Thinking of switching banks? They may know before you

22 Jun 2016

As featured in DisruptiveViews

For banking customers in many countries, the freedom to change banks has been of great benefit in keeping them competitive. In Europe, and especially the UK until recently, it has not been an easy task to change banks – in fact, it’s often downright difficult.

We at DisruptiveViews have had our fair share of banking woes simply opening a small business account. It’s as if the banks just don’t want to bother with small businesses despite hammering them with all sorts of fees and exchange rates that are barely transparent, or justifiable in many cases. Just try challenging them and see how far you get.

Banks, like their telecoms counterparts, are banking heavily (no pun intended) on big data to provide what they loosely call – a better customer experience. But some are enlisting outside third parties to actively monitor what their customers are up to.

One Australian bank has been caught out making counter offers to small business customers that were about to churn. They did this by using an external credit reporting agency to report on customers that had approached other banks for business loans.

TheSydney Morning Herald newspaper reports that National Australia Bank (NAB) received alerts from credit reporting agency Veda and other sources when its business banking customers approached competitors about business loans. A spokesman for the bank said the tip-offs were used to “better manage relationships with customers” – but customers did not necessarily think so. In fact, some were so incensed by the invasion of their business privacy they felt ‘violated’.

The Herald quoted Justin Malbon, a consumer law expert from Monash University, who said “NAB’s ‘sneaky and scary’ alert system raised both privacy and competition concerns”. He said banks should obtain consent from consumers to do such monitoring activities in a clear and upfront manner, and not “bury it in some document.”

However, it seems that the bank is well within its rights because Australia’s privacy laws largely relate to personal credit reports and not business ones. In the eyes of customers, however, the lack of privacy laws for small businesses should not give banks carte blanche to levy data that they assumed would be kept private.

The resulting news coverage and negative publicity may actually increase customer churn instead of decreasing it – the exact opposite result those clever marketing and big data executives were hoping for. Or maybe the idea came from the credit reporting agency Veda, that supplies the bank with the ‘tip-offs’. It seems it has ‘previous form’ of its own having been accused of selling data to marketing companies and refusing to correct errors in reports.

However, the practice may not seem so abnormal for those of us used to online shopping. How many times have you looked up something online and then been bombarded by offers from competing companies, out of the blue, for exactly the same products?

The bank may have just been creative in its marketing, and however distasteful its activities were for some, others may have appreciated the attention. In fact, this could be a whole new way of buying bank services. Gone are the days of calling on your friendly bank manager to arrange a loan, and who can stand the long queues on the phone service lines or the form-filling online. Now all you have to do is simply approach a competing bank and your own bank will come to you with offer in hand. Now that sounds like the customer experience we all dream about.

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