Legislative and regulatory changes have reduced and are threatening to reduce further a substantial portion of fee income from retail banking activities, affecting what drives the profitability of a consumer checking relationship. In response, many large banks have eliminated rewards programs, instituted new balance or other requirements for customers to avoid monthly maintenance fees on core checking accounts and increased fees for non-customer use of proprietary ATMs.
A more positive approach to offsetting fee income can be achieved through better onboarding of new customers. Specifically, effective onboarding programs help to cultivate primary banking relationships and stable, low-cost core deposits by aiding and encouraging new customers to adopt services, such as direct deposit and online bill payment, that ensure checking accounts are regularly funded, actively transacting and thus maintaining higher average balances. These services also help to make relationships stickier, which in turn means fewer accounts attrite and reduces pressure on account acquisition to replace customer and balance churn. This is an important benefit considering that the cost of acquiring a new checking account is typically pegged at between $150 and $300.
To improve onboarding performance, retail bankers should start by examining the five key components of a successful new customer onboarding program: program objectives; process design; communications content; execution; and program management.
Importance of Debit Cards
Fundamentally, banks should focus on services that drive profitability in this new era of retail banking. For most banks, these services include direct deposit, online banking and online bill payment. With lower debit transaction fees looming, many banks have cooled on incenting debit card use. However, active debit card users require regular funding. Thus, debit cards remain an attractive vehicle for creating active checking accounts and primary relationships, as shown by Rudiger Merz, marketing director at Las Vegas-based Nevada State Bank.
Over the last two years, Merz refined his bank’s onboarding program to drive higher levels of cross-sales. Merz and his team determined that active checking customers make for better consumer loan and credit card prospects. Consequently, Nevada State Bank uses the first thirty days of a new client relationship to focus on getting checking customers to adopt electronic banking services, set up account alerts and use their debit card. In making debit card activation the number one goal of the onboarding program, Nevada State Bank improved penetration to the point where today four out of every five customers that open a new checking account activate their debit card.
Nevada State Bank’s new account opening and onboarding processes also emphasize capturing and confirming the email addresses of new customers, which makes it easier to enroll customers in online banking and establish online alerts. In addition, the email addresses help to reduce the cost and increase the effectiveness of cross-sell offers that the bank extends beginning 60 days after the account has been opened. Mobile phone numbers have become increasingly important for communicating fraud alerts. Banks should be sure that new account forms and onboarding conversations facilitate the collection of mobile numbers in addition to email addresses.
Success is also contingent upon when and how banks onboard new customers. Traditional 2x2x2 programs in which the account opening representative thanks the customer after day two, calls the customer after week two, and attempts to cross-sell the customer after month two, can be improved. Banks should look to make more contact between day 14 and day 60. Considering that most banks will place a 10 day hold on an initial check deposit, most new customers will not have the ability, need, or desire to spend or manage their account online until the end of the second week.
For banks operating 2x2x2 programs, the day 14 call becomes the only chance the representative has after account opening to re-promote online services, assist with direct deposit, etc. For many new customers, additional communications could significantly improve the likelihood of service activation. One bank we know recently introduced a new onboarding program that touches new customers every 15 days for the first 120 days.
This same institution also enhanced their program by tightening onboarding procedures to help ensure customers receive all targeted communications. New standard policies include outbound thank-you and status calls. After three unsuccessful calling attempts, representatives are required to leave a voice mail directing the customer to a new account landing page and provide the phone number of a dedicated in-bound call center unit.
The bank is currently evaluating other details to determine what might improve further onboarding program effectiveness. For example, since most customers today have caller ID, the bank is testing to determine whether customers answer calls from a local area code more frequently than from an 800 number. The bank is also charting call attempts and results by time of day. Ultimately, they envision capturing customer communication preferences at account opening and tailoring the onboarding contact schedule accordingly. The bank does not ask for these communication preferences, today, however, for fear of being unable to honor all customer requests and negatively impacting the new customer experience.
Communication content represents another way banks can customize and enhance onboarding programs. Banks are wise to have account opening representatives ask customers that do not immediately enroll in key services to provide an explanation. This understanding can help banks respond more appropriately to key concerns during subsequent calls. More importantly, these initial questions would enable banks to identify the new checking customers who are predisposed to maintain their primary relationship at another institution. Such information would help the onboarding bank reduce acquisition costs by distinguishing between customers who may require a cash incentive to enroll in alerts, e-statements, and online bill pay and those who would not be motivated by such an offer.
