Financial institutions are under financial pressure due to the economic slowdown and uncertainty related to COVID-19. Faced with declining margins, bank executives must either grow revenues or reduce costs.
While interest income from loans is the primary source of income at most banks, savvy financial institutions are seeking ways to grow alternative sources of revenue. Margin compression for community and regional banks is compounded by the pressure they face from larger, global competitors. These behemoths draw on larger traditional and digital marketing efforts to build presence, brand awareness and product offerings.
Smaller institutions can compete, but they must do so with intelligence and speed. To help financial institutions expand revenues intelligently, we offer the following five ideas to accelerate their financial growth in 2021.
Take advantage of high-growth markets while shifting to digital channels
High-revenue-generating banks understand they need to apply maximum sales resources to the highest potential sales territories. They identify the “point of maximum effort” and set sales goals and targets there based on market potential, not past performance. Bank sales staff are redeployed in such a way that growth becomes a product of potential, not incremental measures based on last year’s track record.
Deposit Fair Share is a concept wherein the bank has a market share of deposits equal to their relative share of branches in a given market. Revenue-focused banks can also quickly expand their product and service offerings, commensurate with value-based pricing. For example, a bank could seek to sell billable, revenue-generating offerings in the markets with the greatest opportunity
Leverage customer and market data with analytics
Insightful analytics drives high-revenue-producing banks in sales growth. Insight on your best customers can help expand good relationships even further and help you find similar relationships within your prospect base. Progressive bankers harness the growing power of analytics to evaluate both their existing customer data and market demographic data to maximize marketing expenditures.
Revenue-driven banks use data analytics to help them answer questions such as:
- Who are my best customers and prospects?
- What is the potential demand for a product?
- How do I find growing consumer segments and markets?
- Which markets provide my bank with the greatest opportunity?
- How do I reach consumers most effectively?
Cultivate deposit income sources
Banks can use uncomplicated technology to please their customers, but often overlook this avenue in favor of complicated pricing and relationship credits.
One bank that did not forget this approach used an automated savings program to increase customers’ savings accounts by rounding up debit card transactions to the nearest dollar. Parallel to an automated savings program, rewards checking programs can easily improve your customers’ experiences while increasing the value of your bank’s brand. Rewards reinforce desired customer behavior, increase customer loyalty, and ultimately improve margins. Encouraging behavior such as debit transactions contributes to fee income and helps lock customers into your bank.
Savvy bankers ensure their bank leverages core technology to apply the most current functionality for service charging and account analysis. These tools become vital assets in driving Non-Interest Income. Subject experts from your technology partner(s) should be readily available to help you answer questions such as:
- Are we collecting all the service charges and fees being disclosed?
- Are the processes to assess fees more manual than automated?
Often when deposit products are initially deployed, bankers had a vision for how they would meet the needs of their customers while contributing to the financial health of the institution. However, markets and regulations constantly change and it’s critical the bank takes time to review the current product offerings to ensure they are being executed correctly.
Train to develop a sales culture
The hallmark of high-revenue-producing banks is a strong sales culture that harnesses the skills of the entire organization. The bank’s sales goals and objectives must be understood throughout the financial services organization. Each business unit and individual contributor understands how his/her job can impact sales. Every employee with direct customer contact has a basic understanding of the bank’s products and their respective value propositions.
High-performing banks value training as an investment and leverage training programs that create empowered, skilled, and knowledgeable employees. Effective sales training directly impacts individual performance. In turn, an organization’s ability to achieve revenue growth can be related to the efficacy of employee training.
Given the volatility and unpredictability characteristic of today’s financial services industry, bank management may find itself tempted to practice a reactive approach, to shift gears every time a new set of circumstances presents itself. However, high-revenue-producing banks have demonstrated it is possible to leverage the aforementioned ideas to create an environment conducive to consistent, long-term, revenue growth.