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KeyBank sees conversion as overall success

It was a rough ride for some of the 1 million First Niagara Bank customers whose accounts were switched to KeyBank just over a week ago.

The Key executive who oversaw the two banks' integration, Christopher Gorman, said he felt the conversion as a whole went well, but acknowledged things should have gone better with customers' access to online accounts.

"We're pleased with the way things are going in totality, said Gorman, Cleveland-based Key's merger integration executive. "We've always said we're going to judge this by the way our customers view it. Certainly weren't proud of the fact that some number over 10,000 [customers] were adversely affected.

"But what we are proud of with respect to them, and specifically getting on to online banking, is how the Key team reacted, how we worked quickly and were able to pull together and improve the client experience for that universe of people," Gorman said.

Key converted First Niagara customers' accounts to its own systems over Columbus Day weekend. Thousands of customers were locked out of their online accounts when they couldn't get through the security questions. Then many complained about waiting a long time, sometimes for hours, to get help from Key's customer contact center.

It wasn't a good first impression for those customers, some of whom vented on social media, threatening to take their accounts elsewhere. Key scrambled to make amends, emailing apologies to customers who were locked out and depositing $100 in their accounts. Key hasn't said exactly how many customers received the $100 credits, only that it was more than 10,000  -- meaning Key spent at least $1 million on the goodwill gesture.

The bank has since made the security questions easier for first-time customers to answer, and cross-trained more contact center workers to handle problems with online banking.

While some customers on Tuesday were still complaining about long waits for help from the customer contact center, Gorman said average wait times continue to drop.

"We like the trajectory that we are on and in total we feel good about things," he said. "But we didn't like the fact there were some people adversely impacted."

Chris Gorman of KeyCorp for Prospectus.

Chris Gorman of KeyCorp for Prospectus.

Other elements of the First Niagara conversion went very smoothly, including direct deposit, online bill pay and debit and credit cards, and branches, Gorman said. A critical test was last Friday, the first big payday after the accounts were converted.

"We had to make sure everything went smoothly so our business customers were properly funded, and there were absolutely no issues there," Gorman said.

Online account problems were understandably of high importance to First Niagara customers, as was the case with some First Niagara customers who had trouble switching their accounts from First Niagara to Northwest Bank in early September.

Terry McEvoy, a bank equity analyst with Stephens Inc., expects analysts will ask Key executives some questions about conversion issues when Key releases its quarterly earnings next week. But he said investors are more focused on whether Key can achieve the cost savings the bank has projected from the First Niagara acquisition.

The problems Key encountered spoke to the scale of the integration, McEvoy said.

"This is a large transaction for KeyCorp in terms of the sheer size," he said. "Obviously all their eyes and energy and management's time was extremely focused on making the integration smooth, and these things happen."

McEvoy didn't expect to see an exodus of customers from Key over the online account issues, partly because of the work involved in switching banks.

"You will see a loss of customers in any acquisition who decide to go elsewhere," he said. "But I don't think it's always a function of just something going wrong with the integration."





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