You know banking has changed when London bankers are wearing mufti to avoid getting beaten up in the street. While the level of anger might not be as intense in New Zealand, our financial sector is certainly altered. But what hasn’t seemed to change is their marketing. And it needs to.
A few months ago banks couldn’t wait to lend you money. They were lining up for 100% mortgages, holiday homes, personal loans, new credit cards. There weren’t enough projects to lend money on.
Finance companies were much worse of course. Some were simply incompetent, some misled us and some were downright liars and are now being prosecuted for it. That house of cards was blown over in 2008 when 21 finance companies failed, costing more than 100,000 Kiwi investors around $6 billion.
The banking sector has always been more circumspect but they were still very focussed on filling their lending book. Times have changed with the global financial crisis. The availability of funds from overseas has reduced, and with fewer depositors there is less money to give out. Weakening prices means that houses are much poorer collateral for loans.
It is beyond my ability to understand the dynamics behind this, but in simple terms the marketing promise has changed. Money seemed to be easily available a few months ago, now it is much more of challenge.
There is anecdotal evidence from the business sector that the flexibility of banking services has diminished. Overdrafts being called in, lines of credit cancelled, friendly, long term business relationships being turned over.
For example, a local company I deal with was recently told at short notice by his bank of long standing that they wouldn’t extend an overdraft to cover salaries that month. For a profitable, established business, this was a sea change in their treatment of him. It wasn’t so much that the bank withdrew the facility, given the environment has changed markedly, but the way they did it.
These anecdotes have been backed by official sources. “We are concerned that New Zealand businesses find it increasingly difficult to access credit from the major Australian-owned banks, where lending decisions are reportedly now being made by offshore bank parties rather than onshore relationship managers,” says a report recently released by the Finance and Expenditure Select Committee.
It is clear banks have been forced by economic circumstance to change their levels of service, but they are not modifying their marketing behaviour.
They are still making the same old promises. All of the banks are still running the same old adverts, trying to tell us variations on the same theme – they provide a better, friendlier service and better products than everyone else. ASB Bank has Ira Goldstein, National Bank the classy horse, Westpac the stick figures, BNZ their pigs and ANZ, I’m not sure. Maybe the colour blue. Kiwibank keep telling us they are definitely not Australian.
The BNZ’s website tells us they have been, “helping people, farmers (they are obviously not people) and businesses with their finances for close to 150 years. Over that time, as the needs and expectations of New Zealanders have changed, we've responded and lead (sic) with innovative new services and a willingness to evolve the way we approach things.”
But the banks can’t deliver on their promises, as the value they can offer me has fundamentally changed. The banks’ stance is a bit like BP going on about green but then selling one of the biggest sources of pollution.
Great companies make a compelling promise to customers and then consistently deliver an experience to customers that meet or exceed the expectation created. Banks are damaging their brands by not resetting our expectations. Why aren’t they being more transparent and saying times are tougher, we need to be more prudent so our services aren’t as flexible.
The major trading banks are probably hamstrung by their Aussie masters, but it is disappointing that locally owned entities like Kiwibank or TSB Bank aren’t taking a lead. Instead of trotting out the same old message, they could invest some of their huge advertising budgets into explaining the new reality to us. They could be coaching us on how to cope with this tough new environment.
Ultimately it will damage the bank brands, damage they could be limiting by changing their marketing message instead of resolutely keeping their heads in the advertising sand. Consumers and business people will take some time to trust them again.
Of course we can’t do without banks, but it must open opportunities for one to break ranks and grab some mindshare in the sector. While they were plenty of excesses in the US and UK, our banking sector was far more restrained and is consequently in a far better position. But they still face restrictions in this economic environment, that mean they have to change their services. They shouldn’t be ignoring that in their marketing campaigns.
Perhaps they are bit like 81 year old London banker Alan Cornelius, who according to a Bloomberg news report, refused to change out his suit during protests in the city, because ‘All I’ve got otherwise is my gardening clothes.’ Perhaps banks have nothing new in their marketing wardrobe?