How banks can get ahead of SMB attrition

The key is intelligent customer engagement to win the battle for primary ownership of the relationship.

Consumers and businesses are turning toward products and services outside their primary banking relationship at alarming rates. Some are leaving for good, which creates potentially devastating effects on banking growth and sustainability.

Rather than stand by and watch their relationships fizzle, banks must proactively reengage to maintain ownership of the all-important primary customer relationship.

A large part of the attrition problem lies in data and timing. Often, banks fail to spot and take action of potential customer churn before it’s too late – the final decision for exit has already been made and the client is heading out the door.

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What’s more, banks often underestimate the extent of the problem. They choose to track only total client departures because they are often the most visible sign of dissatisfaction. Where many banks come up short is tracking and managing the less obvious attrition – a silent attrition – that many bank executives fail to notice. It’s the decreasing of customer engagement and the slow decrease of account balances by legacy small business clients.

Because of blind spots in their approach, banks have missed out on what could have been a months-long period where all the signs of trouble were evident. During this time, the customer’s departure could have been avoided with meaningful outreach from a relationship manager.

A 2018 U.S retail banking satisfaction study by J.D. Power found that the 28% of retail banking customers that are considered “digital only” had the lowest customer satisfaction rating of all banking customers. Likewise, the company’s small business banking report found that just 37% of small business banking customers say their bank appreciates their business and only 32% say their bank understands their business.

Bankers that understand their customers’ businesses and provide tailored solutions often lead to long-lasting, primary bank relationships. Fintechs and forward-thinking financial institutions have already started to utilize their customer data and new intelligent technologies to drive personalized experiences that help them keep current SMB customers and attract new ones.

The solution to the attrition problem is in accessing the information that can help banking customers become successful in their finances. An agile relationship management platform, that is able to grow and change as the institution evolves will be critical in order to drive deeper insights and loyalty as the years progress.

Gaining activity-level information can identify the customers most at risk of leaving the institution. That information will help to maintain the stability of the customer base while improving overall engagement.

For example, if a newly opened account doesn’t receive additional funding shortly after initial account opening, it could signal a churn risk and a need for banker intervention. The same process goes for current customers – each customer has a normal activity threshold and when account activity dips below the norm, an insight should be surfaced to the relationship owner to spur re-engagement. The use of machine learning here to learn from previously lost customers presents an opportunity to optimize and retain even more customers in the future.

Having internal and external customer data in one place will ensure that every relationship manager has a complete set of information to be empowered to maintain and grow each relationship. Continuously providing indicators of churn risk, prioritizing the bankers’ most important tasks and activities, and simplifying lead and referral management across business lines will ultimately improve customer retention rates and facilitate collaboration.

There is so much choice in the market right now and the goal is to have small businesses choose your institution now and into the future. The right intelligent systems give relationship managers the tools to engage with customers to provide targeted client retention efforts that can stop the bleeding and boost revenue, but banks need to get smart about retention and become truly customer-centric in their philosophy.

By placing the customer at the center of every interaction, financial institutions can build long-term relationships with every customer, not just the ones they know best. Smart banks can do this – the key is intelligent customer engagement to win the battle for primary ownership of the customer relationship.

Learn how your financial institution can win relationship primacy by offering services to match SMBs’ newly upgraded digital capabilities in the BAI Executive Report, “Big stakes in small-business banking.”

Erik Nilsen is senior vice president for small business solutions at Bottomline.