“What is your bank trying to sneak by you?” appeared in bold letters on my computer screen. The screen was then filled with the complex and confusing words we’ve all seen in small print documents communicating our banks’ fees and financial charge practices. I hate those documents, don’t you?
In one of the cleverest business model innovations of the year, GMAC Financial Services, a $180 billion global financial institution built initially upon the General Motors’ brand, has renamed its bank as Ally Bank and redefined its value promise. Like a river seeking lower ground, Ally Bank moved right into the heart of our frustrations and forced compromises with the banking industry, offering a solution that we’ve been waiting for – a bank that’s on our side.
Ally Bank’s value promise is relevant, compelling and differentiated: Bank with us and you’ll keep more of your money and, by the way, working with us will be effortless. This value promise is a terrific way for the company to break clear of the commoditization of banking services and a compelling growth strategy for GMAC.
I believe Ally Bank’s value promise because it’s backed (as all winning value promises are) by unique elements in Ally Bank’s offering:
- No monthly fees
- No minimum deposits
- No minimum balance
- High rates all the time, not just with promotions
- Compounded daily interest
- 24-hour customer service
- No penalty CD that lets you withdraw your money if you need to
- Explanations you can understand
- No sneaky disclaimers
In the event that this list is not proof enough for you, Ally Bank defines its mission not around what it does (banking) but on its core values. “We are a bank that values integrity as much as deposits. A bank that will always be open, accountable, and honest. Yes, honest. We won’t deal in half-truths, kindatruths, or truths only buried in fine print. That’s because we don’t have anything to hide. We’re always going to give it to you straight.”
Ally Bank’s cost structure as an on-line only bank enables it to deliver on its value promise while at the same time earn a profit. (Click here for more on the connection between value promise and profit.) Banks with brick and mortar retail branches have higher fixed costs. Demographic trends will be in Ally Bank’s favor, as younger generations are much more geared to managing life on-line.
To be fair, there are many community banks that are leaps and bounds above the competition. My bank, Johnson Bank, a member of the Johnson Family of companies that includes S.C. Johnson, comes to mind. It’s on its clients’ side. But Ally Bank claimed the value promise nationally with its full-page Wall Street Journal ad. Johnson Bank’s communications are far less direct.
The Law of Nemesis states that every good idea gets copied. What advantages can Ally Bank/GMAC build to make its value promise not just relevant and compelling, but expensive and time-consuming for current and future competitors to copy? What keeps your organization’s value promise from being copied?
NOTE: Today, GMAC is 51% owned by a consortium of investors led by Cerberus Capital Management, Citigroup, Inc., Japan’s Aozora Bank Ltd. and a subsidiary of The PNC Financial Services Group, Inc. (whose evolution began with Pittsburgh National). My hat is off to the three banks wise enough to see that a different business model will grab share their current business model cannot hold onto.
For insight on business model innovation, read my recently released book, Beyond Price.
Brad Shorr says
Kay, This case study is music to my ears. The banking industry has always struck me as one that is totally deaf when it comes to understanding the needs of its own customers. It’ll be interesting to see how successful they are. I hope you will keep us updated on Ally’s progress. Interesting side note – GM has such a bad rep these days, it overshadows some of the truly innovative things the firm has done and continues to do. A lot of folks may not realize that GM is quite active in social media, and their blog GM FastLane was one of the first of its kind and is exceedingly popular. I believe GM also pioneered ethanol engine technology is Brazil, where that fuel is widely used. GM has a great rep in Brazil and in Europe. What went wrong?
Fred H Schlegel says
I recently heard Adam Leviton (sp?) on Fresh Air talking about practices by banks and credit card companies which included terms and conditions that so muddied the water it was impossible to compare costs between products. He felt the ‘anti-consumer’ practices were so ingrained the only way to get good behavior would be to legislate the actual products that were sold (vs legislate against ‘abusive’ practices which just get worked around). it seems that what you describe here is a perfect way to position against that opinion of the industry. The costs associated with truly copying the idea might rest more with lost revenue that other banks are not willing to part with.