Pub. 10 2021 Issue 6 21 generate. With consumer and business customers having almost six products and services with their primary financial institution – the math works. Most importantly, the more loyal customers you have, the better your bank will perform now and in the future. Segmenting data from several million customers based on their tenure with the community financial institution shows that loyal customers, over their lifetime, generate dramatically more NII (see fig.2). In addition, annual NII contribution peaks once customers have been with their PFI for a few years. Further analysis of the data explains why the checking account revenue stream does not continue to grow. Customer age demographics drive it. In general, more mature customers tend to drive more checking deposits than checking NII. Creating Loyalty To create loyalty, it is imperative your organization be positioned to capture new customers when they are ready to switch. The data shows that up to 12% of current retail and business customers consistently switch financial institutions. A recent study published by The Financial Brand indicated this number could be as high as 22% post-COVID, driven primarily by the failures of the big banks to adequately serve customers during the pandemic. So how do you position your organization for growth? 1. Checking Product: You need to get your checking product right. Confusing product does not create value, and in turn, develop customer loyalty. 2. Processes: You must remove barriers. Your account opening policies and customer identification program (CIP) practices often inhibit growth rather than encourage it. Read them for yourself. 3. Promotion: Community financial institutions have an audience that needs to be maximized and optimized within a defined footprint. If your bank isn’t using targeted, data-driven print and digital marketing to grow PFI customers, you are missing too many growth opportunities. 4. People: Your team members must be equipped with the skills and the product knowledge to develop genuine relationships with customers – customer loyalty is created through customer connections. The Bottom Line 1. T o create loyalty, you have to get the new customer first. 2. Th e checking account is the key to the PFI relationship. 3. O nce you have them, products, processes, promotion and people move up the loyalty ladder. 4. Th e longer customers stay, the more they will contribute. 5. You can do things to accelerate that growth. 6. C ustomers are not all the same. You must understand their lifecycle journey with your bank. As with any strategy, there is no silver bullet. But instead, your bank should be looking for a long-term loyalty payoff. Achim Griesel is president, and Dr. Sean Payant serves as the Chief Strategy Officer at Haberfeld, a data-driven consulting firm specializing in core relationships and profitability growth for community-based financial institutions. Achim can be reached at 402.323.3793 or achim@haberfeld.com. Sean can be reached at 402.323.3614 or sean@haberfeld.com. fig. 1 fig. 2
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