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David Sosna Jan 11, 2017

Cross-selling in the crosshairs of regulators and consumers

Cross-selling is in the crosshairs of anyone who has anything to say about financial services these days—from Congress, to the media, to consumer protection groups. But at the BAI Beacon conference in October, cross-selling was a hot topic. So is cross-selling doomed or is it here to stay?

This conflict epitomizes the two planets banks straddle these days. While banks talk the talk about customer-centricity, most of them have a hard time walking the walk. Banks are organizationally structured around products, and bankers’ incentives focus on getting customers to sign up for more products. With cross-selling deeply engrained in banking, it should come as no surprise that some may try to push the envelope at times, forcing the bank as well as regulators to restate the boundaries.   

This is not the only “split personality” challenge for banks. While trying to keep up with the demand for real-time digital and mobile services, most banks struggle with legacy systems built for a different era. Speaking at a BAI Beacon panel, Zions Bancorporation’s chief information and operations officer Joe Reilly referred to it as a “two-speed world” – moving forward quickly on the digital front while slowly transitioning the enterprise infrastructure towards a more modern architecture: a process that can take over a decade.

Can banks follow a path forward to reconcile the organizational and technological forces that pull them in different directions? To navigate these new territories, banks must take a close look at their cross-selling practices.

From branch-based to digitally-driven cross-selling

Banks have always viewed the branch as the ideal setting for selling products and services to customers. For that reason, even as digital channels have become more prominent, banks continue to make an effort to drive customers from these channels to the branch, with tools such as online appointment scheduling accessible through web and mobile applications.   

But as branch traffic continues to decline, banks must also improve their ability to cross-sell directly through the digital channel —something they’ve not been very successful at so far. The good news is that digital channels generate troves of new data that allow the bank to better understand customer behavior and preferences. Banks can now use the data they have about their customers to improve their sales conversion rates with more intelligent and personalized offers.

And there is a side benefit from a compliance perspective. Digitally-driven cross-selling can help banks stay within regulatory and compliance boundaries, as digital interactions are much easier to control and monitor than in-person conversations.

From cold-selling to relationship-building

There is strong evidence to suggest that when banks keep their customers highly engaged, they also increase their share of the customer’s business. 

Engagement Drives Product Consideration (Gallup)

With that in mind, banks would be better off considering cross-selling as part of an ongoing engagement strategy rather than a standalone effort. The 4-1-1 rule has become a common cross-industry framework for marketers looking to keep a healthy balance in customer communication. The formula calls for four educational, “no-sales” messages followed by one “soft” offer (e.g., “learn more about our financial advisory”) and one explicit sales offer (“get our new rewards credit card”). This combination delivers a measured dose of promotional messages mixed in with non-promotional content.

Whether banks follow the 4-1-1 rule or use some other method, less is more when it comes to cross-selling. The days of flooding customers with endless promotional offers with near-zero acceptance rate are probably over. Instead, smart banks opt for more targeted cross-sell offers that not only generate much higher response rates, but also contribute to strengthening long-term customer relationships and loyalty.

Cross-selling is here to stay, but customers will demand change

It’s probably safe to say that cross-selling will remain an important part of every bank’s customer-facing strategy. Even if regulatory oversight is expected to diminish with the incoming administration, the shift in customer expectations and behavior will continue to push financial institutions to reevaluate today’s cross-selling methods—and come up with new and better practices. That way, cross-selling can move beyond the crosshairs and past its current, critical crossroad.  

David Sosna, the founder of Personetics, is a FinTech pioneer and leading authority on the use of AI and predictive analytics to redefine and personalize the financial customer experience.

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