How Can Banks Move Beyond Transactional Relations to Build Lasting Customer Relationships?

By Dominic Prakash,
Senior Principal – Solution Architecture,
SunTec Business Solutions

What keeps you going back to your favorite coffee shop? Is it just the coffee? Is it the snacks or the free Wi-Fi? Or is there something else; something a little extra that makes it your favorite and keeps you going back for more? Of course, the quality of the coffee and the snacks and the free Wi-Fi are all important, but your long-term loyalty was probably built based on the service you experienced at the shop. A conversation, a warm wish on your birthday, the staff remembering your favorite order –uncontracted and undefined experiences that made the experience better and guaranteed your loyalty. Is it possible for traditional banks to go beyond mere transactional dealings with customers to offer a value-driven and personal experience that helps create a lasting relationship and loyalty? Banks are currently navigating a disruptive marketplace characterized by increasing competition, global slowdowns, and stringent regulations. And it would be safe to say that establishing loyal relationships with customers is crucial for long-term growth and profitability.

Why Banks Must Think About Value-based Customer Relationships

A couple of decades ago, the traditional banking sector was not particularly customer centric. Customers existed at the periphery of the banking process that were created to suit the objectives of the banks. All this changed with the emergence of technology-powered models that put the customer at the center of the banking process. Fintechs and technology giants swept onto the scene with hyper-personalized, value-driven, and customer-centric pricing, offerings, and operating models. And customers, used to a high degree of personalization from other services, are increasingly open to trying out the banking options made available by these new-age players. Banks must not just attract customers with attractive offerings but also retain their business over time. And much like your favorite coffee shop they need to think about going beyond Service Level Agreements (SLAs) and contracts to deliver an experience that is warm, engaging, personalized and that makes their customers happy. After all, building personal relationships with customers can help banks increase revenue from primary customers by 20 percent.1

The good news is that despite competition from fintechs and tech giants, banks still enjoy significant customer trust. Now is the time to revamp operations and engagement models to bulk up that trust with some customer-centric engagement models. Here are some ways in which banks can offer value exchange:

Customer-centric Approach for Building Relationships: The reams of customer data within the bank’s vaults are its biggest asset in its customer-centric transformation. Financial Institutions can use advanced analytical models to identify spending patterns, financial history, and even customer needs. Such inputs when integrated into a revenue management system (RMS) can help build personalized pricing, discounts, bundles, and offerings that help customers address their requirements. For instance, a bank can offer reduced fees on certain banking services for loyal customers or provide discounts on loan interest rates to customers with a strong credit history. An RMS can also help generate targeted offers, such as cashback rewards for using a specific credit card or discounts on mortgage rates for existing customers looking to refinance their homes.

Enhanced Customer Experience: The coffee shop is your favorite, and you keep returning to it because of the warm interactions you have there. A memorable customer experience can be a valuable differentiating factor for the bank. And it doesn’t take a lot of effort to achieve this – simple gestures that go beyond the scope of everyday business, and personalized interactions can leave a lasting impression. This can be in the form of greetings on special days, tokens of appreciations, or even tokens and offers on special occasions.

Proactive Engagement: It is not enough to just help customers carry out their routine financial transactions. Banks must be proactive in helping them with their financial journeys. Timely alerts and reminders on low account balances, financial planning sessions, information about savings plans, etc. can all help to Sending alerts or reminders when a customer’s account balance is low or offering financial planning sessions to help customers stay on track with their financial goals and ensure proactive and value-driven engagement.

Community Engagement: Like all businesses, banks operate within a community and must consider giving back to it. Supporting local initiatives and causes is a good way to foster a sense of community and belonging. Banks can do this by partnering with local charities, organizing volunteering opportunities for employees and customers, and even helping during tough times like natural disasters. Last year when flash floods destroyed property, crops and lives across New South Wales and Queensland in Australia, banks in the region offered local farmers, homeowners, and businesses the opportunity to defer loan repayments by three months.2 This gesture of compassion and support during a terrible time resonated with customers and helped build a relationship based on trust.

Life Stage and Need-based Offers: An individual has different financial needs at different stages in their life. As a student finishing school, they might need education loans. Early on in their career they might need savings options, while little later they might require a car loan or a home loan or options for their children’s education or even a pension plan. A bank must understand this and match their life stage with their offers. A leading South African bank did just this by allowing customers to build customized bundles of products and offerings from the bank’s portfolio to suit their needs. They also had the option to unbundle products that they didn’t require at a different stage in life. Customer data, if leveraged effectively can reveal a wealth of information about the customer’s life stage as well as other needs. Banks can then build their offerings accordingly. For example, if a customer travels abroad often – as evidenced by ticket purchases and hotel bookings, then the bank can consider offering them good rates in forex exchange, or international credit cards, or travel insurance.

Evidently, banks must leverage customer data to drive personalized engagement strategies. And to do this they need an intelligent revenue management platform that can use data-driven insights to create hyper-personalized pricing, offers, discounts and bundles. And banks don’t even need to completely transform their legacy cores to deploy such a powerful system. They can work with specialized vendors who can implement a powerful middleware solution to sit over their legacy infrastructure and help them devise and implement customer-centric strategies.

Competition for share of wallet is increasing in a market characterized by disruption. A mere transactional approach to customers will not result in the kind of long-term loyalty that banks need at this juncture. They must now focus on going the extra mile to deliver customer happiness with innovative customer centric efforts that meet their needs and help establish a value-based connection with them.


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