Summing up: Banks still don’t understand customers

ARE you ready for the embrace, Lloyds customers? Or are you simply bracing for the next stage in the decline of your local banking services as Lloyds turns its back on more of Scotland’s small towns and villages?

Lloyds Banking Group boss Antonio Horta-Osorio said last week that the bank was now “completely ready to embrace customer behaviour which is exponentially becoming more digital”.

Horta-Osorio’s comment came when he revealed that 200 more branches will be closed as taxpayer-supported Lloyds continues to “digitise” its business. Because it’s not about cutting costs, you understand. No, Lloyds – owner of Bank of Scotland – is all about its customers.

That demand for digital services is rising is not in question. The number of transactions carried out on mobile devices doubled last year, according to the British Bankers’ Association, contributing to a decline in branch “footfall” of around 10 per cent a year.

Yet this is only part of the story. The other part is that millions of people still use branches regularly. Half of bank customers use a branch at least once a month, and 90 per cent visit one at least annually, says Accenture.

More strikingly, it found that 21 per cent of people use a branch at least once a week. That figure has almost doubled since 2012, with the biggest increase being among those aged 18 to 24.

Branch closures promote inequality too. Low-income households are far less likely to have access to the internet, especially those in rural areas. In their haste to digitise, the banks are abandoning the 6.7 million people in the UK who have never used the internet, including 5.8 million over the age of 55 (according to the Office for National Statistics).

The banks will disregard such statistics at their peril, because it’s clear that customers still value face-to-face interaction even as they use more digital channels.

Lloyds isn’t alone in shutting its branches, of course, with Barclays and especially Royal Bank of Scotland doing so more aggressively.

But if the needs of their customers really were paramount the likes of Lloyds and RBS would be exploring the alternatives, of which there are several. One proposed by the Campaign for Community Banking Services is for banks to share branch premises.

It works well in other countries, including the US, but over here it just doesn’t fit into their skewed narrative, which is that people don’t want to use branches anymore.

Lloyds, RBS and the rest could pay a long-term price for these decisions. They may finally be investing in their digital and IT systems, but doubts surely linger over their ability to do so effectively.

RBS in particular has caused customers no end of stress by failing to ensure its systems are sufficiently robust. The bank is spending a fortune on rectifying the problems experienced over the past few years, not least the crash last winter that left hundreds of thousands of customers unable to access their accounts.

Yet the word is that this project is a mess, made over-complicated by years of sticking-plaster remedies.

The big banks know they have to make a success of digital if they’re not to be left behind, especially as firms such as Google, Apple and Amazon turn their sights on banking services.

What they don’t get, however, is that a successful shift to digital isn’t just about apps and gizmos. It’s also about being customer-oriented and understanding what their customer really wants – something they are as far away from recognising as they ever have been.