Thanks to the Fintech revolution, many banks, credit unions, and financial institutions are at risk of losing their current members and clientele. Recent studies have shown that 1/3rd of all people may switch their primary banking provider in the next year. Thanks to many banking providers offering free checking and savings accounts with no monthly fees, people are likely to just keep opening new accounts without ever closing their old accounts. Therefore, a person would still have his previous account open but rarely use it. This is known as “invisible migration”.
The most well-known statistic is that the cost of acquiring new customers is up to 7 times higher than the cost of retaining existing clientele. Therefore, it is in everyone’s best interest to retain the people who are already a part of the bank, financial institution, or credit union. This means being more competitive in the banking services provided, and keeping current users as happy as possible. This article will explore five of the most effective strategies used in the banking industry to retain their current book of business.
However, before we dive into the different retention strategies, it may be important to define the three types of customers or members that the banking industry deals with on a daily basis:
New customers/members: These are the ones that require the most effort to retain. They have just recently been onboarded, but there is no loyalty established and if they don’t like the services they may very quickly change to their previous banking provider (or a new banking provider.
Existing customers/members: These are the ones that have already been with their current banking provider for a while. They know that changing their primary banking account is a lot of effort, and are usually happy with the current banking services that they have. These offer ample chances to cross-sell other existing banking services, increasing the value of the customer or member.
Exiting customers/members: These are the ones that have already left their primary banking holder. These are the toughest to win back, as there is probably a reason why they left in the first place. Therefore, it is recommended not to spend too much time or effort winning back this customer/member group. Usually, a simple newsletter showing how the bank, credit union, or financial institution has improved over time is the best that we can do.
Now that we know the three different types of customers/members that exist within the banking industry, let’s explore which strategies may help banks, financial institutions and credit unions to retain a larger portion of their existing clientele:
Know your customers/members
This may sound obvious, but many financial institutions forget that not everyone is the same. In this interconnected day and age, people are looking for more personalized banking services that fit their needs. There are general trends that surface, such as delivering improved mobile banking services and ensuring speedier times for transactions, but the best way to retain a certain customer or member is to know his wants and needs, responding to these wants and needs at the highest possible capacity. By knowing who is using your banking services, you can find out where they are looking for improvements and where they still need more work. This can help direct where the R&D funding should gogo to.
Complete transparency and honesty
Long gone are the years when banks, credit unions, and financial institutions can sneak hidden fees, charging their customers/members wrongfully for every small little mishap. A great example of this is the mean overdraft fee schedule that many banks have: although it is true that the bank has a full disclaimer of the overdraft fee, it is always hidden deep in the paperwork. This makes certain banks, financial institutions, and credit unions become untrustworthy. It is always better to be honest from the start, in order to avoid paying high acquisition costs followed by even higher retention costs. It is better to be transparent from the beginning about hidden costs than making the clientele angry after.
Offer sporadic one-time promotions
People love it when they are randomly rewarded for completing simple tasks. Many successful newcomers in the banking industry bring these one time promotions to a whole new level. For example, some banks offer a $100 referral bonus when people successfully get their friends and family to join their bank. Other banks offer special rewards for long-term checking customers. Yotta has a fantastic model where people have a chance to earn money just by depositing money in their bank accounts. These sporadic promotions and offers for existing members/customers keep everyone engaged with their banking services, while giving them an extra reason to not change their primary account holder: they want to keep earning those rewards and promotions!
Show that you care about their financial health
As time goes on, people are starting to enjoy banks, credit unions and financial institutions that are more than just simple checking accounts. They want a place that can help them grow and become financially free. They want the customer service to help them figure out what the best ways are to manage their money. They like being helped, and hate simple banks that don’t encourage them to manage their money better. Many different FinTech startups have been offering more and more services showing that they care about their current clients through newsletters, smart financial tips, certain rewards for people who are managing their money properly, and more! The best part about helping someone become financially healthy is that it ensures that they will be more loyal to their current banking provider. This banking provider helped them become more financially independent, so why would they ever change?
Offer a stellar banking experience
Offering a stellar banking experience that is different and better than all other banking services can help you differentiate yourself from the crowd. This creates true loyalty, as people will never want to leave because they are already with the best banking experience that they have ever had in their entire lives. This would start with a fantastic, speedy and reliable bank onboarding process, followed by a beautiful mobile app and incredible customer service. The big idea is that if all current customers/members are aware of the fact that their banking services are better than all of their competitors, then they will have no reason to switch. They may even convince their friends and family to join, too!
The most important element to retain customers/members
The most important element that will help banks, financial institutions and credit unions to retain their existing customers/members is by providing a stellar banking experience. The first impression is very important and starts with the bank onboarding process. Therefore, it is impervious to have the smoothest, most user-friendly experience possible when onboarding new prospects. NimbleFi provides incredible onboarding solutions that can fit perfectly into any bank, credit union or financial institution’s current framework. Unlike most clunky and disorganized onboarding solutions, NimbleFi can get a prospect onboarded from start to finish in less than 15 minutes! Thanks to new KYC technology and simple form filling methods, NimbleFi enables a prospect’s first interaction with your bank, credit union or financial institution to be as painless as possible!