We need big banks but they need us more

First published in the Financial Times on 23rd April 2013.

They are hobbled by an ingrained culture in which individual consumers don’t really matter

I have enjoyed (if that is the word) a longer commercial relationship with Barclays Bank than any other business, having been a customer for more than 33 years. But you would never guess it from the way it has treated me and, I suspect, millions of others.

I have only ever made Barclays money in any corporate activity where it was the bank. But its memory of such interactions, as with so many incumbents and dominant players, appears negligible.

Managers come and go like temps, so it has been almost impossible to forge serious long-term relationships with senior personnel. In my experience, the bank takes customer loyalty for granted – and for that I think it is foolish. (Or perhaps I am the fool for not giving up on them.)

Big banks are case studies in what happens to organisations when they become an institution and part of an oligopoly dominating a profitable basic service. With such huge franchises, vast asset bases, an implied government guarantee and greedy executives, the consumer inevitably comes last in the list of priorities.

It has taken hundreds of years to build these colossal edifices – more than three centuries of conservative progress, with goodwill amassed, reserves retained and market share accumulated. No doubt the well-remunerated bosses who ran them thought all that was their effort.

Britain will surely never construct such massive multinationals again. Yet despite the fact many British citizens seem to hate our big banks, we desperately need them to work. They are vital organs of the capitalist system, so they must be supported.

Such huge public companies are by no means an unquestionable good. They breed complacency thanks to their size. And any economies of scale that might accrue to customers are typically cancelled out by a lack of service.

Who at the UK’s high-street banks cares that all of the biggest ones score below average when it comes to customer satisfaction? According to a survey published this month by the consumer rights group Which?, a fifth of UK bank customers have had problems with their current accounts, with poor customer service ranked as the biggest complaint overall.

Most companies would be out of business if they suffered such profound levels of client dissatisfaction. But inertia in banking is a powerful force, and long-held dominance of such a utility is a licence to print money.

It is a tragedy that these institutions did not use the past decade or two of good times to invest more in their business, and modernise their models. They do not possess world-class consumer technology and much of their retail branch networks are in poor shape. Everything from the speed of account-switching to branch opening hours is organised to suit the banks and their employees – not the customers.

I have seen as a director at upstart rival Metro Bank how happily consumers migrate their accounts – both business and personal – when they feel the deposit-taker really appreciates them.

By contrast, I listened to a dull speech this month by Antony Jenkins, Barclays chief executive since last August. No doubt this was a deliberate effort to try to distance the new cadre from the old management team. Unfortunately, my abiding impression was of an organisation in retreat, as if the whole bank had experienced a collapse in ethics. Perhaps that is what the regulators want to hear. But if I were a shareholder, or indeed a staff member, I would have been profoundly demoralised.

British industry cannot expand if its prime lending institutions are afraid of their own shadows, terrified of criticism and so busy navel-gazing that customers come second. Successful companies are confident and proud.

I fear they, like many big companies encumbered by bureaucracy and the inefficiency that comes with it, are hobbled by an ingrained culture in which individual consumers really don’t matter.

No doubt many of their problems are a disease of massive scale. That is why more new banks are the answer.