Our industry is obsessed with “relationship banking.” It’s impossible to attend a management meeting, review a strategic plan or browse through the trade rags without hearing the desperate mantra of providing “total financial solutions.”
Well, Gonzo readers, I have a confession to make: I am an un-bundler. I am that cold-hearted, non-committal financial services playboy over whom banks shake their heads in despair. At this moment, I have “relationships” with 14 (count ‘em – 14!) different financial service providers: three big banks, a local bank, a mortgage company, a credit card company, an online broker, three mutual funds, a credit union, and three insurance companies. A careful scrutiny of my tiny “black book” of financial service hotties reinforces the three factors that drove me into this world of playing the field: price, convenience and inertia. Some relationships arose from smokin’ loan deals (call me opportunistic), some are remnants of past jobs (call me sentimental), and others (call me shallow) made the cut simply on the basis of geographic desirability.
Folks might encourage me to settle down and have a more meaningful relationship with some nice, wholesome financial provider, but I’m really quite happy right now. In my mind nothing’s broken and, therefore, nothing needs to be fixed with a “total financial solutions provider.” I can’t really see that it would add any value to my life. And it’s not just me. I share with everyone around me a common indifference. From an industry standpoint, this concerns me because banks are pinning the industry’s future on the expected success of relationship banking.
A few years ago, Forrester Research released its ground-breaking study on “Open Finance.” The report was so good and optimistic that many bankers became convinced that integrated financial services were just around the corner. Some felt that the Internet and a few technical adjustments would enable financial service providers to effectively run through this now-famous four-step process with their customers:
Then reality set in – we all got stuck at Step 1. Banks simply lacked either the capability or the will to develop complete relationship information. Those that tried experienced clunky results. First came the notorious profile sheets that branch staff had to fill out when anyone walked in the door. I recently got profiled when closing my home equity loan, and it gave me the creeps. The “Financial Consultant” was obviously embarrassed to be following some crazy policy from corporate. Consequently, banks end up with missing profiles, incomplete profiles or nice profiles with absolutely no effective plan to do anything with the data.
Next came account aggregation. No need to subject ourselves to the indignity of gathering profiles – we’ll just let our customers scrape the information off the Internet for us! So far, aggregation has not made relationship banking any easier due to the lack of transactional capabilities.
At this point, banks should dump any near-term dreams about real-time data, dynamic analysis and customized solutions. I’ve got a case of beer for anyone who can show me this stuff in action soon. Instead, bankers should focus on areas where some near-term value could be demonstrated to customers. Here’s some initiatives banks should consider:
#1: Business before retail
While I may be the epitome of indifference in my personal life, I would love a competent relationship banker for my small business. Our company is a highly liquid net depositor that gets little attention from banks. In our 12 years of operation in a busy metropolitan area, a banker has never walked in our doors and asked for the business. Banks have real opportunity to sell into the personal relationships of owners and employees through a business banking relationship. This does not require high tech, just an organizational focus.
#2: Deals! Deals! Deals!
So far, bank attempts at relationship products have been pretty lame: “keep $25,000 in combined balances and we’ll give you free checking, a free credit card and free online banking.” (Is free online banking really a perk?) If banks ever want to suck in the mortgage, credit card, investment and insurance relationships of their depositors, they’re going to have to put more on the table for customers. Whether they’re from airlines, the grocery store or Blockbuster video, the general public is eating up loyalty programs these days. Banks that structure something meaningful here might have a chance to differentiate themselves.
Except for the largest banks, combined statements are talked about often and implemented rarely. Many banks and vendors today define a combined statement as one that aggregates only checking, savings and consumer loans. With some tenacity and the help of providers like Group1 Software and Personix, even small-to-mid-size banks have the opportunity to get serious about expanding their combined statement offerings.
#4: Meaningful contact
Before they can offer total financial solutions with a straight face, banks will have to invest in making customer interaction feel like a relationship. For some customer segments, this means assigning individuals to the account who can actually do stuff. Not cross-selling from a teleprompter, but really helping the customer: transferring money from banking to brokerage, researching a debit card issue, quoting and pre-qualifying a mortgage, etc., without a bunch of phone transfers. In addition, one of the first priorities for any CRM initiative should be an enterprise contact management system, which will eliminate the need for customers to explain their situation each time they contact the bank.
The first step to building a relationship is to earn credibility by solving problems. We’re pushing sales at a time when our problem-solving capabilities are embarrassing.
#5: Single sign-on
It’s difficult for a bank to convince customers it is a total financial solution provider when its own Web site may require 3 – 4 different sign-ons (banking, bill pay, mortgage, investments, etc.). Though the concept is simple, offering a single sign-on can be extremely difficult when dealing with legacy systems. Some folks (a la Wells) view account aggregation as an interim way to provide single sign-on capabilities. Banks should be digging deeper into how they can simplify their Web log-ons. Even if single sign-on is not possible, any reduction here would be a step forward.
#6: Deep Thoughts and Content
Bankers are trying to sell their financial expertise to customers with little evidence they possess any. Customers are thrown sterile brochures and direct mail that reads exactly like every other bank. It seems we equate financial advice with things like “interest payments on home equity loans are tax deductible.” Well, duh! In the future, banks will win more credibility if they deliver more interesting, even entertaining content to their customers and prospects. For example, Cornerstone has a bank client who distributes a popular, offbeat investment newsletter each week. Randy Shuldt at ING Reliastar has gotten attention for his hip www.ihatefinancialplanning.com Web site. There’s a lot of knowledge in the heads of business bankers, investment managers and private bankers that banks could distribute in interesting, user-friendly formats. This content will help banks demonstrate the value of a “relationship” to customers and prospects.
So GonzoBankers, let’s not wait for total financial solution nirvana. There’s a lot banks can do today to up the odds of having a meaningful relationship with shameless un-bundlers like me.