Banking StandardsWritten evidence from Jennifer D. Budden

1. Introduction and Synopsis

1.1 I have felt the need to make this very late submission to the Commission; because of the experience I am currently going through regarding some banking issues relating to an elderly relative. I consider that my experience is a good illustration of a fundamental problem with the current impersonal banking model, the result of which is to make ordinary customers spend a lot of time fitting in with opaque bank systems rather than the bank systems providing a customer friendly service that can deal efficiently with individual issues.

1.2 These problems are exacerbated by the banks’ approach, which concentrates on short-term relationships, so savers for example are expected to constantly monitor their savings accounts and continually shop around for a better offer. One of the effects of this approach is that people constantly have to go through the same bureaucratic process over and over again which has costs for the individual in both time and effort.

1.3 The system is predicated on the fact that this gives competition. It may give some competition in terms of return on savings but there is no competition in terms of the approach used by banks and building societies. Their processes are all essentially the same: it is the customer who is required to take all the initiatives and do all the work to fit in with the banks’ systems. The number of people who end up with low interest bearing accounts as they have failed to take action to move their money is an obvious outcome.

1.4 The ensuing frustration experienced by people trying to work their way through the bureaucracy contributes to the lack of confidence and negative attitude that the public tends to have about the banks, their competence and customer care. A new model is needed which starts from the question of what customers really need, not only in terms of products, but bank processes that really give customer care.

2. An example

2.1 A nice example of this is to consider the problem of an elderly person who has just gone into residential care and is looking, (especially because of the need to meet care home fees) to maximise savings returns. Most savings products offer short-term rates or for a fixed period. Many of the savings accounts offering the best rates are on line.

2.2 However when opening a new account with a different bank or building society it is necessary to prove identity and also one’s address. I appreciate that for legal reasons, money laundering and to prevent fraud this proof of identity and address is important. However while the guidance lists of what is acceptable include notification of entitlements to other governmental/local authority grants or a coding from HMRC, these latter documents are much more difficult to standardise or access than having a current passport or driving licence. Routine coding from HMRC or updates on pension amounts are sent out at a specific time of year. Change of address acknowledgements from such bodies are not sufficient to prove identity. This leads to all sorts of Kafkaesque problems for people in trying to prove who they are and is likely to be of particular problem to a very elderly person.

2.3 Take the example of someone who is elderly and infirm who moves into a residential home because they are no longer able to look after themselves but who has more assets than the amount at which the state will provide any assistance. Such elderly people are unlikely to have a valid passport and if they do have a driving licence it will have their old address on it. It is unlikely that they will want or be considered well enough to continue to drive so will not change the address on the driving licence.

2.4 Also such a move into residential care is unlikely to be planned. It may result from a sudden crisis such as an illness or a hospital stay. But the need to meet the fees of the home is urgent. Good homes are sympathetic but they do need fees to continue to run. So the need to access funds, close or transfer savings accounts and open accounts to maximise the interest on available funds becomes very significant. But if the account to be closed has not been actively used for some years, perhaps because it was seen as a rainy day account, trying to get the account closed with a new address raises all the concerns of the banks about fraud or money laundering and proving identity then becomes a bureaucratic nightmare. Photocopies of official documents may have to be certified. Information may be held to be incomplete even when properly provided by the official organisation because for various reasons it does not include precisely the information specified by the bank concerned. There is a lot of discussion in the press about the number of people who are currently living into their 90s or over a 100. It seems to me ironic that someone can be on this earth for 90+ years but not be able to easily prove who they are to the bank’s satisfaction.

2.5 Proving an address may be equally challenging. Once in residential care the elderly person won’t have utility bills. They may not have a BT telephone. They may not be online savvy. Phoning up distant call centres to check up what to do is stressful particularly if you need pass words and to use the phone keypad to put in pin numbers, assuming you can remember them. When you finally do get through—assuming you can hear them—the call centre staff may have to transfer you to another department—more cost on your phone bill and you may get information that is then not accepted when acted upon.

2.6 Relatives cannot help because activating power of attorney takes time for the banks to confirm and also seems a waste of time if the account is to be closed. Even having power of attorney does not make the bank systems any more transparent. You have to pick up understanding by trial and error. There is no one to guide you through.

