The Bank Executive’s Agenda: Differentiating Their Bank in a “Me-Too” Marketplace
Part 1 in a new blog series
By Lisa Bullock
As I speak with leaders from top-performing banks across the country, I hear the same refrain: To stay successful, we have to increase organic growth and manage new acquisitions effectively. While the environment has shifted dramatically in recent years, the ability to win new customers and retain profitable relationships remains the driving force behind a bank’s ability to grow market share and shareholder value.
But in a rapidly changing landscape, one that is shifting the way in which banks fulfill their customers’ financial service’s needs, the challenges of growing profitably become more complicated.
Many senior leaders’ time and attention has become absorbed with staying current on the latest technology and managing their operations in the current regulatory environment. Although these issues are important, this all-consuming focus is taking time and attention away from what may matter most – differentiating their bank in an increasingly “me-too” marketplace.
The Rise of Technology in Banking: A Double-Edged Sword
Technology represents the biggest sea change in banking in the last decade. As banks digitize client interactions, use data mining to target high-potential prospects, and shift to an omni-channel model to offer clients multiple ways to communicate and do business with the bank, technology has become a valuable—and vital—competitive tool. But technology also has its downsides. Bankers are now faced with decreased client loyalty with customers who are increasingly rate sensitive. Using technology to analyze buying patterns will never replace needs uncovered in conversations with bankers who are highly skilled at solving customers’ financial concerns.
Let’s take a closer look at some of the trends that have emerged as technology use has increased:
Trend 1: Increased technology use has not translated into increased wallet share.
Despite all of these new resources bankers have on tap to support client needs, share of wallet remains at 2.1 out of 7 per household—unchanged over the last few decades. Technology simply can’t build the kind of relationships that result in broader use of a bank’s products and services. The question is, are bankers prepared to do it? The PwC Retail Banking 2020 Report found that 61% of bankers consider a customer-centric model to be very important, but less than 20% are very prepared for it.
To make it even more difficult for bankers, Edelman found that an average of 58% of customers believe their banks don’t have their best interest at heart, and, even worse, 42% believe banks take advantage of them.
Bottom line: Using technology to analyze buying patterns will never replace needs uncovered in conversations with bankers who are highly skilled at solving customers’ financial concerns.
Trend 2: Increased technology use has decreased customers’ loyalty to a specific bank.
As bankers struggle to meet a broader range of lifecycle needs, every customer is a digital user. Accenture found that 27% of consumers are out shopping for better deals, and 31% find that it’s not too much of a hassle to switch. The true differentiator that can counteract the switching is the one thing every banker can control: the customer experience.
In fact, the human factor is what bank customers crave. According to the Accenture study, among the top measures for success from the customer’s perspective are bank trustworthiness, banker skills and higher quality of services with an ease of doing business. And banks clearly aren’t doing enough in these areas: 80% of banking customers with negative experiences say they leave because they don’t trust the bank to solve their problems.
Bottom line: Customer loyalty is decreasing, and the core drivers of customer satisfaction are not being met.
Capitalizing on Missed Opportunities: 2 Strategic Steps Every Bank Leader Should Take
Banks are struggling to move clients from basic core products to more complex financial products that could increase bank profitability. Technology is here to stay – Using it as a measuring stick to determine whether the bank is maximizing resources and identifying relationship building opportunities is only one piece of the puzzle. So, what can bank leaders do to build brand loyalty that their customers trust and believe in?
Step 1: Know where you are going so you can arrive at the desired destination.
Too often, solutions are applied without the internal dialogue necessary to fully understand why that solution is meaningful. Bank leaders need to develop their strategy around maximizing the value bankers deliver to customers. Employee satisfaction, loyalty and productivity directly impact the level of value banks deliver. When senior leaders are able to keep both client and employee needs in balance, more value is created, which will ultimately support the bank’s ability to increase shareholder value.
Step 2: Engage the hearts and minds of all bank employees.
Engaging hearts and minds starts with a wholesale mindset shift about what the customer experience means across the bank. A key priority for bank leaders in today’s environment should be focusing on developing a customer-centric culture. For such a culture to take hold, it must be supported by bank leaders who constantly communicate the importance of delivering meaningful value from the customers’ perspective.
As bankers focus on developing differentiating customer experiences, internal bank partnerships must evolve as well. Sharing what is uncovered across banking divisions—whether wealth management, small business or commercial—will have a multiplier effect on organic bank growth
The Commitment to Shift Culture and Drive Growth
In a complex, highly competitive marketplace, bank leaders and managers who make it a priority to develop a customer-centric culture are well on the road to building competitive advantage.
As banks focus on developing differentiating customer experiences, internal bank partnerships must evolve as well. The ultimate multiplier for bank growth is when all of the bank’s divisions and departments work with shared purpose in support of their customers’ financial success. For more information on leveraging current bank resources to achieve greater market success, read part 2 in this blog series.