The New Philosophy That’s Catching on With Banks

Bankers are right to be concerned that Amazon will one day emerge as a competitor in the financial services industry, but that shouldn’t stop banks from stealing a page from the ecommerce company’s playbook.

Banking is a relationships business. For ages, banks have tried to leverage that relationship to grow and maximize shareholder return.

Some of the ways they’ve done so seem antiquated now, like giving away toasters to anyone that opens a checking account. But the underlying logic remains sound.

That’s why many top banks are now starting to think more like Jeff Bezos, Amazon’s chairman and CEO.

In 1997, the year Bezos wrote his first shareholder letter, he cycled through the usual subjects, boasting about growth and maximizing the return for shareholders. But he also talked about the long game Amazon would play by eschewing even faster growth and profitability by instead focusing “relentlessly” on customers.

“We have invested and will continue to invest aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise,” he wrote in his inaugural letter.

Why? Because Bezos wanted Amazon to be engrained in people’s lives, far more than just the books they were getting 20-some years ago.

“Because of our emphasis on the long term, we may make decisions and weigh tradeoffs differently than some companies,” Bezos wrote, noting that Amazon’s first and foremost priority would be serving customers, not buckling under pressure from Wall Street.

Two decades later, everything Amazon does is driven by what the “divinely discontent” customer wants, which they learn through data collection and analysis. And as a result, Amazon has become an integral part of many consumers’ lives.

“I sense that the same customer empowerment phenomenon is happening broadly across everything we do at Amazon and most other industries as well. You cannot rest on your laurels in this world. Customers won’t have it,” Bezos wrote two decades later in his 2018 shareholder letter.

It’s this relentless, single-minded drive to satisfy customers that banks are beginning to adopt, especially when it comes to serving customers over digital distribution channels.

Many banks have modernized their digital offerings to attract digitally savvy customers. An ancillary benefit is that the interactions conducted over these channels generate immense amounts of valuable data. It’s be effectively using this data that banks can build out an Amazon-like experience.

Brian Moynihan, CEO of Bank of America, recently explained to Bank Director the value of that data, and also how the $2 trillion bank can leverage it to improve customers’ experience: “We know that customer better than everybody else, because we’re seeing everything they do.”

Another bank doing this is Citizens Bank, a New England-based bank with $155 billion in assets. Citizens CEO Bruce Van Saun talked his focus on customers at the Wharton Leadership Conference this summer.

This focus is behind the bank’s decision to launch its digital offshoot, Citizens Access. It has also informed how they think and obsess over—what else—data. Van Saun said it allows them to leverage it in “moments of truth” for customers that the bank knows better than anyone.

“Citizens is doing this through an intense focus on ‘customer journeys’ – transforming the way we engage with customers at critical moments so that they are compelling, differentiated, personalized and highly user-friendly. This process starts with putting the customer – not the organization – at the center.”

Sounds an awful lot like Bezos and Moynihan. It also sounds a lot like “The Law of The Customer,” a theory discussed in Stephen Denning’s book, “The Age of Agile.”

Denning discusses a “Copernican revolution” of management that puts the customer at the center, rather than the firm. Nicolas Copernicus, of course, was first with the theory the Earth revolved around the Sun, not vice versa, a blasphemous idea in the 16th century.

What that means is delivering things like delight, enthusiasm and passion instead of products or services.

This requires a cultural transformation at organizations, Denning argues, and especially at banks that have long been driven by traditional metrics.

That is where not just the CEO, but the entire C-suite, comes in.

“If the drive to delight customers comes from the CEO alone, or from the bottom alone, the firm is lost,” Denning writes.

Most banks don’t have the manpower or capital to invest in tech capabilities like the biggest banks, but many are now realizing they do have the most prized collection of data about their customers.

That data can be leveraged, and it’s data that would make Bezos even more obsessed than he already is about customers.