What banks can learn from airlines

What banks can learn from airlines
Celent thinks that banks can learn a lot from other industries.  Since I spend a lot of time on planes, I’ve gotten to thinking about the similarities between banks and airlines.  They have a lot in common when we think about the way that they interact with their customers.  They are both: 1. A means to an end. Just as no one says, “Let’s go to the bank for fun today,” no one says “let’s pack ourselves onto a metal tube with a bunch of strangers for several hours” (frequent flyers making year-end mileage runs notwithstanding). People bank so that they can have a safe place to store their money, pay for things, and borrow. Similarly, people subject themselves to flying in order to get somewhere a lot more fun than the airport. 2. Typically not held in high esteem by their customers. While this is certainly strongly related to the point above, it’s also the case that even when banks and airlines perform perfectly, customers aren’t excited.  “How was your trip?” “Oh, fine” meaning that the airline did what it committed to do.  Rarely does someone who hasn’t been bumped up unexpectedly say, “That was a fantastic flying experience.” Rather, it’s a case of, “That was uneventful,” or “that was as good as can be expected.” Banks, too, suffer from the curse of being unappreciated (as do, for that matter, utilities).  Only when something goes wrong do people pay attention. 3. Involved with their customers in a very intimate way. Banks know many details of their customers’ personal finances. Airlines put travelers in very close proximity to perfect strangers for hours at a time. This intimacy engenders strong feelings in customers and lays the groundwork for strong feelings to flow. Despite how much worse the US airline experience has gotten for most customers, airlines are nevertheless returning to profitability. Bankers may want to mull some of the tactics that airlines have used, if not for outright emulation, than at least for lessons that they might provide in a banking context. Five key areas come to mind: 1. Pricing fairly 2. Being human 3. Setting expectations and being transparent 4. Recognizing valuable customers 5. Providing value-added services 1. Pricing fairly Unbundling products and services is one element of pricing fairly. Charging fees for baggage is the most prominent example of unbundling a service that used to be included in the price of a ticket. Customers squawked, and behavior changed in ways anticipated and not (have you ever squabbled about overhead bin space?), but they adapted and paid up, opening up an annual revenue stream counted in the billions of dollars. Even as the typical airline seat shrinks, airlines have added rows of more comfortable seats that they either give to their frequent fliers or sell on a variable-priced basis. Airlines are segmenting their frequent fliers and letting other customers self-select with respect to what they’re willing to pay for extra comfort. The lesson: demonstrate the value in the services that you provide, then charge customer segments appropriately. 2. Being human Because of the intimacy I mentioned above, it’s critical that firms let their employees act as people rather than automatons or faceless bureaucrats. Three key areas help ease the pain of a long flight or a mistake on an account. Foster personalities and connections: Having a person-to-person conversation, rather than focusing only on the business at hand, can drastically change the tone of an interaction. A simple “are you heading to or from home?” from a flight attendant makes me feel better about the flight, and the feeling is a critical part of the customer experience. Thank people for their loyalty: When an airline actually thanks me, it again helps with the good feelings. Similarly, the airlines send me coupons that I can give to staff who’ve performed exceptionally – the corporation has given me the opportunity to be human, too. Develop a brand personality: Airlines are required to give a safety briefing at the beginning of the flight. Some personnel simply read their manual in an incredibly bored (and boring) tone; others personalize it and manage to make it sound interesting. Some, like Delta, even have genuinely funny video briefings (see a YouTube version here: http://youtu.be/eduNjwNvcH4). 3. Setting expectations and being transparent It really helps to makes rules and expectations (in both directions) clear and easy to understand.  Once those mutual obligations are set, then the firm has to stick to them – think about boarding by rows. When someone in group 4 tries to board with group 2, gate attendants who politely ask them to wait are reinforcing the mutual obligations that everyone on the flight has assumed. And you’ve got to be transparent about what’s going on; airlines still have some ways to go, but they’re making some progress in explaining why, for example, a flight is delayed. 4. Recognizing valuable customers Banks have recently begun doing a better job of segmenting their customers, but they can still learn a lot from the ongoing refinements that airlines continue to make. Airlines give passengers goals (elite status levels), keep them apprised of their progress, and have devised ways to monetize the desire to achieve those goals.  “Mileage runs” are a topic of discussion on frequent flier community sites, and some airlines have dispensed with that and will simply sell miles at the end of the year to allow people to achieve their desired status. Providing differentiated service to valued customers is very basic, but airlines do it transparently and consistently while laying out the benefits different elite segments stand to reap. Incidentally, this isn’t to say that banks aren’t doing some of these things now, but if and when they are, it’s not necessarily widespread. 5. Providing Value-Added Services The basic function of an airline – getting a passenger from one airport to another – is pretty commoditized. Airlines try to differentiate on all the elements that we’ve just discussed, but they also try to make themselves stand out by offering a variety of value-added services.  These are often driven by a web of partnerships that the airline has developed. Some of the most basic include:
  • Building a network of partners (e.g., Delta and Starwood) whose members enjoy reciprocal benefits
  • Booking hotels or renting cars through the airline site
  • Redeeming miles for a variety of goods or services offered through the airlines network of partners
  • Describing the weather at the destination (easy to do, not necessarily a huge value, but a nice touch)
There are a host of other value-added services that airlines offer. Rather than going into an exhaustive list, I’d simply point out that banks should examine what kind of additional value they can offer to their customers on top of the increasingly commoditized product suite on offer today. There are undoubtedly other salient comparisons that I’ve missed – please comment on what other areas airlines (or other industries) can provide lessons for banks.  
Dan Latimore About Dan Latimore

