Banking Needs Personalization at Scale

December 4, 2017 Maria Abbe

There's a shift in relationship banking and it's time to act accordingly.

Dallas Wells and Jim Young discuss the changes we're seeing in relationship banking and what you can do at your bank to better serve your customers. This topic comes from a recent Financial Brand article by Jim Marous entitled, "Banking Desperately Needs A Relationship-Based Selling Strategy."

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Helpful Information

Banking Desperately Needs a Relationship-Based Selling Strategy - Jim Marous, The Financial Brand

3 Reasons to Cross-Sell & 4 Ways to Do It Better

Podcast Transcript

Jim: Hi, and welcome to The Purposeful Banker, the podcast brought to you by Precision Lender, where we discuss the big topics on the minds of today's best bankers. I'm your host, Jim Young, Director of Communications at Precision Lender, and I'm joined again today by Dallas Wells, our EVP of banking strategies.
Today, we're going to talk about relationship banking. I think your immediate reaction may be, "Yeah, Jim, relationship banking, that is not a new concept, why are we covering old ground?" The answer I think may be that the ground is no longer old. Actually, it's shifting and it's time to adjust accordingly. Dallas this podcast conversation was sparked, as a lot of our podcasts are, by a Jim Marous article on the Financial Brand website. It's called, Banks Desperately Need a Relationship Based Selling Strategy.
Before we get into that article, there's the obvious question. Don't banks already have a relationship based selling strategy?
Dallas: Well, I think if you ask them, every bank in the world would probably say, "Of course we do. We're a relationship based bank." Only a very few niche players wouldn't say that. We actually, I think, talked about this in a recent blog post about cross-selling, where banks talk a good game about relationship banking, but when you try to dig in and say, "Well, how do you do that?" They don't always have a good answer other than just the platitudes, you know, the "We really know our customers."
Again, when you dig into that, I think it's the kind of classic, especially amongst community banks, when somebody comes in the lobby we know their names and we know who their kids are, and we understand them. We know them because we're members of their local community. I have a couple of real issues with that. First of all, I think maybe the biggest one is, okay, you know the very small subset of your customers that come through your lobbies. Even in a small community bank, I don't know, maybe five hundred people are regular users of your lobby, regular enough that your tellers and your staff there know them by name and know their kids names, and how many thousands of customers do you have? Check the profitability of those customers. Those five hundred are not necessarily your top five hundred. In fact, their heavy users of your branch network, they may be near the bottom.
The other side of that, and this is the one that's a little more nuanced, and I think is maybe just as important for the big banks as the community banks. Knowing your customer's name and what their kids names are is a little different from knowing what you need to know, which is, what are the real details of their financial lives? What is likely to be the next thing they're going to need, and how can you best help them with that? How can you provide them real value there?
I think relationship based banking is one of those phrases that gets thrown out. Bankers keep saying that word. I'm not sure they know what it means. To really cover the relationship of their customers.
Jim: Okay, so, moving beyond say, the golf course or the branch lobby here, but we're also being repeatedly told that the human touch is critical, even more so than before, in the sales process, and that customers expect a relationship with their banker. How do you reconcile that need to go, hey, beyond the five hundred or so people that are familiar faces, so you got to expand that reach beyond that core group of people that you know personally, with the need to actually still be personalized?
Dallas: Yeah, and I think this is where, what customers are looking for is a little more depth to the personalization, so they don't want for you just to say, "Hey, Jim, how's it going today?" Right? They don't want just that level of personalization. It's the knowing of your name. It is more the personalized offers.
Back up just a step and think about how consumers, and I don't just mean for retail banking, but I mean for commercial borrowers too, and this is a point that we talk about a lot here, because I think it's really important. Your customers are used to being able to get personalized everything in their life. If they want to shop, they go to Amazon, and what they see on Amazon will be very different than what I see on Amazon. Because it's all customized based on prior purchases and prior browsing history and what else you've searched for, even other places on the internet. It's a very customized view of the world.
The same is true for what TV you want to watch through Netflix and what music you want to listen to through Spotify. Even simple things like typing a search into Google, it's different depending on who you are, what else you've searched for, where you are in the world, et cetera. Personalized doesn't mean that there's somebody there who knows your name. It's a much deeper personalization than that. It's based on everything that we can know about you. That's where the human element comes in.
It's the technology and the person working together, so that you can have a deeper conversation than, "Hey, Jim, how's the weather?" You can have a conversation about that person's prior purchases. "Hey, I see that you came in and opened a checking account six months ago. How's that going?" Simple things like that that banks have really struggled with, all the way up to the much deeper things of all the algorithms that the Amazons and Facebooks of the world are using to really shape your experience. That's what it's all about and that's where relationship banking I think needs to head.
Jim: I would imagine it would be anticipatory, as well, in a sense of like, hey, the markets have shifted this way. It might be a time for you to consider doing this or changing this strategy?
Dallas: Yeah. It's the financial equivalent of shoppers who bought this also bought this, or who looked at this also looked at this. Right? It's the association of things and it's the predicting what's next. The way a lot of bank systems are designed is it's overly simplified and it's using these big customer based averages and really it's more about the banks needs than the customer needs. It's hey, "You only have three products, we'd love to get you to five, so how about you open a credit card?"
Maybe they don't need a dang credit card, you know? It's more about based on that customer's profile. What are they likely to need next, and let's talk about that. That goes, I think there's much more value for the commercial customers of the world. Think about if you are a bank and you could get to the point where you go to your commercial customer and you say, "Look, you've got this $500,000 revolving line. Based on your business growth, and the seasonal trends we typically see in your industry, we think that might need to be higher. We're going to increase that to a million bucks unless you say not to."
