“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.