Nigel Roberts

Last week I received a letter from my bank and mortgage provider, ING. They very kindly wrote to tell me that rates on my variable loans were going up by 0.15%. That was it. No reason, no explanation, no context as to why my loan, which was only recently refinanced to a better rate, would be going back up again.

Think about the context. RBA cash rates on hold for 26 months, a stuttering housing market, and a relatively strong domestic economy and you wonder, firstly, why have the rates gone up at all? Then you put that in the specific context of the seemingly ever-growing profitability of the big four retail banks and it appears to add up to a profit grab, plain and simple.

However, there’s context for the banks too. Market conditions have meant that the cost of borrowing has increased and has been hit by fluctuations in the BBSW. So there is a technical explanation, but, does that make it right?

And, how on earth can the banks get away with such a terrible experience?

They do it, because they can.

Just think about that for a moment. Think about the experience of receiving a letter, which you may or may not have read, being the only communication you receive about an increased cost to a service you receive, without an explanation of why it was happening. Compounding the lack of explanation was a lack of clarity of what the change meant to my payments.

They have my email address. I use the app, every day. But neither channel was used, no content was sent to explain why, no additional engagement attempted. It was a terrible experience.

But ask me, am I going to change my mortgage provider and the answer is no. Not because I’m lazy (although I can be), but because broadly, they’re all the same, with little difference between their overall experience. It seems when it comes to mortgages, the banks really don’t want to be that different..

Or do they?

The exceptions that prove the rule

ING was following the pack, with most of the big four and non-bank lenders all raising their variable rates, with two notable exceptions – NAB and AMP.

Notable not just because of their apparent stand against out of cycle rate rises, but also because they were the two institutions that have arguably taken the biggest hammering at the Royal Commission.

Both firms have seen issues raised about practices and cultures that clearly put shareholder value ahead of customer interests. It’s not been pretty and while they are far from alone in having these issues exposed, they do appear to have been the most visibly and highly criticised.

But while the industry as a whole has been criticised by the Commission about lending standards, there’s been few concerns about the setting of rates.

Which raises the question of what prompted these two to go against the grain?

Rebuilding trust through grand gestures

It seems that NAB and AMP have seen this as an opportunity to start rebuilding their reputations, through a headline grabbing action, which will be welcomed by their customers.

NAB in particular has apparently made this an issue upon which they want to stand apart from their peers. To quote the Guardian:

‘NAB’s chief executive, Andrew Thorburn, indicated the bank’s decision was a direct result of an environment in which huge profits and revelations of misconduct aired at the royal commission had damaged the big banks’ public standing.

“We need to rebuild the trust of our customers, and by holding our NAB standard variable rate longer, we help our customers for longer,” Thorburn said.

“By focusing more on our customers, we build trust and advocacy, and this creates a more sustainable business.”’

This even got a ‘well done’ from our new Prime Minister (who, if you remember voted against the Commission on multiple occasions).

However, interestingly enough, Thorburn also said the bank would ‘continue to monitor funding conditions’, which seems to show that this may be a headline action that stands them apart in the short-term, but will likely see them revert back to the normal cycle.

Is this really how you rebuild trust?

What do you think impacts customer sentiment most, not raising rates, or raising them and providing a well communicated explanation of the context with personalised outcomes outlined?

It’s an intriguing question, to which I’d offer the following answer.

Customers don’t credit you for doing something they would argue you shouldn’t be doing in the first place. Just because your peers are doing something which disappoints their customers, you not doing that doesn’t make you better than them, it just doesn’t provide a negative impact.

Think of it like this; if your friends break the speed limit and you don’t, does that make you a better person, or are you doing what you should do?

Whether that’s fair or not, that’s how many of your customers perceive this sort of behaviour.

So what should they do?

I believe that if financial firms are serious about changing perceptions and rebuilding trust with their customers, they should focus on the micro, not the macro.

The everyday experiences we have with brands are what build our perceptions of their credibility and effectiveness. Trust is won through ongoing, constant positive behaviour, not one-off gestures, however laudable.

Real credit comes when you focus on the interactions that make up your customers’ experience of your product. For the rate rise example, you could communicate through their preferred channel, taking them through the reasoning behind the process, in a way that makes it easy to understand, with clear impacts and offers of support to clarify anything that’s not clear.

You may even offer to help them by refinancing, looking at rates offered to new customers, as a means of rewarding their loyalty. Now that’s when you start to have an impact.

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