Dedham Institution for Savings in Massachusetts customizes the new customer experience through a partnership with Truebridge, Inc., a financial marketing firm. Jerry Lavoie, executive vice president and chief operating officer of Dedham Savings, uses TrueBridge’s Educate First platform to profile new customers at account opening and structure a new customer experience that reflects the customer’s specific interests. Within the platform, sales representatives create and print educational brochures that soft-sell bank products and services requested by customers and schedule appointments with product specialists, thereby enabling customers to dictate the series of next interactions with the bank.
Importantly, onboarding communications should reflect each customer’s status. For example, Nevada State Bank designs messages based upon whether each customer is enrolled in a targeted service and if he/she has used the service within the last 30 days.
Onboarding program execution is perhaps the greatest challenge for most banks, including those with well-timed processes and well-designed communications. A number of banks are focusing time and energy to improve execution effectiveness, some by centralizing onboarding activities to ensure more consistent execution. The case for centralization makes increasing sense. As online account opening becomes more and more prevalent, the percentage of customers that form a “relationship” with a branch or phone sales representative is declining.
Additionally, behaviors are easier to monitor and standardize within a centralized, dedicated onboarding team than across a decentralized branch environment. Centralization, however, can create angst within the retail bank, particularly for frontline sales representatives whose compensation plans measure new account cross-sales. One bank that recently created a centralized onboarding team mitigated branch representative concerns by staffing the centralized unit with field staff, conducting an extensive “road show” to introduce the field to the new unit, and tweaking compensation plan formulas and objectives.
Banks that persist with a decentralized model must take actions to ensure field representatives are effective advocates of the services targeted during onboarding. One super-regional bank is investing resources in multiple areas to accomplish this. First, they have re-educated their frontline staff and conducted extensive training to ensure representatives fully endorse the bank’s value proposition as part of a long-term strategy to build a distinguishable sales and service culture. Each representative is expected to know what the bank stands for, adapt the bank’s positioning in his or her own words, and make his or her own “value promise” to the customers they serve.
Secondly, the bank has put a full court press on employee banking, recognizing that representatives cannot advocate services that they do not use themselves. The institution has stopped short of mandates and penalties, but senior management communications have made clear what is expected, and employee adoption has increased dramatically.
United Community Banks of Blairsville, Ga., has driven high internal penetration of e-statements, mobile banking, and other electronic services through promotions that include games, contests, and bankwide publication of branch and individual staff adoption rates. While the company has worked hard to create a culture that fosters new relationships, United Community has also adopted a hybrid approach that uses technology and customer feedback to ensure consistent onboarding execution.
According to Tricia Stoeckig, vice president of direct marketing and database management, branch representatives send personal thank yous to new customers while Stoeckig’s central unit mails letters to new customers under the name of the local affiliate CEO or branch manager, reiterating the bank’s service commitment and asking for customer feedback. The bank’s CRM platform also creates an auto-reminder on the frontline representative’s calendar to assess new customer activity after two weeks and call the customer. Stoeckig and her team are currently looking at improving the information they collect from new customers and introducing customer-specific product offers based upon additional analytics.
Working with Customer Service Profiles, LLC (CSP), which specializes in customer satisfaction analytics, United Community has also invested time to improve measurement of onboarding and new customer cross-sell efforts. The bank closely monitors cross-sell ratios while CSP helps United Community to assess how well representatives assess customer needs and provide service through a customer satisfaction survey program that collects over 5,000 customer responses per year. United Community uses the results of these surveys to identify and address both individual and systematic execution issues. Importantly, banks adopting such surveys must be careful to integrate survey execution into the onboarding program and timeline. They should also recognize that most customers will only devote a limited amount of time and attention to bank communications.
Banks should also adopt a customer-centric perspective in monitoring onboarding performance. Tracking execution, such as outbound calls made, email bounces, etc., is important. So is knowing how many onboarding touches each customer actually received. Banks should develop an onboarding scorecard that looks at both micro (bank activities, customer touches) and macro (cross-sell penetration, service activation, average balances) performance to evaluate program implementation and provide continuous improvement of the onboarding program.
Finally, onboarding programs must be “owned.” Because onboarding activities typically touch multiple channels and involve many functional areas, most banks need to designate someone outside of the branch system or call center with responsibility for the overall onboarding program. Doing so ensures that at least one person at the bank is in a position to assess the end-to-end process and evaluate each of the onboarding program components. This person must have the cooperation of all key units; together they must share responsibility for attaining performance objectives.
In summary, the time has come for banks to take the next evolutionary step in onboarding program development. Most institutions have an opportunity to improve the profitability and development of new primary accounts by refining each of the five elements discussed. To get started, banks should adapt a holistic perspective of what new customers experience; assess new customer service activation, balance growth, and retention; and rationalize existing objectives, process design, communications content and execution.
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