Abbey must not bank on the Net

Do high street banks believe that marketing and customer service are by any chance related? Not on the evidence of Abbey National’s latest cack-handed public relations initiative they don’t.

Abbey, it will be recalled, recently announced that it would be charging customers £5 a time for the pleasure of queuing up to pay their bills over the counter. Now, in a move reminiscent of the more curious sections of Alice in Wonderland, it has decided to do away with the counters. Yes, 30 per cent or more of its 3,500 counters across the branch network will in due course disappear, wildly delighting its many customers. In the words of a City analyst with a taste for irony: ‘Abbey is sending out strong signals it doesn’t wish people to use its branches. This could be quite a dangerous strategy.’

The not unnatural question, therefore, is why Abbey should embark on it in the first place. Ostensibly, the reasons ­ or at least the excuses ­ are easy to catalogue. Abbey, in common with all other traditional retail branch networks, is under margin pressure from a host of competitors entering the field. Some of these, like Tesco and Sainsbury’s, have been able to capitalise on their existing infrastructure, and greater customer loyalty, to undercut the traditional banks. But there is no doubt that changes wrought by technology, whether in the relatively unsophisticated form of call centres or the more exotic guise of online banking, have been the main cause for concern. In driving down the cost of distribution, technological empowerment has encouraged the likes of Pru’s Egg and Standard Life Bank to enter the lists without all the expensive paraphernalia of branch overheads.

The net effect, as it were, is the appearance of a kind of banking apartheid which increasingly favours the rich over the poor. Its symptoms can be readily detected in Egg’s recent decision to restrict new business to those with Internet access. An effective mechanism, given low UK Internet penetration, for cutting down the number of applicants swayed by its overly-generous introductory savings rate. But also, note, a discriminating means of ensuring that those who now apply are likely to be higher net-worth individuals.

For the traditional high street banks, things are not so simple. They are saddled not only with colossal overheads in bricks and mortar, but a substantial customer base which simply does not pay. It’s an example of the Pareto Principle at work in marketing: about 20 per cent of their customers generate around 80 per cent of revenue. The problem is what to do with the rest, in the interests of keeping shareholders sweet.

Abbey reckons it has found an answer. But it may be too crude and brutal for its own good. These days, changing your bank account is a lot, lot easier.

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