3. Failures of a Centralised System

3.1 Many banks, especially for on line accounts, deal with proof of identity centrally. Such central departments have by definition no local knowledge—they won’t know even if a residential home actually exists for example. The decision made to accept or reject proof of identity and address is purely on the basis of written information which, when it is not a standard passport or driving licence, may be open to interpretation. For example a letter from the Pension Service may be rejected because it only contains initials rather than the person’s full name. So what can ensue is a series of apparently standard letters from the banks demanding more detailed information to prove identity. For an elderly person, even assuming they understand what is required; it may be difficult to work out how they might obtain the information demanded. The whole process is time consuming, stressful and probably beyond may elderly people and even for their relatives trying to support them.

3.2 Banks obviously need to prevent fraud and meet legislative standards. However my contention is that the systems banks put in place to do this often make it incredibly difficult for genuine people to meet the requirements. In this as in many other aspects of current banking, the systems in place may keep both administrative and training costs down for the banks but do not provide a service that meets what an individual customer needs or wants, especially if the person concerned is not articulate, IT savvy, able easily to understand complex detail or has the time to devote to working their way through websites or hanging on for telephone call centres or know precisely what information they are seeking.

3.3 The whole basis of a call centre for example is that it is impersonal. You never speak to the same person twice. Different calls may elicit different information in answer to the same problem. The cost in time and money is born by the customer: for example many banks’ call centres frequently seem to be “experiencing high volumes of calls” where a wait at a cost to the customer’s phone bill can be lengthy. Such call centres deal with general enquiries but may not able to deal with particular aspects which have to be transferred to other departments with even more waiting time. Websites may be difficult to navigate or not give the answers to the questions you have. Most people will shudder when required to phone many bank’s call centres or use their website for all but routine matters—how much more difficult and stressful is it for a very elderly person?

3.4 Even where a local branch exists, local staff have limited authority to sort out issues. They do not know their customers personally even if the person has been banking with their bank all their adult life. They are not allowed to interpret the rules with common sense. They are not trained to act as gatekeepers or to anticipate what the person concerned will need to do and give them the appropriate guidance. This may be bad enough for a person in good health, for someone who is elderly, fatigued and infirm—the sort of person who is likely to go into residential care for example, it can add to the distress of losing one’s independence, feeling unwell and generally out of control. Relatives have limited power to help.

4. Need to Consult Age UK

I don’t know if the Banking Commission has received a submission from Age UK or other organisations that support the elderly or those who are more vulnerable about the shortcomings of bank systems for their use. However anecdotally I know that this is a common problem.

5. Banks Need to Fundamentally Change Their Approach

5.1 The processes the banks have put in place to meet customer need are essentially clerical in nature not professional: the staff that their customers come into contact with either in person or remotely are often only allowed to follow procedures rather than to exercise judgments on how the policies should be applied in that particular case. While all the banks pay lip service to good customer service in practice their systems mean that are unable to treat customers as individuals: their systems do not allow them to differentiate between those whose simple standard questions can be answered automatically from those who really need individual help to sort out the problems they are grappling with.

5.2 Banks will no doubt argue that with the volume of their business they cannot provide a personal service and that such a model harks back to an earlier era when life was simpler. However I would contend that companies such as John Lewis do manage to provide a personal service, which also deals with volume and this may be one of the reasons why the public holds them in more regard. It is a question of corporate culture and attitude and the systems put in place to meet that culture.

5.3 While banks and building societies claim there is competition between them, they mostly all operate in the same way so there is little to chose between them. In effect they are mostly as bad as each other. If they really put customer service first they could not have set up the business systems that they have.

5.4 If the banks are really to find favour with the public, they need a total change in culture. They need to put their customers needs really at the heart of what they do rather than expecting customers to fit with what works for the bank. This would include:

5.4.1if they are going to use call centres, these should be free for the user so that the costs of insufficient staffing are born by the banks not their customers.

5.4.2Training their local branch staff so that they have the authority to understand and interpret the rules with professionalism and common sense.

5.4.3Rather than offering short term savings products they should seek to create a long term relationship with their clients where the bank or building society continuously seeks to provide the best savings rates, for example, without the customer having to continuously shop around and go through the same bureaucratic process again and again.

6. Conclusion

6.1 In the 21st century it is vital that banks and building societies work for all sections of society and are inclusive. Everyone needs banking services and everyone needs to maximise the amounts they earn on their savings. If banks are to be inclusive they must fundamentally change their approach so that they really do put customers at the heart of what they are doing, not only in their advertisements.

6.2 If this happened then the public might over time develop more trust for their banks and feel that they were genuinely working to meet their customer needs rather than as now feeling either exploited or totally frustrated.

5 October 2012

Prepared 19th June 2013