Additionally, with an increasing number of sophisticated
third-party nonbank competitors emerging there is pressure
for banks to find niches where they can add more value to
customers and generate fee income. For instance, the payment space is under fierce competition with the emergence
of products such as Square, PayPal, Google Wallet and now
Apple Pay. As innovation continues to influence customer
behavior, banks are at risk of being viewed as payment processing centers similar to a utility company.
So, what should banks do to drive noninterest income
Focus on providing value, not just an experience
The majority of banks will highlight customer experience
as part of their 2015 business strategy. But what few will
address is what improving the customer experience entails
and whether or not it will provide a return. One of the challenges with customer experience is that it typically becomes
a question of measuring and not a goal of delivering value in
the eyes of the customer. This mindset leads to a great deal of
time and resources being allocated to establish quantification
for a subjective measurement rather than actually focusing
on direct drivers of return on investment, which is achieved
when servicing a need the customer is willing to pay for.
While quantifiable data provides helpful insights, banks
need to focus on the original goal—generating income with
customer experience. An all-encompassing experience involves
two perspectives: the customer’s perception of the institution
as well as the institution’s perception of the customer. Banks
often fall short on this aspect by taking a reactive approach
to customer needs.
A more customer-centric approach would break-down
functional silos within a bank and facilitate the sharing of
customer information. Customer “ownership” (not to be
confused with data governance) often becomes a barrier
within organizations and prohibits information sharing
that could allow for cross-selling opportunities. The lines
of business are separated in such a way that customers can’t
have a single experience with access to all banking services.
By breaking down this barrier and allowing cross-functional
collaboration, organizations can capture a greater share of
wallet and drive noninterest income.
While this strategy makes sense from a cross-selling perspective, it’s important to take into account how technology
has disrupted the traditional banking customer relationship.
The world of a la cart banking products and services has cre-
ated dispersed banking relationships where customers rely
on multiple financial institutions to meet their needs. This
shift has greatly impacted aspects of cross-selling efforts and
thus fee-income opportunity.
To overcome this obstacle, the bundling of products and
services could offer customers packaged solutions for a more
comprehensive financial relationship. Offering discounts on
specific products can add to the share of wallet and ultimately
generate more noninterest income. For instance, offering a
lower credit interest rate for checking and savings account
customers deepens the relationship and opens the door for
future cross-selling opportunities with the growth of the
customer’s financial needs. Each interaction can be more
impactful. If a bank is presented with an opportunity to
interact with a customer, it needs to proactively market the
full suite of services and effectively do so through customer
Customer segmentation analysis provides insight on the
volume and demographic of customers. When done properly,
banks are presented with an accurate picture of their customer
portfolio broken down into a manageable set of segments.
Developing packaged solutions that speak to these segments
allows sales staff to have more influential conversations that
accurately market the appropriate services.
It is important to keep in mind that the modern customer
no longer feels the loyalty that once existed in branch network
community banking. While some financial institutions see
this as an opportunity, it’s not a common differentiator seen
among many banks. Banks are doing little to reward customers
for their business, which only further enables them to seek
out third-party services to meet their needs. Relationship
banking is failing to adapt to the modern customer, and
banking products and services are becoming commodities.
As a result, the customer experience is being lost all together
and both customers and banking institutions are missing out
on valuable opportunities.
A comprehensive banking relationship, tailored to customers’ specific financial needs is the key to establishing trust and
creating mutually beneficial customer relationships. This focus
is an opportunity to stand out among competitors (most of
which are lacking differentiation) and generate fee income
where it is currently being lost on commoditized products.
The key to future fee income is the alignment of
customer and technology strategies
While technology innovation over the past decade has created
the digital customer and the disruption to traditional relationship banking, it has also opened the door for tremendous
opportunity. After defining a comprehensive cross-selling
strategy, the ability to execute requires supporting technology
for success. Leveraging technology and data advancements
can be used to drive fee income and assist in establishing
deeper customer relationships rather than disrupting them.
It’s critical for banks to have a complete 360-degree view
of customers’ activity across all internal products and services.
By implementing a CRM (customer relationship management) tool into daily operation, this activity can be easily
The bundling of products and services could offer customers
packaged solutions for a more comprehensive