Free banking will still come at a cost

By Brian O'Mahony(BR>IT never made any sense that the banks saw their customers as a cost and spent decades driving them out of their branches.

Launching new customer-centred initiatives on Thursday, Bank of Ireland chief executive Brian Goggin said the perception existed that the bank wanted to banish customers from its 250 branch network.

It was more than a perception, and it is the case that, for quite a while, the banks became obsessed with costs and the famous Cost Income Ratio was addressed with a vengeance.

But this week, Brian Goggin and his senior staff had what could be described as a Feargal Quinn moment when he pronounced his firm belief in the critical importance of the consumer to the bank’s business.

It was that commitment Feargal Quinn used to set his supermarket chain apart from the competition for a long time. Time eventually caught up with Feargal but his basic philosophy stood the test of time and it boils down to the simple fact that if you treat people well, they tend to respond positively.

There is no argument that online banking, the cash machines and other innovations, have served the consumer well and in that way, the banks got it absolutely right.

Now the bank is bumping up its image and its offer of “free banking” made a lot of headlines yesterday. It’s not free banking for starters. At least €500 has to be kept in the current account and so many on line transactions are also required to qualify for this great free offer.

If, as the bank suggests 500,000 will pick up on the offer, it means a guaranteed €250 million in its coffers to make use of any way it chooses, and the notion of this being free banking is stretching it.

There can be no doubt from the tone set by Brian Goggin on Thursday at the bank’s O’Connell Street branch that the group has gone for wooing customers with messianic zeal.

Goggin came from branch banking and understands the importance of the customer. His choice of a branch from which to launch the new customer initiatives is a pointer, however, as to how far Goggin is prepared to go to re-establish the primacy of the customer in terms of branch banking.

He also stole Quinn’s clothes on the ‘queuing for no longer than three minutes’ initiative. That’s the aim. There won’t be any contributions to charities if it isn’t met. But Goggin made the point he wants to see his managers out front in their branches to reassure customers that they are real.

Polish and Chinese people are being recruited and in the Talbot St branch in Dublin, and literature is being written in Polish to make documentation and banking terms easier to understand for the burgeoning number of Poles.

Without doubt, Bank of Ireland is waking up to the consumer and conducts extensive surveys annually to ensure it is meeting the needs of its increasingly sophisticated client base.

When it comes to the crunch, however, the primacy of the consumer in the bank’s grand plan isn’t all embracing.

The bank will not pay interest on money held in current accounts. It costs €330m per year to get cheques, etc, through the system and the bank recovers just about 20% of that.

So Brian Goggin insists the consumer has to bear some part of the burden.

From what one can judge, this is about the bank creating an environment and ethos among its staff which says you do everything in your power to give the customer the best possible service. What’s in his or her interest is the new mantra.

Just don’t expect that to translate into better deposit rates or lower credit card rates anytime soon. In a virtual duopoly, you don’t need to undermine your generous profit base by such foolish acts of generosity.