You don't often see high-ranking business executives suggest that it should be easier for their customers to leave them. But that, in effect, is what Sallie Krawcheck argues.
Krawcheck, the former president of global wealth and investment management at Charlotte-based Bank of America, wrote a surprising opinion piece for Politico. In it, she makes a case that is unsettling to some of her former banking industry colleagues.
Krawcheck argues that the Consumer Financial Protection Bureau should take dramatic steps to make it easier for consumers to switch banks. Many have been tempted to do so in recent years, but didn't because it was too much trouble. Krawcheck envisions a world with short descriptions of all bank products in plain English. More radically, when switching banks, customers could transfer account numbers and their direct-deposit and bill-pay information. And they could do it all without incurring fees.
Banks should support this, Krawcheck says, even though it would cost them money in the short run.
For banks, these changes would represent a short-term challenge. Not only would this require investment, it would strip banks of the significant earnings they derive from customer inertia — including earnings from deposits on which they pay below-market interest rates. But such transparency and portability could unleash a significant wave of innovation benefiting the customer, as rewards for that innovation notably improve, rather than being stifled by this inertia.
Across the industry, consumer satisfaction rates probably would rise, putting the industry on more stable footing with customers. This greater trust could, in time, generate greater consumer confidence in taking out loans and taking on risks they now understand, feeding through to economic growth.
Such changes would be enacted by CFPB, a new regulator that has not been seen as a friend to banks. But, Krawcheck says, "Banks should support the CFPB’s efforts. Contrary to conventional wisdom, it’s in their interest." That's because over the long-term it would improve customers' relationship with their bank and their perception of the industry.
Krawcheck, once considered a potential CEO of Bank of America, was forced out last year. So maybe banking insiders could dismiss her ideas as sour grapes. But we think they have a lot of merit. The banking industry has not been known for its outstanding customer service in recent years. This kind of approach could be one way to mend its strained relationships with customers over time.
-- Taylor Batten