Are Retail Banks Relationship-Challenged?

James Eardley, Jr.

Creating a long-lasting relationship is tricky, whether you’re a college student on a date or a bank looking to create loyalty. Back in college, my friends and I used to joke that we were all “relationship-challenged.” A steady relationship took a lot of work, and when you’re 20 years old a lot of work is, well, a lot of work. Building something solid requires a shift in thinking from “what makes me happy” to “what makes someone else happy”—and that’s precisely the predicament banks are facing.

The customer relationships banks need to grow take effort, and in retail banking, the winners are applying that effort in creating day-to-day value. And just like in a personal relationship, where you need to make an effort beyond just acknowledging birthdays, anniversaries, and Valentine’s Day, banks should also be reaching out more frequently to their customers with information and advice that adds value. Selling is obviously important, but if that’s the only time banks are talking to customers, they don’t really have an advisory relationship with their customer, and this opens the door to competitors.

The banks I do business seem to take the stereotypical attitude of a 19-year-old male. They are focused more on their own well-being than on mine. The recent Finextra report on Engaging the Unengaged Customer confirmed and underscored my experience, as only about one-third of customers actively believed their bank advocates for them. That’s a pretty dismal percentage, and it makes you realize why there is so little loyalty in banking.

Where banks have gone wrong

If banks want to engage with customers and build loyalty, they need to do a better job adding value that is clearly centered on the customer. Acquisition numbers don’t mean much if you aren’t retaining customers and building wallet share. It’s like robbing Peter to pay Paul: You haven’t solved your original problem and you get stuck in a bad cycle.

The surprising part of all this is that banks overwhelmingly think they are engaging customers—but the data shows something quite different. Only 49% of customers say their banks are trying hard to engage them, while 84% of banks said customer engagement is a top three priority. Banks have been seriously missing the mark on this one, and it’s time to rethink the problem.

Relationships require more than technology

Simply offering a cool app that makes it easy for customers to check their balances and pay bills on the go doesn’t translate into engagement that fosters loyalty. Much to the dismay of banks, even as customers interact with their banks more than ever, they are less engaged.

Retail banks aren’t catching on to this as quickly as they should, and they need to do so. I do business with two banks, which on the surface are quite different: One is a top five U.S. bank, the other is a small third-tier bank. Yet from my perspective as a customer, very little differentiates the two. Both have convenient mobile apps and online sites, which I use regularly, but I couldn’t tell you whether one offers some feature or function that the other doesn’t. As far as I can tell, there’s no personalization, or if there is, it seems of little value. There is nothing there that engenders loyalty, and if I were looking for a loan, I’d be just as likely to turn to the Internet as I would to one of my banks.

How to improve relationships day-by-day

Consumers want banks that will make their financial lives better and simpler, and opportunities for banks to do just that happen potentially every day. The tricky part is that there is no “one-size-fits-all” advice.

Some banks have been experimenting with games and other apps, but to find a real solution that avoids the commodity trap, banks must go back to their roots and start acting like banks again. Banking was founded on helping customers meet their financial goals, and the Finextra report confirms that customers still want bankers to play that role. Unfortunately, this requires the hard work of understanding customers down to a “bank-of-one” level.  Every customer’s financial situation is unique, and customers need to feel like their specific needs are being addressed and met.

Bankers: How have you aligned your products with your customers’ financial goals and well-being? This might mean, for example, advising them to save on fees by consolidating their accounts, or recommending that customers with a high checking account balance month-over-month make an extra payment on their mortgage to pay it off earlier. Small bits of advice go a long way toward creating trust and loyalty.

One final question: If your advice resulted in less revenue for the bank, would you be free to give it, or would you wait for some other bank or a fintech to point it out to them?

Just like relationships, it isn’t about how many dates you go on, but the relationships you develop. The only way to win in banking is to focus on the quality of engagement, measured through day-to-day value added.

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This article originally appeared on the Future of Customer Engagement and Commerce.

About James Eardley, Jr.

James Eardley, Jr, is global director of Industry Marketing at SAP.