Article

What can FIs learn from gas stations?

If you remember the days of full-service fill-ups, you already have a clue.

May 22, 2014

by Terrina Rishel

CEO, ATM Authority

In 1974, my father was 26 years old and he worked at a gas station located in the center of our small town. I remember it had a garage on the side where they could change oil or make repairs, and there were three gas pumps in front.

When customers pulled up to the pump, a loud bell would ring and my dad would come running out. The gas station didn’t have a convenience store, just a dark office with steel desks, greasy yellow rotary phones and a cigarette machine.

When my father wasn’t dispatching the tow trucks or changing someone’s oil, he took great pride in offering the full service that came with buying gas. He would pop the hood and check all the fluids, then clean the windshield and make sure the tire pressure looked right. When the pump clicked off, he brought a clipboard out to the customer so they could write a check or sign for the fuel charge on their “house” account.

Our little town was growing; eventually new roads changed the flow of traffic and allowed people to reach the highway by different routes, bypassing the center of town. My father’s friend Johnny, who owned the gas station, had an opportunity to purchase land closer to the highway on ramps, but he didn’t. He felt his customers were loyal and would go out of their way to keep getting his great service.

In 1986, Mobile launched their new “pay-at-the-pump” strategy. They didn’t need to hire expensive labor to do all the things my dad could do. They didn’t need the expensive garage, oil changing pits, oil disposal equipment, large piece of land and the like.

By 1988, Johnny didn’t offer gas to the public anymore because he didn’t have the space for more gas pumps, had to charge more for gas because of his overhead, and didn’t have the convenient location that his competition did. He was able to keep his towing business, but his station essentially became a garage where he parked his tow trucks.

In 1994, 13 percent of convenience stores offered pay-at-the-pump technology; by 2002, 80 percent did; and virtually 100 percent do today. (Exceptions are Oregon and New Jersey which mandate full service by law.)

So, what four things can financial institutions learn from gas stations?

Change is coming faster today. Financial institutions that do not buy into the need to implement new strategies that reflect the rapid evolution of retail delivery will become obsolete. Many FIs have been using technology for several years now, and have benefitted from decreased labor and real estate costs. They are building smaller branches in targeted areas that provide 24-hour teller service without the operational costs of traditional tellers and large branches. New technologies such as video teller devices give these FI’s the ability to leverage their workforce and decrease the expense of an old-school branch without sacrificing service.
Consumers are loyal to experiences, not brands. Bleeding-edge FIs have been chipping away at their competitors’ market share by offering high levels of convenient service coupled with longer hours. We know from case studies that consumer adoption of new technology is much more rapid than in the past, because technology has become so pervasive in every aspects of our lives. Consumers from every demographic are different today; they know what they want, and they are not afraid to change providers in order to get it.
If you don’t offer what consumers want, your competitors will. FIs need to embrace strategies that make branches much more agile. Inefficiencies will prevent cost savings and ultimately limit product offerings. Today, consumers have the ability to compare loan and savings interest rates almost instantly with a search on their phones. Serious competitors will turn the benefits of branch efficiencies into revenue by engaging new consumers through a sales- and service-focused model.
A culture that embraces change is the best defense against becoming obsolete. I asked my dad, “If someone had told you in 1984 that within a decade Johnny would no longer be the gas business would you have believed them?” He answered in a flash, “No way!” The future of banking is already here with 24-hour teller service, more branch locations and consumer-centric, flexible offerings. FIs that do not invest in creating a culture that embraces change will fail.

In 1974, gas station owners never would have believed the success of companies such as Mobile, Big O Tires, Jiffy Lube, and car dealerships offering mechanic services. By offering more convenient locations, buying products with economies of scale, and staying open longer hours, these businesses have rendered the traditional full-service gas station model virtually extinct. In a competitive landscape, FIs that don’t accept the need to evolve sooner rather than later will go the same way.

photo: kool cats photography