The Wall Street Journal recently reported an increasing effort across banks to cut costs amidst declining loan volumes and the effect of Durbin and other regulations. This is of course a reasonable and necessary response to the challenging external environment. The challenge lies in understanding how deep to cut before the cost cutting does more long term harm than it’s worth.
It can only take one interaction with an overwhelmed teller or one call with a 15 minute hold to lose a customer’s support. Banks have the data and should be able to know in advance what will happen if they cut various customer facing functions, or even entire branches. If they look, what they should see is that the customer sensitivity to these pull backs vary greatly by channel, by customer type, and by geography, but these variations are also predictable. Bank should know where the low hanging fruit is and be to know in advance where and how deep they can cut with minimal negative customer response.