Banks gathering all their clients’ eggs into one basket

Banks and credit unions facing more competition from online lenders—and now even from big-box stores offering financial products—are working harder to get a bigger piece of a customer’s wallet over the long haul.

It means shifting the focus from making a killing on transactions to convincing customers to bring them all of their accounts.

It’s one reason Forum Credit Union recently offered those visiting its East Washington Street branch a free credit report and analysis. Meanwhile, its Carmel branch was offering help with budgeting.

Langford

If a refinancing or loan consolidation comes out of such visits, then terrific. But even more valuable could be that the experience creates an expectation the credit union is the first place to go as other financial needs arise down the road.

“It’s not about how much you make off each product, but what the value of that relationship is over a lifetime. … I think everyone is going the route of the ‘lifetime concept,’” said Andy Mattingly, Forum senior vice president of strategy and marketing.

Yet as a number of financial institutions have grown in scale and complexity, “some have become more focused on products, leaving their customer relationships in need of a major overhaul,” Deloitte Center for Banking Solutions found after surveying 2,000 bank customers.

Despite a strong preference for “one-stop shopping” at a single institution, 73 percent of those surveyed said they had relationships with two or more banks in addition to their primary bank.

“Clearly, in the past, I think most banks were more transactional—selling checking accounts, selling savings accounts or whatever,” said Nancy Huber, president

and CEO of Fifth Third Bank in central Indiana.

Of course, banks have long tried to get a bigger share of a customer’s wallet, noted Joe DeHaven, president of the Indiana Bankers Association. But there’s renewed urgency as new competitors arise and banks lose valuable face time with customers.

“The advances in technology have sort of taken people out of the lobby. They don’t have to come in. They do a fair share of their banking business electronically,” DeHaven added.

The flip side of the challenge imposed by technology is that banks have lots of electronic data on the customer and new tools to analyze and predict consumer behavior, he said.

For example, a customer making a larger-than-usual deposit could be a sign he sold a business or received an inheritance, noted Kevin Langford, president of First Financial Bank’s Indiana operations. That data could prompt the bank to reach out and offer an appropriate product, Langford said.

Often, it appears to be a lost opportunity, however. More than 80 percent of consumers surveyed who experienced such a major life event said they were never contacted by their bank, Deloitte found.

“However, 70 percent of those who were contacted liked the experience,” said Deloitte’s Rebuilding the Relationship Bank report.

Fewer people coming into a branch than in the old days hasn’t stopped Indianapolis-based Salin Bank from trying to have a conversation with customers—even after installing technology that has de-emphasized the traditional branch model.

Many Salin branches now have video tellers installed in drive-through lanes and inside the branch that connect to tellers stationed in Salin’s Lafayette operations.

The technology saves on personnel costs and allows longer hours, but it still allows an actual conversation with customers. If, say, a customer indicates he’s planning to move, the remote teller could offer to set up a meeting with Salin’s mortgage team. Salin’s remotely located tellers are trained to keep an ear out for such opportunities.

“It’s a point of contact. … It’s all in the conversation,” said Jim Badger, Salin’s senior vice president of marketing.

In fact, DeHaven said, with the arrival of new technology, “banks are more aggressive in initiating relationships than they historically have” been.

It’s easy to see why. There’s no need to trudge down to the local bank when any number of lenders around the country allow customers to apply for a mortgage or a credit card online.

And while consumers these days may rarely cast a shadow at their bank’s branch, they might more regularly visit big-box stores now offering their own banking services.

Walmart, for example, offers a pre-paid credit card that allows customers to make withdrawals at an ATM.

Costco stores invite shoppers to go online to apply for a mortgage now offered through the retail chain.

Who needs a bank when the local Home Depot can lend you that $40,000 for a kitchen renovation? And Sam’s Club is offering loans to small businesses.

From products to needs

Banks think they can counter these sorts of threats and grow in relevance.

Fifth Third’s Huber said the bank did a lot of soul-searching after the financial crisis and conducted customer surveys.

“A lot of customers told us they didn’t just want a transaction. They wanted a relationship with their bank,” Huber said. “People still want to discuss their personal situation and they want somebody who listens to them and gives them a solution.”

One of Fifth Third’s moves was to reduce its confusing number of checking account types—to about a half-dozen from 40. “It was so confusing that, gosh, our associates often didn’t know what we offered.”

With better data tools in hand, it also tries to better assess customers’ circumstances, to engage them where they are at any given moment. “Are you challenged with credit? OK, let’s help you with that,” said Huber, noting products like a cash-card as one option to help rebuild credit.

“Our goal is to exceed their expectations so they come to us. They stay with us for a long time. They go through all those [financial] life cycles.”

Of course, customers who ascend to financial nirvana—the “1-percenters”—are of most interest to bankers.

Just about every bank has a trust department staffed to cater to the well-to-do. But some, like BMO Harris Bank, have a number of units set to serve the ultra wealthy with all their needs.

Its purchase in recent years of M&I Bank branches here—formerly First Indiana Bank—brought a beefed-up private-client offering to Indianapolis as well as “Harris myCFO,” which offers any number of wealth management services from customized investment advisory to financial planning to income tax planning.

“All the surveys show that customers would prefer to deal with one bank—kind of one-stop shopping,” said Tim Massey, BMO Harris regional president.

Although it might sound a bit Zen-like, some of the push to win over customers involves a bank’s mind-set. Langford said he wants his bankers to pay attention to what the customer needs at a given time, whether it’s a mortgage or college savings or whatnot.

After all, people aren’t camping out in front of a bank waiting for it to introduce the latest and greatest mortgage as if it were a new Apple device.

“Nobody comes in to get a mortgage. They want a house,” he said. “We’re willing to be patient and earn our relationship.”•