Lending & Credit Risk

Cross-Selling: Uncover Hidden Growth in Your Financial Institution

January 13, 2020

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Key Takeaways

Cross-selling may be the most efficient way for your financial institution to achieve strong growth.
Cross-selling to stem “hidden defections” represents huge untapped opportunities for institutions, according to a study by Bain.
Having the right technology can play an important role in cross-selling customers or members.

Cross-selling: An efficient growth investment

In 2020, a top focus for community financial institutions is new customer acquisition, according to the BAI Banking Outlook: Trends in 2020 survey. Finding new customers was the #2 business challenge -- second only to improving the customer digital experience, according to BAI’s survey of 400 bankers representing institutions of all sizes.

What if the growth your institution seeks is right under your nose? Acquiring new customers or members is important, but the most efficient investment may be cross-selling. Getting current customers or members to access additional products and services can produce the growth in revenue and profit the financial institution needs. Cross-selling also creates the “stickiness” so crucial to customer retention. In a recent whitepaper, Abrigo outlined several tips for refreshing cross-selling practices and leveraging technology to address customer needs through marketing to existing customers or members.

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Cross-selling: “Huge untapped opportunities”

Cross-selling to stem “hidden defections” (when a financial institution’s customer purchases an additional banking product from a competing bank) represents huge untapped opportunities for institutions, according to a 2017 study by Bain & Company involving a survey of more than 133,000 banking customers in 22 countries.

For example, the study found that in the U.S., 42% of “defectors” reported buying from a competitor institution because they received an offer or saw an advertisement. In addition, only 1 in 10 were actively researching when they decided to buy the product. “Just as striking, more than half would have purchased from their primary bank if the bank had made an offer,” the Bain report said. A separate study by Bain & Co. said that in financial services, a mere 5% increase in customer retention produces more than a 25% increase in profit.

With fintechs, specialty companies like Rocket Mortgage, and even tech companies like Apple and Amazon adding to the competitive scene these days, your institution needs to be top of mind to prevent hidden defections from increasing.

In fact, half of Americans already use more than one financial institution, and nearly one in four (21%) use more than three financial institutions, according to a survey by GOBankingRates. The top reason given for having multiple accounts is flexibility and convenience, followed by different products and services offered. Younger customers are even more prone to shopping around. The BAI Banking Outlook: Trends in 2020 survey found that roughly half of Millennial, Gen X, and Gen Z consumers expressed a willingness to switch financial services providers for better banking apps and digital platform capabilities.

Technology can aid cross-selling efforts

Just as not having the right technology can play a role in losing customers or members, having the right technology can play an important role in cross-selling them. For example, as Bain noted in its study: “Banks have copious data on their customers’ risk profile and stage of life, which allows them to present the right offer at the right time and place—before competitors step in and poach a willing customer.”

However, some community financial institutions cannot access the data easily to analyze it or use it for strategic decisionmaking, because data is siloed in different systems -- those for processing commercial loans or opening checking accounts, for example. A customer relationship manager (CRM) solution built specifically for financial institutions will integrate core customer data with data from lending, credit analysis, and other systems, and the resulting database and analysis can be used for cross-selling opportunities. It provides that 360-degree view of a customer or member’s ongoing activities, financial history, profitability to the bank or credit union, and relationships to other parties. This helps the institution to offer services and products, track cross-sale opportunities, or lean more heavily into relationship pricing when it makes sense to do so.

Effective loan-pricing tools, along with a disciplined process, are another way technology enables financial institutions to lean into relationship pricing when it makes sense to cross-sell a customer or member – without losing money.

Cross-selling is relationship building, pure and simple. Matching your customers and members with products and services they need fits in with the mission of community financial institutions. By talking with them and using technology to identify the right offer at the right time and price, community financial institutions will generate more revenue, loyalty, and profit.