I used to work at a bank the CEO of which used to worship at the altar of tech companies like Apple, Google, Microsoft etc. He used to wonder why the culture of a tech company could not pervade that of a bank. Oh, and he was also originally hired into banking from a background of consulting. So, he wasn’t a banker but a professional manager of process. He, like many, had failed to see the unseen value-add of these tech companies and how that could be translated to banking.
He wasn’t alone. Nearly all our current crop of CEO’s came from a background other than banking. Cast your mind back a few decades and this would’ve been unusual. But that’s a whole other article.
In our business we use Apple products. Both computers are over 5 years old. We just haven’t had time to upgrade them. Also, as most people would know, these computers aren’t cheap.
My business partner’s (Nick’s) computer developed a critical problem earlier this year. The motherboard failed. He booked it into the Genius Bar at the Apple Store. The chap that was running the diagnostic checks came and informed us of the problem. He then informed us that the $1200 repair would be conducted free of charge as the problem was a known fault.
Nick and I had been contemplating going back to Windows, this brought us right back to Apple.
I’ve had a very similar experience in the last few days.
So, what’s the point of all of this?
The point is that although you pay a lot more for an Apple there is a lot of unseen value-add in the brand. Apple work hard at this. They put their own brand on their stores for a reason. They invest in that brand. As a result they have a loyal following. Other brands have tweaked to this and have opened similar stores but the real value-add is so much more than that. It’s experiencing the service, the excitement of opening a product. It’s a sense of occasion.
Compare that to banks.
When you walk into to a bank branch and you have a problem with your mortgage. Say you had missed payments and were behind because of unexpected circumstances – anything from job loss to illness.
The good banks (and there are plenty of them) will take you aside immediately and suspend interest charges. They call this hardship. But for some reason this type of generosity by banks doesn’t seem to evoke the same type of loyalty as Apple’s customers. Why?
The short answer is I don’t know. But you know me, I won’t let the matter rest there. Here’s a few uneducated suppositions:
- With an Apple product by the time something goes wrong you own the product. It’s been paid for. If not they’re obligated to fix it under consumer warranty laws anyway. But with a home loan when things go wrong you still have to pay it off. So, although the bank comes through for you in hard times, you may have another 25 years left on that home loan. That’s a long time for them to undo all the good work from when you were down on your luck.
- Apple’s also good at marketing their products. So much so that people line up for days to pay thousands for them. The only time you join a queue at a bank is if you have a problem and there’s no happy ending at the end of that queue.
- The banks’ products are commoditised. If one bank doesn’t give you what you want you just walk into another. Better still, you go see a broker. Apple’s products are unique to that brand. They don’t licence or outsource. The brand you buy is Apple (not Google, Samsung, Motorola, Microsoft, Nokia, Sony etc)
- The Apple ecosystem is not easily transferable. Once you start using their products (iCloud, iTunes, IOS, OSX etc) you can’t easily switch to another product. People just can’t be bothered. In any event, the Apple tag line of “it just works” is apt. The difficulty in moving banks is really with your direct debits – which entails just looking at your bank statements to see which ones you need to transfer. Last time I did mine – and I have over thirty – it took about 75 minutes. The Qantas points were worth it.
- Perceived quality. I pass my old iPhones down to my kids. It’s difficult to do that with an intangible product. Particularly a commoditised one. In any event, no one wants to pass down a home loan.
Steve Jobs famously quipped:
“It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”
Or this
“You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.”
Or my personal favourite:
“Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.”
The last point is addressed by a previous article here.
Our bank CEO’s should take note.
In our business – and as I’ve said in many previous articles – this is where brokers have filled a void. We now provide that elusive value-add that banks are searching for. As Steve Jobs said in the last quote above (and I’m paraphrasing) it’s not about the money you throw at it. It’s about the talent that you attract and retain. Banks have outsourced all of the value-add functions.
That’s why more than 50% of loans written are via brokers. This was a deliberate strategy and a good one. This number will continue to grow. That’s why we achieve a record month after record month.
People can see the value-add (service, comparability of products and prices, innovation – with CRM and systems that help us achieve those comparisons). We don’t advertise, spend money on R&D or attend conferences with TEDx speakers from tech companies. We can’t afford that. We simply provide value-add with the knowledge in our heads that has come from a combined 47 years experience in product, credit/risk and general finance practice. We stay up-to-date by speaking with people.
When things go wrong we don’t abandon our clients. We hold their hands through the minefield that is dealing with banks and bankers today.
All of our clients are referred to us by word-of-mouth.
What about you? I’d be interested in hearing from our readers as to what unseen value-add you get from your lender.