Order in the courtship: How banks can become number one with fickle customers
The competition for market share in the banking industry is fierce. As a result, the typical customer gets inundated with an array of offers from a variety of financial institutions—from the traditional retail bank to online lenders, payment providers and mobile-only banks. So it’s no wonder more consumers have grown comfortable having relationships with several banks.
Just look at the statistics: More than one-quarter of customers have accounts with more than one bank, while one-third have purchased a financial product from a provider that was not their primary bank in the past year.
GOBankingRates call this “Americans cheating on their banks,” and the financial promiscuity is not abating. In fact, it promises potentially catastrophic financial ramifications for banks that can’t adapt. Blame it on the global financial crisis, new technology and the staggering number of customers who view a bank as a place to hold their money and process automated bill payments, rather than a trusted financial advisor. Regardless, by 2020 roughly one-third of the retail banking industry’s market share could be up for grabs, according to data from Accenture.
The trend hardly sits well with traditional retail bankers who labor to woo new customers, maintain their existing ones and forge the powerful bonds that have consumers eagerly try new products and services.
But this is the new reality: Financial monogamy is as obsolete as a rotary phone.
Just remember the first rule: To become a customer’s primary financial institution you don’t need to be the only one, just the favorite one. Yet even that equals no small challenge. Banks need to offer the right products and services and have employees on hand—at bank branches or online—trained to recognize these opportunities and coached to make the appropriate recommendation.
But nifty products alone are not enough to win the necessary level of consumer affection. You need patience. Earning the de facto designation as a customer’s go-to bank offers rich rewards but can also turn into a long process. Though it’s tempting to bank on your long-standing customers, don’t. Data collected from Informa Research Services SEA Score, which measures member and customer engagement, shows almost no correlation between a customer’s intention to stay with their current financial institution and whether they’d use that same bank’s other financial products and services.
Such a mindset means bank executives must better understand their customers’ wants, needs and the size of their wallet, which can vary depending on wealth and age. While baby boomers have earned piles of money, the banking industry’s future growth relies on the millennial generation. Millennials are the ones who will buy new homes, save for their children’s college educations, borrow to start new businesses, and open retirement accounts. (They also stand to inherit record amounts of wealth from their boomer parents.)
Unfortunately, the tools banks have most often used to gauge customer satisfaction and loyalty now offer little real insight into why customers stay with (or leave) a bank and how deep their loyalty goes. And more than eight out of every 10 customers regard their relationship with their bank as transactional. That creates a huge hurdle towards developing those deeper customer relationships. In short, traditional measurement tools miss the true relationship opportunities to make customers think differently about how they interact with their banks.
It’s harder to make customers engage with you exclusively if you’re not willing to put in the work. But it’s what we must do. After all, no one ever said courtship was easy.
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Sue Hines is head of customer engagement at Informa Research Services. Sue has more than 30 years’ experience in consulting and brand measurement. She brings deep understanding of consumer mindset and the ties that bind people to what they buy and the organizations with whom they do business.