XYZ bank’s competitive edge is our people and how we serve our clients. Sound familiar? In 25 years of working with bank clients- large or small, the steady competitive strategic edge uttered repeatedly how they provide their clients with great service.
The follow up question of HOW do you achieve delivering this superior understanding and service is usually framed around a variation of hiring only the best people and being responsive to client’s needs. Yet, when asked what tools or resources are applied to help achieve this level of service- that’s when the blank stares start. That’s not true completely true. They will tell me that is why they only hire the best people. Of course, I often wonder, if they indeed go through the time and expense to find, recruit and hire the best people, then why don’t they equip them to succeed?
A few baseline statistics for your consideration.
As a good rule of thumb, 20 percent of clients generate 80 percent of the top line revenue. In addition, 80% of new services or account openings are from existing clients, yet on average over half of a bank’s clients keep one account or service with the bank. This means that a relatively small number of overall client’s drive (or control) most of the shareholder value. So, the obvious question is does your bank know who those clients are? Is there a consistent customer communication and servicing strategy in place to manage these clients evolving needs?
A March 2021 Financial Brand survey focusing on the usage and accessibility of customer data, revealed that only 20% of institutions with assets of less than $10 Billion have implemented a customer data platform that can inform marketing and servicing activities. Given that bank’s maintain huge amounts of data about these clients (their relationships, transaction volumes and patters), why isn’t that more bank’s aren’t leveraging what they know to increase the share of wallet of these most important clients? Could it be technology investment costs and length of time for payback from a return-on-investment perspective? I’m not sure that is a practical reason.
Repeatedly, industry experts have proved it takes 3 times more time and expense to obtain a new client versus expanding an existing client. Subsequently, the greatest low hanging fruit of opportunity in expanding our business and with the lowest aquisiton cost lies with customers whom already know us but unfortunately have additional current or future needs have or will have served elsewhere. Seems investment in a data technology solution would have a very compelling (and easy) business case to make. This is especially true considering the duel benefits of not only leveraging current unused data to reduce high value client defections but also deepen the share of wallet of existing high potential clients. So what’s getting in the way of moving forward with an enterprise wide solution that provides structured and exposed data to better serve clients?
I believe the challenge comes down to one tough little word- culture. Because of the nature of our organizations, with regulatory oversight, ever competing priorities in risk management and controls, and general challenges of meeting immediate larger institution and non-bank challengers, investment in technology is relegated as a reactionary or defensive investment- begrudgingly done to close the gap on a recent audit finding, new regulatory requirement, or vendor induced upgrade. Meeting the needs of developing a data driven organization needs leadership the business development area of the bank. This means retail and commercial sales and marketing leaders developing a defined strategy that articulates the level of information needed, the frequency, and most importantly the accessibility for front line personnel to make prompt contacts and decisions. Taking the time to define the requirements to support your client strategy will yield huge benefits in not only building to the scale and needs of the organization now and into the future but will also ensure that the right level of integration among systems is sought day 1. Too many times I see where organizations are painted into a vendor corner by engaging into a solution without doing the homework of defining what they need (and why) which is important in building a credible business case and delivery timeline. Most community bank’s pride themselves about understanding and knowing their clients and being responsive to their unique needs. Why not take that strategy to the next level and build tools that can exploit the true unique advantage that you have over the competition by using what you know about your clients? Proactively communicating with clients whose needs are changing or expanding in informing sales or promotional activities are key to increasing share of wallet with compelling ROI payback continues to be overlooked.