Friday, July 23, 2010

Newly Acquired Bank Customers Need to be Onboarded

Regulators closed six more banks last Friday, bringing the failure total this year to more than 100. As each of these banks failed, or as others have been acquired through mergers, healthier banks are expanding their geographies and gaining new customers along the way trying to benefit from efficiencies and economies of scale. Unfortunately, too much focus on cost savings and a lack of focus on the newly acquired customers can have unintended consequences.

This was found in a study done earlier this year by the Deloitte Center for Banking Solutions entitled, Beyond Day One: Minimizing Customer Attrition During Bank Mergers and Acquisitions. According to the study, 17 percent of respondents who had gone through a merger or acquisition had switched at least one of their accounts to another institution after their bank was acquired, while an additional 31 percent said they were at least somewhat likely to switch over the next year. The study further found that that those who had switched had more financial products and more investable assets than those who had not, making the potential revenue impact of lost relationships even greater.

The challenge for the acquiring bank is that the recently acquired customer is more aware than ever of service flaws, system inefficiencies, changes in account structure, fees and even competitive offers that are in abundance after a merger or acquisition is announced. This awareness occurs quickly after a merger is announced as well. In fact, almost two-thirds of the Deloitte survey respondents who had switched an account to another bank did so within the first month after the deal was announced.

Much like I recommend to clients that they implement a multi-channel, multi-touch onboarding process with customers that open new accounts, the same process should be done with customers who are acquired in a merger or acquisition. Not only can onboarding a new household reduce customer attrition, an acquiring bank also has an opportunity to drive relationship engagement and cross-sales by introducing the bank’s brand and taking a proactive interest in the newly acquired customer's needs.

In their special report entitled, Bank Consolidation Through the Eyes of the Customer, J.D. Power found that constant, proactive communication is the key to success. In fact, only a small percentage of customers believed they received too much communication, yet they are quick to react when they don't receive enough communication. That is why banks should implement an integrated communication process that not only includes what is required by the regulators, but has additional components that deal with what your bank stands for, the best products based on customer account ownership and behavior, and FAQs related to the acquisition.

As J.D. Power states, "While every bank diligently fulfills regulatory notification requirements when it merges, that bare minimum isn’t sufficient for maintaining customer satisfaction. In today’s environment of uncertainty and fear, customers need to feel that they are informed every step of the way during a merger so there are no surprises. Banks that focus on the communications aspect of the customer satisfaction equation will reap the dividends of customer and deposit growth".

If you have recently acquired or merged with another financial organization, tell me how you have gone beyond the basic regulatory communication and the results you have achieved.

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