Can Our Local Banks Improve?

Former Commerce Bank CEO Vernon Hill says yes.

A few months ago, I called my big, national bank and asked to do what I thought would be a simple thing: a wire transfer. No problem in this electronic age, right? Except it wasn’t such a simple thing. That’s because my vendor was a software development company that had the audacity to be located in the Ukraine. How dare they! I could understand if such a transaction were difficult in, say, 1973. But this is 2013. And this is a big bank, with branches throughout the Philadelphia area (their name is on one of our sports stadiums).

I was told on the phone that I had to do this in person at my local branch. So I went there. The customer service agent in the branch was befuddled. The bank manager had to get involved. (For the record, I was in this same branch not three months before, and these people were not working there then.) The home office was called. Actual forms with carbon copy paper (I kid you not) were completed, and then completed again after all the mistakes were fixed. The director of the FBI was notified and a congressional committee was briefed. Everyone was in a tizzy. Yes, I just used the word “tizzy” in a sentence. And no, I never did hear from the manager at my local branch who promised to email me “the minute the transaction went through.” Did it go through? Yes. But I only found out after I called to confirm.

Oh, where was Vernon Hill? Where? Where?

I bet he was chuckling somewhere in his New Jersey home. Hill, the former CEO of Commerce Bank hates bad customer service. Particularly in the banking industry. Hill started Commerce with one location and grew it to more than 200 before, according to him, he sold out for $8 billion. He’s now chairman of the board of a new chain of banks in the United Kingdom called Metro Bank, where he’s trying to bring the “Commerce magic” back to banking. He writes about this in his new book, Fans Not Customers: How to Create Growth Companies in a No Growth World, and he spoke with me just this past week.

“It’s all about convenience and service,” he told me. “Great businesses create success by building fans. These are the people who will stay with you and recommend you to their friends. That’s how Commerce grew itself 25 percent every year for 30 years.”

Unfortunately for Philadelphians, Hill is busy creating these fans in England. He’s entering a market that, until 2010, hadn’t seen a new bank since 1830. And he’s doing the same thing he did here: 24/7 service, free coin counting, reduced fees, pens that aren’t chained to desks, people who answer the phones and who care. But what about here? Is this also possible? Can a local business in Philadelphia find a bank like this? And how can that banker really create small-business fans?

Many bigger banks do a good job for their customers. But I’m a small business. And according to Hill, I’m banking at the wrong bank. No matter what I see in the ads, it’s understandably challenging for a large bank to treat my little business as well as they’re going to treat their big customers. “For a small business like yours, you’re better off with a community bank,” he told me. And there are plenty of good ones around the area to choose from.

Why? Because my $500,000 loan would be significant to a smaller, community bank. I would get more attention. I would be a bigger deal. Would a community bank have handled my wire transfer any worse than my current banker? The same paperwork would be done but, Hill says, it would be done with a better level of service and convenience.

Meanwhile, bankers need to change how they perceive service, particularly when it comes to small businesses like mine. Hill talks about “service and convenience,” and he’s right. To really service a small business well you have to provide proactive service and convenience. Small-business owners don’t have financial staffs. Our accountants are paid by the hour to primarily just do our tax returns. We do not have the education that people in finance departments at big corporations have. We do not have the time to maximize our cash management returns like others do in larger organizations.

Occasionally I get a call from someone in my bank to “check in.” That’s nice. But it’s clearly a sales call to offer some other product his bosses told him to push in last week’s national meeting. And it’s never the same person calling each time. And, no offense, but it’s almost always someone at a lower level, with less experience. Ever experience this?

Here’s what I want: the same guy checking my accounts once a quarter, and communication via email (that’s just my preference; if you like to get calls then that’s fine too). Advice on how to shave a few extra points on my enormous cash balances. A look at my history to see where I can save on fees. A request for my financial statements (or maybe just my general ledger) from my accountant and a quick look-through. Please, share some of that MBA experience from grad school, OK? Give me some advice that you might have learned from your hundred other clients that could help me reduce expenses or sell to someone new. How does my business compare? How can I improve? Even a visit maybe once or twice a year—but not too much. You don’t have to do too much to make me happy. But show me some attention. And for God’s sake, help me. Help me increase my chances of staying in business, and you can increase your chances of keeping your fee-paying customer around.

Hill is right. Most banks can do a much better job. And community banks are probably a better bet for small businesses. But it’s not just about service. It’s about proactive service. It’s about making a simple wire transfer simple. Even if it’s to the Ukraine.