Bank M&A Lessons from Obamacare Website Disaster

People dislike change and they dislike broken websites. Combine those two and you have a recipe for some very unhappy customers, whether the product is health insurance or banking.

The disastrous launch of HealthCare.gov, the online health care marketplace for the Affordable Care Act, makes that clear. Though the ultimate legacy of Obamacare is to be determined, today its image is that of a broken website.

Yes, bankers tend to be a conservative bunch or at least have a complex relationship with the government. In that regard the failures of Obamacare might be welcome in some of their eyes.

Yet bankers, particularly those in M&A mode, should take stock of the business lesson of the ordeal: don't let an online breakdown be the thing that your new customers remember about your acquisition.

"As the saying goes, you only have one chance to make a first impression," says Chris Duval, the president of McCabe, Duval + Associates, an advertising firm that specializes in M&A work. "Chances are the customers are not happy about the bank being sold, so you want to act carefully. … With bank mergers, you don't want to inconvenience your new customers."

An inconvenienced customer might not be a customer for very long.

While many citizens swear they are moving out of the country following the election of certain leaders or the implementation of controversial laws, they rarely follow through. But switching banks is an easier threat to carry out.  

The so-called stickiness of online banking has helped banks retain customers after an acquisition. And the best acquirers go out of their way to make sure their new customers find the transition seamless -- or at least relatively painless. Duval says his one of his favorite examples of an integration that went right involved a bank that mailed customers a printout of the names, addresses and account numbers for all their electronic-bill-pay payees.

"Customers now had a written record of what they had before," Duval says. "It was a nice way to go above and beyond. It cost the bank a lot of money to do it, but it helped alleviate the stress."

Acquisitions unavoidably cause some disruptions. It's why banks often benefit from mergers between their rivals – it is a perfect opportunity to pick up good lenders and customers who want to move on.

News of acquisition-related problems spreads faster today. Twitter, Facebook, Yelp and other social media are just a click away.

BMO Harris got a taste of the backlash last year when customers it picked up in the Marshall & Ilsley acquisition were denied access to their online accounts for longer than expected.

It is unclear how many customers left, but the company's ranking in J.D. Power and Associates' 2013 U.S. Retail Banking Satisfaction Study took a big hit. It fell from a score of 771 in 2012, or 18 points better than the  U.S. average, to 716 this year, which was 47 points worse than the latest national average. In May BMO Harris said it was mending the relationships and was encouraged by its progress.

The old business wisdom is that it takes 13 good interactions to make up for a bad one, says Mike Boyle,‎ the chief executive at Perseus Technical Strategies.

"In today's digital world, you don't get 13 tries," says Boyle, a former chief information officer of the insurers Aflac and Allstate and a regular contributor to Insurance Networking News, a sister publication of American Banker. 

Further, banks need to be aware that their customers seek an online experience that stacks up with the other websites they use, he says.

"They are judging your services compared to Zappos, Amazon and Google," Boyle says. "They are not just comparing Harris Bank to Chase."

The stakes are high when it comes to online interactions with customers. Just ask President Obama and the operators of HealthCare.org.

Robert Barba is American Banker's deputy editor for mergers and acquisitions coverage. The views expressed are his own. Follow him on Twitter @Barba_AB