Banks fall short on customer feedback management

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Re: Banks fall short on customer feedback management

Banks fall short on customer feedback management


As the first UK National Customer Satisfaction Index for banks and mortgage lenders is launched, customer complaints reach record levels in the financial sector. How are banks going to improve customer relations?

By Stuart Lauchlan, news and analysis editor
Customer feedback – aka complaints – about banks and other financial institutions are at their highest ever level on record. The Financial Ombudsman Service (FOS) recorded a massive 30% hike in formal complaints to 123,089 in the year to March, the highest figure since numbers were first recorded back in 2001.
There was a specific reason for the increase in the form of complaints about bank charges and payment protection insurance. In fact, there was a near tenfold increase in bank charge complaints in April to July last year, a total of around 32,000. In the three months to July last year, the Ombudsman received about 20,000 new complaints about these charges. Hundreds of thousands of current account customers contacted their bank to reclaim overdraft charges after high-profile campaigns by consumer groups. But tens of thousands also contacted the Ombudsman in a bid to reclaim the charges, which were sometimes as high as £39 for each infringement.
This 30% year on year increase came in the middle of a High Court test case involving the Office of Fair Trading (OFT) and major banks which resulted in the FOS putting bank overdraft charge complaints on hold from July while the OFT agreed to freeze new cases until the outcome of the case which ruled in favour of the OFT. A spokeswoman from the FOS said: "This figure is very high, and driven primarily by cases where the banks refunded all the money involved to customers when we contacted them and gave them the choice of doing this or being investigated."
"The sudden surges in banking and insurance disputes this year have meant that predicting, managing and dealing with complaint volumes has been more of a challenge for us organisationally than ever before."

Christopher Kelly, chairman, the ombudsman service

Customer complaints about credit card default charges soared to more than 14,000, up from 2,731 the previous year. Two years ago the OFT forced the banks to cap default charges at £12. Some banks were charging up to £35 a time. Complaints about payment protection insurance (PPI) have also risen sharply. Nearly 11,000 complaints were received in the 12 months to March this year, up from 1,832 the previous year.
Overall, FOS settled 99,699 disputes, with the proportion of complaints upheld in favour of consumers ranging from 16%to over 80%, depending on the financial product or service involved. Around 84% of complaints made about current accounts, and 78% of those made about credit cards, were met with a decision in the customer's favour.
However, there has been a 70% decline in the number of mortgage endowment complaints. The number of complaints fell from 46,134 in the 12 months to March last year to 13,778 this year. It was the only bit of good news which was disappointing to the ombudsman after an overall fall in the previous full year period. But it seems that reduction was too good to be true.
“This time last year we had hoped we were starting to see a downward trend in complaint numbers for the first time,” admitted Sir Christopher Kelly, chairman of the ombudsman service. “But instead, events during the year have led to the ombudsman service receiving record numbers of new cases. The sudden surges in banking and insurance disputes this year have meant that predicting, managing and dealing with complaint volumes has been more of a challenge for us organisationally than ever before. But the picture is mixed, and the continued slowdown in the number of disputes referred to us about health insurance, travel insurance and some investment products is very welcome, especially where this follows specific initiatives by the industry sectors involved to improve standards of complaints-handling.”
Customer relations outreach
The record number of complaints coincides with a move by Barclays Bank - expected to be followed by others - to cut the cost of its overdrafts. Barclays will launch two new fee-charging accounts and seek to attract new customers by replacing its variable charges for unauthorised overdrafts of up to £35 with a flat fee of £8 per transaction. The Barclays changes come into effect in August and will impact of 11 million customers - branches and call centres have been primed to cope with an influx of inquiries.
Barclays is making a number of other major changes including the introduction of a ‘personal reserve’ for account holders that allows them - for a fee of £22 - to go over their overdraft limit for up to five days. More than two million people are likely to gain at Barclays alone, because the bank estimates a fifth of its 11 million customers slip into unauthorised overdrafts – with those numbers are expected to rise as the credit crisis deepens. "Our new approach has been tested with consumers extensively over the past two years and we are confident that our products will promote account-switching to Barclays,” said Mark Parsons, managing director of current accounts at Barclays.
"Our new approach has been tested with consumers extensively over the past two years and we are confident that our products will promote account-switching to Barclays."

Mark Parsons, managing director of current accounts, Barclays

It's potentially a good piece of PR and customer relations outreach for the bank as its climbdown comes after high street banks lost the first stage of a High Court battle over the legality of penalty fees. There is currently a £35 fee per account per day for a payment that has bounced and a £30 fee per account per day for a payment that takes the customer beyond their authorised level of borrowing. The fees are capped at £90 a month.
Whether other high street banks reach out to their customers in a similar way remains to be seen, but it's clear that the issue remains hugely contentious and impacts severely on customer perception of various institutions. To measure just such perceptions, CFI Group has launched the first UK National Customer Satisfaction Index (NCSI-UK) for banks and mortgage lenders, based on a sample of 5,383 responses from customers who have a current account with a bank or have a mortgage agreement with a lender.
“There has been plenty of research in the UK looking at current consumer spend, but very few are actually using the voice of the customer to drive their business performance,” said Sheri Teodoru, managing partner of CFI Group. “Customer satisfaction is a critical measurement for companies hoping to retain and grow their customer base in this difficult and highly competitive market climate. Companies that do well by the customer will be rewarded with increased market share and more capital investment, while companies that fail to satisfy the customer will be punished by defections of both buyers and investors.”
All companies were measured with a customer satisfaction score on a scale of 0-100, with 100 being the highest. The Industry measure includes six major mortgage lenders: HBOS (Bank of Scotland/Halifax/Birmingham Midshires), Abbey, Lloyds TSB (includes Cheltenham and Gloucester), Nationwide, Northern Rock and RBS (The Royal Bank of Scotland/NatWest); smaller companies are included as ‘All Other’. The retail banking and mortgage industries score 71 and 70 respectively.
Top rated lenders include Nationwide Building Society (77), followed by RBS Group (NatWest/The Royal Bank of Scotland) with 72 and Lloyds TSB, with 71. Abbey was the bottom scorer with 65, closely followed – hardly surprisingly given recent events!- by Northern Rock (68). Nationwide customers are the most loyal. Northern Rock customers are most likely to change lenders with the lowest loyalty score – again, hardly surprising given the chaos of recent months. That said, RBS Group is the most complained about body, with 18% of its customers making a claim in the past year. Ironically, Northern Rock has the lowest number of customer complaints followed by Nationwide. That said, where there was a complaint, Northern Rock was worst at complaint handling, with the Abbey doing only slightly better.