That is a personalized level of service that is much different than, "Hey, Jim, how's the weather, you want to go play golf on Friday?" That may be great. You may still want to go play golf, but the discussions are as you said, anticipatory and they're based on what we know about you. Not about what the bank needs, but about what's going to be right for that customer.
Jim: I want to get a little bit more. I got another question on this sort of analytic side of things, but you touched on something just a minute ago about the need to, "Hey, you have these four products, so how about adding this one." That's something that Jim Marous writes about, that some banks are still very much in a product based selling sort of mode. Is there an issue there with, if you're going to make sure to make that change, do you also then need to change incentivization? Did I invent a word? I might have. Incentive plans then? Is part of the issue here that the type of selling that banks have been doing is incentivized toward product based rather than relationship based?
Dallas: I think it goes deeper than just how banks sell. I think it goes all the way down to the very core of how banks are set up and organized. If you look at the org chart of just about any bank in the world. It is, we have a head of deposits and a head of lending and a head of investment banking and a head of wealth management. It's all product based, and where banks struggle is because everything is set up in those silos. You have bankers who view only their small niche of the world, so most of the banks that we work with, where they really, really struggle is, they say, "Look, we see the value of cross-selling wealth management to our commercial borrowers."
That's the perfect mix of business owners who have some wealth and some planning that needs to be dealt with. We have people right across the hallway who do that. The problem is, my commercial bankers don't really care about that. That has nothing to do with their pay, with maybe they get a little kicker referral bonus, but rarely is it enough to move the needle for them.
Same way on the other side of the hallway. There are wealthy people who need commercial banking products and services, but why rock the boat with that customer and make that introduction across the aisle and complicate things when, what's it really do for me? My whole world is inside of this product based silo.
This is not an easy thing for banks to solve, but they have to start thinking about being customer centric and relationship based instead of product based. It's not about checking accounts versus loans, it's about that customer and their financial needs.
Jim: All righty. Shifting it back again, getting back a little bit, there was a paragraph here from Jim's article where he writes that unfortunately while the use of advanced analytics for insight driven marketing is one of the most important trends in marketing, it still ranks low on the list of priorities according to the 2017 State of Financial Marketing study, that Digital Banking Report published.
Is that part of the problem? We just talked about how there's this, kind of this overall sort of structure of a bank issue, but is there also the issue of, yeah, yeah, we kind of figured that that's the way we need to do relationship based selling, but we'll get to that after we get to ABC cost cutting compliance? Is part of the issue here that it's low on the totem pole?
I'll ask this also, is it fair that maybe, as important as you and I think this is, that a bank can say, "Yeah, it's important, but I've still got to put out these three fires first."
Dallas: Well, I think this is the issue and the complaint that a lot of customers have about their banks is, they don't properly prioritize these things. Meaning they don't put the right kind of resources toward them. You still run into, so I was in a bank branch the other day for the first time in a long time, and I was standing at the teller counter, and on either side of me, and the person right across from me, all three were dealing with problems. Right? Part of that's just because that's the only reason that you come into the branch, but the responses coming from, on the other side of this very thick, bullet proof glass still, which still seems like a throw back as well. The response from the other side of the glass in all three cases, "That's our policy. That's just how we have to do it."
I think that that general mentality of that's our policy, we have to comply, and that is a reason for stymieing this innovation and improvement around the customer experience. That's why people get so frustrated with banks, and that's why banks rate in customer service similar to the cable companies of the world, is that frustration. There are banks out there that are going the other way, and they are solving those problems, and they're the ones running away with the market share. As much of a commoditized product as banking is, there are some big out performers, and they're the ones that are focusing on the customer.
For that analytics and the marketing possibilities there, the data sets, banks will complain about their own data, and they'll say, "Well, it's incomplete, it's a little messy, it's hard to get it from one system to the other." They think of their data as being weak and incomplete, and if you look at almost any other industry in the world, the data the banks have, that is the envy of every other industry, is all the stuff that a bank has at their disposal.
I think banks need to, number one, make the focus about the customer. Let's start at the customer and yes, we have to comply. There are safety and soundness issues that have to be in place, but those are solvable. If the right amount of resources are put towards it. Then, the second thing is, is stop waiting on perfection from your data. Modern data science tools and modern analytics are very, very good at filling data gaps. If you have a data set that's missing one field that you really wish you had, that's okay. Don't let that stop you from doing what you're going to do. Those are solvable problems and you have a data set that again is the envy of every other marketer out there, so banks should be taking advantage of that. They should have customized, personalized offers in front of every customer and potential customer. Those should be at their fingertips. You're going to have to spend money to do it, but there is a big ROI on the other side.
Jim: All right. You convinced me, but I'm probably an easy audience to convince on this sort of thing.
Dallas: You are, sorry. No offense, but you are.
Jim: All right. Well, that will do it for us today. Thanks for listening. If you'd like to learn more, visit our research page at If you like what you've been hearing, make sure to subscribe to the feed in iTunes, Sound Cloud, Google Play, or Stitcher. We love to get ratings and feedback on any of those platforms.
Until next time, this has been Jim Young with Dallas Wells. You've been listening to Purposeful Banker.

About the Author

Maria Abbe

As a Content Manager here at PrecisionLender, Maria develops the messaging, stories and content pieces for prospects and current clients – showing them the value in PrecisionLender. Her passion for serving others is evident as she leads the volunteer program here at PrecisionLender. Maria’s ability to be organized and constructive, along with her ability to be practical makes her an exceptional addition to our team.

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