Contributor: Colin Day
In my recent blog posts, ‘Lessons learned from the economic downturn’ and ‘What does it mean to be a ’Well Managed’ bank?’, you may recall that we have been following the exploits of my 14-year old son as he attempts to find the right bank to open his first bank account.
How hard can it really be?
If you read my most recent post, you can see that I tried once again to encourage him to seek guidance from my wife. After all, nine times out of ten she will be the one that has to help him out with any day-to-day issues. Alas, it didn’t work and he still hasn’t made up his mind!
Looking at some of the comments, feedback and advice from the previous posts I can’t help but think I might have some inspiration. In response to my very first posting, Graham Williamson from Australia suggested “Your son should look for the bank that makes banking convenient (maybe deposits at school?) or provides training on financial matters for first-time bank users and, of course, charges no fees to those under 18”. This is great advise – look for a bank that has a keen focus on the customer ( in this case a 14-year old boy) and a customer centricity program designed to meet his needs.
Customers are one of the three main assets of a bank, wouldn’t you agree?
All of a bank’s business is derived from servicing its customers. This is true for all kinds of banking; retail, private, corporate and wholesale. As such, it must be necessary for a bank to understand clearly the kinds of customers it has, and what kind of customers it wants. It is then necessary to map products and instruments to these customer types. Once a bank has determined this targeted demographic, it is then able to use marketing, customer insight and customer relationship management to create a product portfolio that is specially designed to meet the needs of its targeted customer.
A bank needs to continue to bear in mind both short-term and long-term profitability. This means that the disciplines of profitability measurement at customer segment level and risk management need to permeate the operational and management processes.
The operational activities also need to be executed efficiently. This means that only appropriate products are targeted to customers. In this case appropriate means both products that a customer is likely to actually purchase, and that the bank is likely to actually successfully originate to the customer. In this way, little effort is wasted in starting sales processes that are unlikely to have a successful outcome. This has the incidental benefit of increasing customer satisfaction with the bank.
This kind of customer-centric approach is based on customer insight and a tight link with both profitability and risk data which is applicable across all kinds of banking. It is a useful tool when selling retail deposit or credit solutions to individuals; it is equally applicable when selling bonds to other banks, structured products to high net worth individuals and cash management and commercial credit solutions to corporations.
Some banks have survived without applying enough focus in this area. However, operating in such a way seems unlikely to remain viable given the changed economic and social environment in which we find ourselves today. Additionally, for such a strategy to work, a bank requires a 360°view of the customer relationship, across the enterprise — but how many banks can really boast of having that?
My son is only 14, and this seems like a lot to digest for someone who is ultimately just looking for an account that provides him easy access to his money with an ATM card and internet access. But after much discussion, it caused me to ponder, is everyone taking the same care in choosing a bank that is aligned with their banking needs? And do all banks always align their products and services with their targeted customer demographic?