3 Cross Selling Mistakes and How to Avoid Them

3 Cross Selling Mistakes and How to Avoid Them

Cross Selling Oh, everyone talks about it. Cross selling. It will save the bank. We all know the statistics. Based on several different sources, we know that any given bank holds about 2 – 3 financial products per household where there could be up to 10 possible accounts. I spend a good deal of time talking about the appropriate use of cross selling in my book, Seven Billion Banks. Despite cross selling being a major priority for banks over the last few years, we’re just not that good at it. Consider the typical example: The Phone Call Jill has her checking account with her primary bank. It’s the only account she has there, although she has credit cards, an auto loan, and a mortgage with other institutions. She has three different credit cards, one that she just opened last week to start earning miles. They all have high limits and no balances, making her credit score quite high. But her auto loan is about 3 years old – about the time when people think about trading the car in or refinancing. Jill gets a call from her bank. It’s an account executive at the branch cross selling. He tells Jill that they’re really happy she’s been such a good customer for so long and would like to schedule an appointment for Jill to come into the bank and review her bank relationship. Jill doesn’t really know what that means – but it sounds ominous. She’s never met this “account executive” before; it wasn’t the person she opened her account with. She’s quite busy and declines. Undaunted, the banker continues...
Keep Payday Lending Safe, Legal, and Rare

Keep Payday Lending Safe, Legal, and Rare

Nothing seems to get bankers, consumer advocates, and government regulators so riled up as payday lending. The short-term non-bank loans taken out by millions of consumers a year are the focus of government studies and consumer reporting. But clearly, there’s a demand, and if we are creating personalized banking experiences for each and every consumer, there must be room here somewhere. It’s easy to dismiss this financial vehicle as predatory and harmful, but it opens up the question: what should these borrowers do? When you start to look at the data, you find that the story isn’t so simple and the pejoratives used to describe the industry and its customers don’t quite fit. I’ve completed an initial analysis on the data reported by the Consumer Financial Protection Bureau (CFPB) in the United States and have drawn some conclusions about the behavior of the typical payday loan borrower. From those conclusions, we see what these borrowers need and we have an glimpse into how to provide it. Keep Payday Lending Safe It’s clear there’s a need for short-term borrowing – either as an emergency funding source or because of poor cash-flow management practices. The trick is to provide for short-term financing without trapping consumers in a never-ending downward predatory spiral. The way to do that is to finally admit to ourselves one simple truth: these are not short-term loans. At least not the 14-day or 30-day ones that people think they are. Data collected and reported by the CFPB in their report, CFPB Data Point: Payday Lending, shows that the typical payday loan borrower “rolls over” their loan multiple times...
To Act or Not to Act: 2 Metrics Drive Banking Customer Retention

To Act or Not to Act: 2 Metrics Drive Banking Customer Retention

Recently my satellite company called me up. I thought it was a typical sales call, upselling me to some premium package. But I was surprised… They told me that data they are collecting on my system showed that we are having some signal loss and they would like to send someone out to fix it – on their dime. No service call charge, regardless of what they find. I was a little shocked, and I must admit, I was looking for the catch. There wasn’t one. But it was true that we were suffering silently with some signal issues. They sent out a tech. He reviewed the situation, found the installation wasn’t done right, and re-installed the entire satellite system. All without us asking. I asked what the motivation was for taking such a huge step. He said the company had identified that they were losing customers based on quality issues. Those quality issues were totally fixable, but they just didn’t know about them. So, they started collecting data. But what amazed me was the proactive way in which they intervened – even those they weren’t asked. It got me thinking about our banking customer retention experiences. Would you intervene financially with a customer if you thought – but did not know – the relationship was at risk? I’ve asked this question to many banks, and all too often the answer is no. At best, I get an “I don’t know.” Knowing When to Act The problem is that our banking customer retention efforts are build on being reactive, not proactive. We respond when a customer complains or closes...
3 Reasons for Price Optimization in Banking Besides Profit Improvement

3 Reasons for Price Optimization in Banking Besides Profit Improvement

Anyone who has been following bank price optimization technology since 2003 knows that the science was originally deployed to squeeze out additional profitability in portfolios that wouldn’t otherwise been seen. The idea was to use price sensitivity of customers to split them into sensitive and insensitive customers and trade off. Raise prices on the insensitive customers and gain profit. Lower prices on sensitive customers and gain volume. The loss of volume in the first group is offset by the gain in the second group. Profit increases overall. Seems like a great idea, right? Well, just using price sensitivity to arbitrarily increase profits hasn’t been a great motivator for the technology. Banks are worried about a lot of other things: regulatory pressure, customer engagement, share of wallet, etc. In fact, a recent survey of US community bankers by KPMG showed 57% of revenue-growth initiatives are around operational areas like cost reduction, divestitures, operational improvement, and M&A. Only 13% of initiatives are around business model changes, like price optimization. So, is price optimization dead? No. Think about what price optimization is. It’s using statistics to predict how your customers will behave when you change price – and then leveraging that information to be profitable. Basically, it’s what you should be doing anyways. But you still have to come up with a business case for the technology. I’d like to give you three reasons that correlate to three of Jim Marous’ top 10 retail banking trends. You can see the full list here. 1. Increased Competition (#3 on Jim’s Top 10 List) When competitors change their prices, the relevant question is: “now...