Daniel W. Latimore, CFA, is the Senior Vice President of Celent’s Banking practice and is based in the firm’s Boston office. With a wide range of experience in industry and as a consultant, he brings examples from outside financial services to help banks improve their customer relationships, with a particular emphasis on the importance of technology and culture.

Dan's coverage areas include the banking ecosystem, digital and omnichannel banking, and innovation. He has a passionate interest in behavioral economics and exploring why consumers and humans make the decisions they make, and what the implications are for banks.

Dan has been widely quoted in the press, including the Wall Street Journal, American Banker, Boston Globe, CNBC, and CNBC Europe. He is also a frequent speaker at industry conferences and client gatherings, having addressed audiences ranging from intimate meetings with CEOs and central banks to keynote conference speeches in more than a dozen countries.

Prior to Celent, Dan led research groups at Deloitte and IBM, worked in industry at Merrill Lynch (where he lived in New York, Tokyo and London) and Liberty Mutual, and was a consultant at McKinsey & Co.

Dan received a Masters in Public Administration from the John F. Kennedy School of Government at Harvard, and an undergraduate degree from Dartmouth College. He holds the Chartered Financial Analyst designation from the CFA institute.


  1. Great points, these are very valid current topics. Being human is one that I think is forgotten often.

    Thanks for sharing.

  2. I was stuck at the Dallas airport last week (storms). So here are the capacity and performance calculations I ran while waiting in a huge line to check my baggage (freezing rain so no outside check in).
    Time wasted using utilization law:
    I was wondering how much accumulated time my fellow travelers wasted standing in line W=X*S (or also known as U=X*R)
    X= counted 60 people in line
    S= length of time I waited 30 minutes.
    W=time of all requests.
    For these 60 people the airline wasted 1800 minute of total customer time. If you look at the arrival rate for the whole day this would be an even bigger number for the daily waste. Okay more calculations…

    Little’s Law:
    I next wondered how fast people were entering my line every minute with all the flights and flight cancellations. I got a surprise for an answer:

    L = A*W or A=LW (L number of customers in the system, W average time in the system & A is what I want to know)

    We had only 2 check in clerks (the airlines were not prepared for storms)
    I observed (will post my iphone video so you can see the line):
    50% of travelers check in bags taking 4 minutes each (BF 1)
    50% of travels arrange a new flight (east coast was shut down) 8 minutes each (BF 2)

    So with 2 check in clerks the average person was 6 minutes at the counter. (B1+B2)2. The business
    functions had about the same amount of people requesting them. Many people had weather related flight cancellations, I knew from the loud complaining there were a lot and that they came about the same rate as baggage check in’s. So with 60 customers in line, the total work processing time was 60*6=360 this meant it would take 6 hours to service the entire line…HOWEVER for the half hour I was there the line stayed constant at about 60 people. So
    W=6 minute service time
    A new customer entered the line almost every 10 minutes…surprise you guessed it they could never empty the queue and more people could potentially miss flights due to the line.

    In sum, limited resources = big queues!! Many airlines can learn from banks, I have never waited a half hour for a teller. Better to take just a carry on and forget the baggage fee. I apply these formulas to banking website applications so we are never like the airline I just used, but they work anywhere so have fun.

    Best Regards,

    Daniel Sidman

  3. Financial Institutions (FIs) need to provide more value-added services, just as airlines do, and I think they are going in the right direction with prequalification. Prequalification is a way for FIs to allow consumers to choose from personalized credit products in real-time. In the privacy of their homes, consumers are presented with credit products they qualify for, the many features that come with each, and a quick online form to apply—similar to searching for flights online, comparing fares, choosing the seat you want, and booking and receiving your boarding pass online.

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