If you’ve ever spoke with banks or done any banking, you probably feel like it is a you-against-them relationship. To customers, it may feel as if banks will try to get every dollar out of you while being unhelpful. Continue reading to learn How Banks Compete.
However, it doesn’t have to be this way all the time. Some banks actually succeed by providing their customers with good products and services. This may be hard to believe though because most bank customers do their business at larger banks that offer relatively unattractive terms, such as high fees on checking accounts and low interest rates on CDs, savings accounts and money market accounts.
Customer Service – How Successful Banks Compete
If you’re not satisfied with the rates and terms that large banks offer, dig deeper and find establishments that offer everything you want. Not only are you doing whats good for you, you are helping out that bank become better and this can result in better terms for you.
Although two banks can be different in terms of what they offer, as long as they serve their customers well, they can succeed. Here are the seven principles that banks can follow to succeed.
Offer Good Value
Banking is an extremely competitive business. There are more than 5,000 FDIC-insured institutions, and that’s just part of the competitive landscape. With the wave of local credit unions and national online banks, as well as larger companies like Apple, Amazon, etc. joining the financial service industry, it is getting increasingly harder to distinguish yourself.
Some smaller banks compete against this by offering free checking accounts at most of their branches. These banks stand out against other banks with extensive branch networks. In contrast, accounts without those fees are he norm among many online checking accounts. Therefore, by offering the cost effectiveness of free checking, smaller banks are able to offer customers a best of both worlds situation.
Millennials Mean Growth
Offering competitive products and services isn’t always enough to win banking business. People tend to not move away from their banks because it is such a hassle. This is especially the case when they’ve already set up automated payments and direct deposits.
One strategy to work around this is focus on younger customers. Although they have less money than older bank customers, they are less likely to have deep banking relationships and are more reluctant to change.
We even see a shift of even traditional banks move towards offering online accounts. This helps them compete with the new wave of banks like Ally that started as a online-only institution. Regardless, the key is to have up-to-date digital offerings to enter the market of people who are reaching an age when they are actively looking to form banking relationships.
Find a Profitable Niche
While retail checking and savings accounts have the highest visibility to the average consumer, there are more specialized segments of the deposits business. Performing well for customers in these specialized niches can also be a pathway to success.
It’s Not All About The Numbers
A bank’s success isn’t simply determined by their financial terms. Banks can offer other services such as mortgages and loans that catapults them to success. This makes them more attractive partners to companies that want to work with them.
Technology and Humanity Can Work Together
As mentioned in the above sections, banking has begun moving towards an all digital approach to offering their products and services. However, many banks, both traditional and online, still say they value their personal side of banking.
Traditional banks still have their tellers who can have up to 15 years of experience. On the other hand, even online banks hire customer service representatives that can speak without relying on talking points provided by the bank.
Don’t Give Your Customers a Hard Time
An extremely simply rule when working in customer service is this. This rule is an easy way to attract and keep bank customers for a long time.
An example of this would be a smaller bank joining a network of ATMs because they realize that their customers may travel nationally or internationally. This means they need access to ATMs over a wider area.
Look For a Win-Win
While many banks, both traditional and new, offer online banking, certain banks will still consider themselves as a “digital-first bank.” This prevents them from falling victim to outdated infrastructure which some large banks struggle with now.
These cost savings allow certain online banks to pass on their savings to their customers. That is why banks that are digital-first can offer products like free checking and competitive interest rates on CDs, savings accounts and money market accounts.
These seven ways for a bank to succeed outlines reasons why certain banks succeed over others. The main takeaway is customer service. At the end of the day, if you can stand out with this, then you will be successful no matter how many online banks there are.
However, if you haven’t established a solid banking relationship, take a look at online banks because they tend to offer free checking and competitive interest rates on CDs, savings accounts and money market accounts.