balance to close all other debt.

Read More:

2. “You Can Get a Loan or Checking Account Digitally.”

There should be a disclaimer on any statement made by a financial institution about providing ‘digital capabilities’ indicating the average length of time it will take to open a new account or get a loan digitally. There should also be a disclaimer regarding the financial institution’s definition of “digital.”

Research done by the Digital Banking Report on digital lending and account opening found that a majority of financial institutions claimed to have end-to-end digital account opening and digital loan application functionality. That is where the charade ends. In reality, the average length of time financial institutions said it took to complete a new account form or loan application on a phone was in excess of 12 minutes. The online experience was only three minutes shorter on average.

That is not a digital experience. That is a branch experience on a phone or computer. In most cases, it would be the same as if a branch employee took your digital device and went through all of the steps they used to do in person. The problem is … the consumer knows you can do better.

I experienced the worst case of “digital deception” with the new mortgage I reference above. When asked if their process was “digital,” they stated (correctly) that no in-person activity would be needed until closing. In reality, their definition of “digital” was sending multitudes of documents in PDF format for digital signatures and initials. Some of the documents required “wet” signatures, with FedEx being the “digital liaison.”

Unlike the experience we would have had with Rocket Mortgage or a number of other providers, there was no benefit to doing business digitally with our new mortgage provider. In fact, the process took more than two months to complete.

3. “We Provide ‘Personalized’ Financial Solutions.”

No, you don’t. There is a very big difference between “targeted solutions” and “personalized solutions.” With almost every consumer being an Amazon Prime member, a Netflix watcher, a Spotify listener or a Google user, everyone knows the difference between good targeting and great personalization of solutions.

My business bank did an acceptable job “targeting” me for communication around PPP small business loans and for video workshops geared to small businesses. The “personalization” fell apart when the email (using my name) asked me to enroll in online banking (I already was), told me I should use remote deposits (I often do), and call my personal banker (who left the bank over a year ago). Nothing in these communications provided a solution specific to my needs, goals or business.

Another example I discuss often on the Banking Transformed podcast is when the bank that has had my personal checking account for over 15 years asked me what balance level I would like to set as a minimum for a ‘low balance’ notification. That ‘targeted’ communication is far from personalized. They would have made a far better impression had they asked if I would like notifications when my balance falls below my normal average balance for key days of the month (prior to mortgage and tuition payment dates).

Alternatively, PayPal uses my payment receipts and my payments to my contractors as a basis for offering very personalized solutions. From pre-approved short-term bridge loans, to longer term small business credit, they use information about my business to provide very specific products and services.

Financial Institutions Must Stop ‘Faking It’

Each of these examples illustrate the challenge legacy banking organizations have in a digital world. Consumers know what the combination of data, advanced analytics, digital technology and innovation can provide. They see the potential of digital with the fintech firms and big tech organizations. They also see, and feel, the difference between what digital-first organizations are offering and what traditional banks and credit unions are delivering.

The question becomes, when will financial institutions stop the deceptions and exaggerations that can kill consumer loyalty?