The One Mistake Banks Can't Make Is the Second

A.T. Kearney's Financial Services practice published a study showing which financial services firms are in the best position to grow their retail banking businesses from operations rather than just by acquisitions. (No surprise -- the study also found that companies that do well organically are in the best position to also grow by acquisition.) Overall, 31 institutions were ranked on various parameters, creating what the consulting firm calls its Organic Growth Index. You can read more about it here.

Make a second mistake and a customer is 35% more likely to leave.

The study found that one of the biggest indicators of whether a bank will keep and add customers is number of service errors. The study also found that big institutions are more likely than smaller ones to make mistakes with a customer -- despite the larger institutions' obvious advantages in infrastructure like call centers, ATM networks, and back office consolidations -- in other words, all the economies of scale typically cited as reasons banks should merge.

And their customers are not very forgiving either. The tipping point seems to be only a single mistake a year. Make a second mistake and a customer is 35% more likely to leave. Make it three, and the attrition rate doubles.

Clearly, big providers still have problems acting like small providers (when it counts) in retail banking. I would guess that this is also still a problem as well for a lot of other customer-facing services that are technology intensive.