Lloyds Banking Group: We can be one of the best for service

It three major brands, Lloyds TSB, Halifax and Bank of Scotland regularly score average-to-poorly in our current account customer service polls, though the group says it can eventually be among the best.

In our most recent customer service survey in August, Lloyds TSB came second-bottom, while the combined Halifax/Bank of Scotland (Hbos) group was joint third bottom in a pack that also included Barclays, HSBC and Natwest/RBS.

However, the picture is improving. The number of people in our latest survey who rate Hbos's service as poor dropped from 20% to 18% since our last poll in February, while its 'great' rating is up from 34% to 40%.

In a candid interview (below) with Lloyds director of customer service Martin Dodd, he promises change, including extended branch opening hours.

He also acknowledges the huge mistakes the bank made for its role in the mis-selling of payment protection insurance (PPI), which it has already apologised for.

Below, Dodd explains what steps the giant is taking to rectify its problems, while also commenting on wider industry issues around service (our questions in bold).

MSE: There has been a marked improvement from Hbos but we know all is not great. What message do you have for customers?

Dodd: We've got better at fixing things. With Halifax, the percentage of customers rating us as good has risen, which is about Halifax going back to what they're good at which is being a challenger to the main high street banks.

Now, let's be candid: the results aren't fantastic, we're not head and shoulders above the competition.

It's good that Halifax has improved but I'd like to see a place where you had Lloyds, Halifax, Bank of Scotland at 1, 2 and 3 at some point in the future after the likes of First Direct which are built around service.

We are constantly trying to improve and do better but from time to time we make mistakes.

Has there been an active drive in the last few months to improve service?

Yes. We've also looked at when a customer comes to complain, how do we deal with it. There are a multitude of things we're doing right across the organisation to first of all reduce the number of complaints that come in. Secondly, when they do come in, to make the experience much better for our customers, and thirdly, we've got to try to make it easier for customers to bank with us.

For example, we've trained all 40,000 front-line colleagues across all the brands to take ownership of a complaint to look to resolve it there and then.

Dodd: Results aren't fantastic

What's planned to improve matters?

We're actually going to have qualified complaints handlers. One of the things I've been looking at when somebody complains is the interaction they have with our staff.

We said we would reduce our FSA reportable complaints by 20% year-on-year – we reduced them by 24%. The other commitment we said we'd do is in terms of the change rate [the proportion of claims the Ombudsman upholds in the consumer's favour].

Across the group, we were at 45% which is too high. We've reduced that to below 40% in the six months just gone and we've set ourselves a target of being at 20% or below for the second half of the year.

The next change is the hours we operate. You look at consumer demands, how customers operate now – we're no longer a nine-to-five business, Monday to Friday. So later this year, on the Lloyds TSB side, we're looking at our opening hours.

It could be in places like major shopping centres we have full coverage on a Saturday and Sunday. We've gone through quite a bit of work identifying at individual branch level so we've got quite a rapid expansion throughout the end of this year.

Are there any particular product areas that you're more happy with, or less happy with?

With Lloyds TSB, we made quite a few changes to our overdraft charging structure (see details in the Lloyds bank charges MSE News). When we did the analysis of why people were complaining, we looked at one of our biggest drivers, which were bank charges. We completely changed our charging structure, made it much more transparent. We're currently running at a 35% reduction in complaints.

The second one would be Isas. We've had a phenomenal Isa campaign with Halifax earlier this year. The danger with that is when you attract big volumes, you get some operational issues.

We have been working relentlessly to make sure the service backs it up. The challenge you have is you are reliant on whoever is transferring that Isa in to you and some of our peers are very good, some of our peers have more challenges.

Moving onto Halifax overdraft charges. A lot of people complain to us because they're high (£1 a day if within your limit, £5 a day if you breach it). They're clear, but they're high. What's your take on that?

Complaints about Halifax bank charges are much lower than they were before. I think the main reason is it's completely transparent. However, I accept there are certain customers who will complain that charges are too high.

Our readers tell us the change negatively affected people who are within their limit more than people who go above their limit.

We could go into a debate about what you do with bank charges going forward because obviously the UK is very different to everywhere else in the world.

We get into this fine line of whether we want bank accounts that everybody pays for. Or do we continue our current system [where many have free accounts but those overdrawn pay high fees]? And that will be a debate that will carry on for some time.

What's your view on that debate?

My view is at the moment we're in about the right space. It's a big step where we go to charging everybody. That would be the end of free banking.

Hbos appears to have many bonuses to encourage customers to join, such as a £5 monthly payment to Reward account customers. Is that likely to be the way forward?

At its most simplistic level, Lloyds TSB and Bank of Scotland are relationship banks. Halifax is much more a challenger to the traditional high street banks and alongside that it will always come up with propositions that are different to the norm.

So based on current interest rates, as a simplistic example, are you saying Lloyds is more likely to be the bank that will have a 1.5% flat savings rate, while Halifax is more likely to start at 3% which then drops down to 1%?

Around products, I wouldn't disagree that Halifax would be the one that had the headline rate.

On a more general level, where does service fit with product design when it comes to attracting customers? Where do banks put more of their resources? Where do you feel they should be putting the resources?

I think the industry puts its resources around service. If you look at branches, call centres etc, they're all geared up around service. I would say we haven't got it right as an industry.

You look at the number of complaints we get, the service offering – we need to do more as an industry. However, we've reached a bit of a tipping point, the days of increasing complaints, worsening service levels in banking.

I'm not saying they're gone, but if you sit back and look at the complaint results at the half year, you'll see a definite trend where complaints are decreasing, service is improving.

So is banking getting better?

I personally think banking is getting better. It won't be an overnight thing, it will be constantly doing lots of little things better for customers.

How do scandals like PPI mis-selling help you focus because that's really bringing home that some bad things happened, and Lloyds has said itself it's sorry.

PPI is not great. Full stop. We got to a stage, we've come out, we've made our commitment and we're now dealing with the complaints.

What you've got to do is learn from anything like that. You've got to be constantly looking at how we are working with our customers, how we are serving our customers, how we are designing products so as an industry we never end up in the situation that we're in today with PPI.

With Isa transfers you said things have got to get better on an industry level. Can we get to a stage where Isas are transferred electronically like with a standard savings account?

We'd all like to get to a stage where the transfer for customers is as immediate as it possibly could be. Whether it will ever be as quick as transferring money from one account to another I'm not sure, but we can definitely look at how we work with the other banks.

On the same vein, we're doing exactly the same thing with current accounts because the transfer between current accounts has improved. Is it good enough? Not yet. So again, the whole industry is working together.

Is it possible to sustain a bank on poor service. Some banks have fantastic products but service is terrible. Is that a sustainable model?

My personal opinion: I don't think it is. You might get attracted by a headline rate but if you experience poor service, I'm not sure you'd be attracted to it second time around.