Royal Commission root cause: conduct or relationships?

Royal Commission root cause: conduct or relationships?

By December 14, 2018News, Royal Commission

The Hayne Royal Commission has shown that the behaviour of banks (and some insurers) towards their customers has deteriorated well below the standards that society expects. In answering the question "Why did it happen?", the interim report says:


"Too often, the answer seems to be greed – the pursuit of short term profit at the expense of basic standards of honesty."


In an attempt to maximise the learnings out of this Royal Commission, I’ve been contemplating the following question: “Under what circumstances or conditions does greed or self-centredness prevail over doing the right thing by the customer?”. I think greed prevails where there is a lack of care, commitment, trust, empathy, connection and goodwill between two parties. In other words, where the relationship in question is weak, distant or strained. Could the increasingly distant relationship between banks and customers be the fundamental root cause that is allowing greed to gain a foothold?

If we analyse the recent trends in the bank-customer relationship using the five drivers from my favoured framework - the Relational Proximity Framework® (also known as Relational Analytics), we can see a number of factors or trends that have resulted in greater ‘distance’ and reduced goodwill and social capital:

1. The quantity and quality of communication has decreased as face-to-face interactions have been replaced with ATMs, call centres, apps, webchats etc. Opportunities for true feedback, and the willingness of customers to provide feedback, have both decreased. {I recently asked my bank if I could provide feedback and was informed that the only way to do so was to lodge a complaint.}
2. Perceptions of parity has decreased, with banks getting bigger and from the customer’s perspective setting all the rules. At the same time, banks feel they have too little power in the relationship, as customers are shopping around more, often based solely on price.
3. Alignment of interests between banks and customers has decreased with banks adopting a short-term shareholder and financial focus, and with society’s expectations increasing.
4. Loyalty and continuity of relationship have decreased with the rise of aggregators and comparison websites, and large discounts for new customers.
5. Information and mutual understanding have decreased as customer-facing teams deliver narrowly-focused transactional services and emphasise immediate customer experience rather than creating and building broader and more meaningful connections over time. Customers too, are less interested in investing time to get to know their bank and the bank staff.

A few questions for us all to ponder:

  1.  Is it possible that the poor conduct brought to light by the Royal Commission has actually been a predictable outward expression of the poor underlying relationship?
  2. If banks had been measuring their relationships in this way, might they have avoided their current predicament? Given that relationships are two-way, what might they have discovered if they had surveyed their own staff’s perspectives on customer relationships and customer behaviour?
  3.  To what extent do you think the above analysis applies to the insurance industry and to your insurance company?

For more information contact Hadyn Bernau

Hadny Bernau discusses the Royal Commission and social capital