It is more important than ever for banks to get customers more engaged to retain them. Having a healthy bank account does not equate to loyalty or retention. Even dissatisfied customers may stay, simply because it’s too cumbersome to change banks. Instead, customers start using services from other fintechs more frequently – such as PayPal and Venmo or other fintechs instead of their traditional banking provider. These fintechs are providing services that are impacting customer loyalty and eroding the banks’ customer base. This is why engagement and connection with bank customers is so very important to retention and loyalty. What valuable solutions can banks provide that will intrigue customers to engage more, and how quickly can they get a new initiative up and running?
It’s all about offering the right products to the right customer at the right time.
Numerous studies over the years have shown that having multiple relationships with bank customers has a significant impact on retention – and retention has a direct bottom-line impact. Recently, Bain & Company research showed that a 5 percent increase in customer retention produces more than a 25 percent increase in profit. Today, though, what products you are offering can be critical to retention.
According to a Forrester Consulting study, 65 percent of banking customers hold financial products with several different institutions because they are driven by products that best meet their needs, rather than by loyalty. And 72 percent of those surveyed in the same study said they would prefer to work with a bank or credit union that understands and speaks to what’s happening in their lives at that moment.
Here are some interesting financial institution statistics according to BAI:
- It is 68 percent more expensive to acquire a new customer than to sell more products/services to a new customer
- Less than half of revenue (5 to 30 percent) is generated through initial sales. The rest comes from those with whom a relationship has already been established.
- Probability of closing a sale to an existing account holder is much higher than landing a new account.
- Sales to current account holders take less time to generate ROI: one quarter versus one year or more.
Helping customers attain financial wellness continues to become more important to bank customers. In fact, J.D. Power in collaboration with Financial Health Network has recently launched their Health Support Certification Program that focuses on measuring and understanding customer experience through the lens of financial health.
According to the Financial Health Network, the insurance industry is going through an exciting time of innovation, growth, and transformation. Incumbent and startup providers both have the opportunity to look holistically at a person’s financial life to understand how insurance products can best support them. By doing this, they will attract more loyal customers.
A recent study conducted by Cover Genius revealed that 45 percent of bank customers are highly interested in at least one insurance offer relevant to their purchases and events. Digital bank customers top the charts with 70 percent considered “highly interested” compared to only 44 percent for conventional bank customers.
Now is the time for banks to leverage insurance programs to enhance customer loyalty, increase retention, and generate non-interest income.
Additionally, some customers view insurance as part of their overall financial wellness plan. If your bank is not offering insurance to your customers, they will go elsewhere for it. This presents an untapped opportunity to provide valuable insurance offerings to your customers to help with their financial security.
Another recent study, conducted by Franklin Madison, showed that customers are truly interested in purchasing insurance from their financial institution. Franklin Madison looked at some key demographics to find out which customers are most likely to purchase insurance from their financial institution. According to the study, the following groups are most interested in purchasing insurance from their financial institution:
- 31% of married respondents
- 33% of single respondents
- 25% of financially secure respondents
- 48% of underbanked respondents
- 47% of city dweller respondents
- 32% of rural respondents
Click here to get the full report from Franklin Madison.