Would You Prefer A Relationship With A Ton Of Bricks?

Vernon Hill, former CEO of Commerce Bank, recently joined Tom Brown as co-chairman of bankstocks.com. Mr. Hill has wasted no time, and has already contributed content to the site. He recently wrote:

BANK BRANCHES OBSOLETE? NONSENSE: My colleague Matt Stichnoth posted a comment about the upcoming death of bank branches — this time due to the rise of remote capture deposit devices. Sadly, Matt, like so many others, is wrong again. The bank branch is the cornerstone, not the millstone, of retail banking. The point of a bank branch is to reflect your brand and to open new relationships. How do you build a relationship with a machine?”

My take: Respectfully, while Mr. Hill is right that remote capture devices don’t spell the death of the branch, he is wrong about the power of machines like the Internet to build relationships, and misinterprets the nature of what contributes to building a customer relationship.

I realize that I’m merely a David shooting my slingshot at Goliath here. After all, Mr. Hill founded and grew Commerce Bank into one of the leading banks, and, more importantly, a bank renowned for its superior customer service.

But truth be told, I’ve long believed that Commerce’s branch-centric strategy has a short half-life to it. The future of retail banking isn’t represented by aging boomers and seniors looking for mid-morning chats with the assistant manager of their local bank branch.

The future of retail banking lies in the provision of good, objective advice and guidance on managing one’s finances, and the fast and flawless delivery of transactions and services.

The reality is that a “machine” — i.e., the Internet or a remote capture device — can often do this as well, if not better, than somebody in a branch or a call center (increasingly located in some far away land).

If it weren’t possible to develop a relationship with a “machine”, then how would you account for the success of Amazon.com? Don’t tell me, “oh, that’s different — it isn’t financial services.” That argument doesn’t fly. Consumers don’t care — to them it’s just another type of product or service in which they’re looking for help in making the right decision, and a fast and painless way to get that product or service.

So how can Amazon succeed at building relationships using only a machine as a contact point? Interestingly, the answer lies in one of Mr. Hill’s own statements.

Mr. Hill says that “the point of a bank branch is to reflect your brand.” But what really is a bank branch? Answer: Nothing but a ton of bricks. The people within that branch come and go over time, and many customers never learn the names of those people anyway. But it’s the nature of how interactions are handled within that branch that lead customers to form an opinion about the bank.

In other words, the branch becomes the “face” of the bank in the eyes of the customer. And please listen, Mr. Hill, because increasingly, the Internet is the face of banks for many customers, especially those under the age of 40.

This doesn’t mean, as I’ve said before, that branches go away. Until banks build out all the service functionality that’s available in the branch on their Web sites, that won’t happen. Bank branches are security blankets.

Mr. Hill is right that customers don’t want a relationship with a machine. But they don’t want a relationship with a ton of bricks either. It’s what that machine or ton of bricks represents in the mind of the customer that matters. And that perception is formed more by the quality of the interactions that occur.

Bottom line: Relationship value is assigned to the quality of the interaction, not the location where that interaction took place.

In an earlier post, I quoted psychologist John Gottman who said that relationships are about the small moments of attachment and intimacy. It doesn’t matter where those moments occur.

If a bank customer who considers convenience to be an important driver of their bank relationship uses a remote capture device and consciously thinks about the convenience that the device provides — then a step towards strengthening that relationship has occurred.

I don’t believe that a lot of senior executives in the banking industry get this.

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