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The Holy Grail of Banking: Profitable Customers and Members Strategies to Attract and Maintain the Lifeline of Your Financial Institution

  
  
  
  
  

Dave Foss Author: Dave Foss, dfoss@profitstars.com

Bankers are faced with the most significant regulatory overhaul seen in decades. Simultaneously, rapid technology advancements are requiring them to analyze traditional ways of business. Before making major changes, decision makers must first and foremost identify what they can do to maintain and grow the lifeline of their institutions: profitable clients. Some important strategies to consider include:

1)    Know your profitable clients. Bankers should have access to dashboards and reporting tools with real-time intelligence to best analyze and adjust their strategic plans. Don’t be surprised to find that nearly 200 percent of your income comes from only 10 to 20 percent of your clients.

2)    Recognize small businesses. Aite Group and Javelin Strategy & Research have reported that small businesses are underbanked and are often lost within consumer services. Meanwhile, their behaviors show tremendous opportunity to become more profitable. Small businesses must be recognized for being unique, and should be offered additional capabilities if a financial institution wishes to retain their business. Furthermore, small businesses need access to self-service strategies, which leads to my next point.

3)    View self-service strategies as necessities. Advancements in consumer and small business technology have made self-service strategies a necessity. Banks and credit unions are leveraging solutions for mobile RDC and P2P payments as an acquisition and retention strategy for profitable clients. Javelin reported in its 2011 Mobile Remote Deposit Capture Report that one in every four consumers finds mobile RDC desirable, and 13 percent of those consumers will change their financial institution based on its mobile capabilities. Plus, financial institutions with solid mobile foundations will be well positioned to benefit from mobile payments, a very near reality.

4)   Plan for the future. Leaders cannot rely on current accounts for success; a financial institution needs a strategic plan to ensure survival. It should come as no surprise that Gen Y needs to be included in that plan – and that generation of consumers has high demands for self-service. Javelin also reported in its mobile RDC report that 13 percent of Gen Y consumers have switched financial institutions for more ATMs, and seven percent has left for mobile banking capabilities. Conversely, banks and credit unions that attract young individuals gain significant advantages from their self-service preferences. The group tends to be less expensive to bank and their combined incomes will triple by 2025, clearly making them a wise and profitable investment. 

Maintaining loyalty and profitability is a heightened challenge for today’s bankers. Both consumers and small business owners have an added sense of financial responsibility and independence since the recession, and they are unlikely to settle for a financial partner who can’t or won’t meet their needs.  It is crucial that financial institutions recognize their profitable customers and members and have a strategic plan in place to maintain and expand those relationships.

Please leave a comment with any other strategies that you feel are important.

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