The Great Recession of the late 2000s undoubtedly challenged financial institutions to engineer new profit centers. With real estate loans impossibly risky, liquidity scarce and revenue lines from interchange fees crimped by regulators, many FIs went back to basics. The underlying goal was this: build a comprehensive strategy that increases satisfaction and confidence among their best customers.
With surveys indicating 63% of consumers still believe U.S. financial institutions are no more secure than they were prior to the recession, the industry has more work to do. The challenge for FIs is finding new ways to develop deeper relationships with customers and communicate how they’re adding value to consumers’ daily lives. The solution for some is total relationship banking, a philosophy that incorporates brand-encompassing loyalty programs with the core notion that customers should be the impetus for all business operations.
Although the idea was first introduced in the early 2000s, it wasn’t until 2009 that FIs began to apply this philosophy to the integration of loyalty, mobile and online portals. When conceived and executed correctly, total relationship banking has demonstrated significant increases in cross-sell and upsell opportunities, reduced attrition and improved profit margins.
Total Relationship Banking Puts the Customer First
Historically, financial service companies have attracted customers with a products-based approach. Marketing collateral would variously emphasize benefits in home equity lines, interest rates and debit card fees. Business came, but it also went. Customers were persistently prone to flee if they lost interest in the feature that first attracted them.
Conversely, a total relationship banking strategy seeks to build trust and deep ties with a consumer, nurturing a dynamic that culminates in the consolidation of entire financial need portfolios within an institution. The approach relies on high-level customer satisfaction, enticing rewards programs and even personalized products conceived out of the vast universe of customer data collected by FIs.
Other points of potential friction include:
- Integrating services under one customer I.D.
Customers holding multiple accounts with the same bank are likely identified by separate IDs created at the point of sale and integrated with third-party solutions that, over time, have failed to communicate. Some financial institutions will find it challenging to pull them into a centralized location. - Extracting private data from separate departments.
FIs protect personal information by storing it in separate departments. The implementation of a enterprise-wide loyalty program will require the consolidation of such data to provide appropriate rewards – not just initially, but on a continual basis. - Value propositions and liability acceptance.
When FIs integrate across multiple products, each party involved needs to accept the liability that comes with awarding points for various transactions. To convince siloed departments to accept this liability, FIs must ensure all participants understand the value of rewarding customers for their loans, mortgages and additional accounts. - Poor marketing in an era of distrust.
Because total relationship banking involves the integration of multiple product groups into a single solution, and each group has its own marketing strategy, FIs often struggle to create a unified marketing approach. For example, some departments may wish to engage consumers through mobile and social media strategies, while others have no interest in those channels at all. - Government regulations and stricter protocols.
The Credit Card Act of 2009 and Dodd-Frank legislation are changing the way FIs operate and disclose information to customers. The regulations apply even to loyalty programs, causing some banks to pause rewards program launches until they see how others within the sector are affected.
It’s a Marathon, Not a Sprint
Total relationship banking has the unique ability to simultaneously strengthen consumer confidence and increase profit. But it won’t happen overnight. True success is achieved when operations become so seamless that customers feel they are interacting with a unified company that appreciates and rewards their business – not disparate departments for each of their accounts.
To achieve this goal, banks and financial services brands must conceive, evaluate and execute a strategy that analyzes results over several months, or even a year. It will take time to marry various customer initiatives, but it’s worth the effort.
The following are best practices to consider when implementing a total relationship banking strategy:
- Organize and integrate financial databases so customers can see their profiles and account history through one portal, in real time.
- Establish a collective tone and standard of messaging to avoid confusion about the bank’s value proposition or the products and services it offers.
- Develop a loyalty program which limits churn and leverages the data collected into behavior and preference insights.
- Create opportunities for team members to collaborate with one another, ensuring employees understand the full scope of the products and services in use.
The Goal: Customer Engagement Beyond Acquisition
Unlike traditional banking, total relationship banking goes beyond the scope of acquisition and focuses on the big picture: long-term revenue growth.
It starts with the simple premise of focusing on customers who have been most valuable – in this case, those who’ve interacted with the brand regularly and over an extended period of time. And it concludes in the transformation from a simple brand to an integral part of consumers’ financial lives and future planning.
The approach also proves banks don’t have to discover new revenue streams to compete on Wall Street. They just need to keep the customers they already have.
