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Relationship Lending: Three reasons for Bankers to consider a CRM

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Bess Patton

By: Bess Patton, Marketing Manager, Sageworks

Many institutions share the three-pronged goal of maintaining high-quality customer service, growing loans and prospecting to grow their portfolio.

However, with the work that goes into generally managing the portfolio, sometimes these growth initiatives don’t get the attention they deserve. Spending time on repetitive internal communication, checking back on customer and loan status, and fumbling with paper documents can easily contribute to wasted time that could be poured back into efficient and proactive customer interactions and identifying new business opportunities. With the right customer relationship manager, however, financial institutions have the opportunity to vastly improve the customer experience, increase lender productivity, boost portfolio growth and create significant efficiencies throughout their organization.

Here are three key reasons why bankers consider leveraging a CRM:

  1. Inefficient lending process. Inefficiencies in the lending processes at financial institutions can range from delayed document gathering and missing information to unnecessary data-entry. Waiting on customers to deliver documents in person to your institution can mean long delays, while emailing financial documents back and forth presents risk of data breach no customer should be exposed to. Another point of inefficiency is that bankers are often unable to obtain accurate data about their customers quickly. Having to check back on paper documents, or search for specific information from disparate data systems leads to longer wait times for customers, and wasted time for bankers.
  2. Disconnect between departments. When different teams use several different methods to document information, be it Excel spreadsheets or emails, tasks will be missed and information can get misplaced because the communications are not streamlined or centrally located. These disconnects in relationship management can lead to missed deadlines and opportunities. Furthermore, having to actively connect repetitively with other professionals at the institution to check in on where a customer relationship currently stands or where a loan in the pipeline adds to the inefficiencies of the process at large.
  3. Losing track of customers. Without a central database and a 360-degree view of the customer, cross-sale opportunities are not maximized, risky relationships are not properly monitored and the best clients are not given adequate, personalized service. It’s near impossible to actively monitor the financial status of every customer manually – so any current customer could grow in the risk they present and remain under the institution’s radar. Furthermore, clients who experience change that presents a new opportunity for the institution to extend further products might never be reached out to. This means loss of potential revenue, as well as less impressive service for members who can easily take their business elsewhere down the road.

Lending is all about relationships

Every banker knows that relationships are the most important piece in building a portfolio. Yet data entry, tracking down information and other paper-shuffling duties can reduce the time available to spend fostering, growing and retaining your customer base. By using software to supplement time-consuming data entry and organize customer data, time is opened up for the lenders to focus on what’s really important: relationships. Furthermore, the insights made available by employing a CRM will ensure time is spent on the right relationships, offering the assistance they need or opportunities they weren’t even aware were available to them. Though it might sound intuitive that a CRM allows bankers to better manage relationships, the impact of this opening in bandwidth to spend facetime with customers cannot be underestimated.

Switching to a CRM

Change can be hard but managing a sales pipeline out of an email inbox, spreadsheets or stacks of business cards is harder.  If customer information is stored disparately, it is impossible for different departments at the institution to report on up-to-date customer activity. For a management team trying to hold lenders accountable for sales activities, develop a reliable business forecast and grow the portfolio, it’s time for a strong CRM.

Implementing a new technology of this scale does require stopping and examining your processes – bringing in new technology that simply supports legacy processes could hold back progress and defeat the effort to innovate. Bringing in your employees on this process evaluation, and the following implementation, from the start will be crucial to the success of the switch. Engage them, leverage their closeness to the processes, and allow them to help drive the change through their involvement rather than resist change they feel is being imposed on them.

Another important element in switching to a CRM, or a different CRM, is helping users understand the value. Finding a CRM with a customizable interface is one element to look for in selecting a solution your lenders can more readily adjust too and be ensured serves the needs of your specific institution. Finding a solution with robust capabilities whose value is easily explained will also promote excitement around adoption rather than resistance. A purpose-built solution should allow you to pull in faster, better data that enables lenders and analysts to more effectively service their customers and report on the institutions’ lending pipeline, and make it easier to consistently build forecasts. Further, it should allow for instantaneous cross-departmental access to accurate customer data.

With a host of processes that are improved by bringing in a CRM, anchored to the necessity of serving customers well to survive and thrive in the modern banking environment, institutions can be sure that the aches of change management are well worth the pursuit of innovation that will ultimately move a bank forward.

Bess Patton is a Credit and Lending Marketing Manager at Sageworks, a financial information company that provides financial analysis and valuation applications to accounting firms.

Banking

A quarter of banking customers noted an improvement in customer service over lockdown, research shows

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A quarter of banking customers noted an improvement in customer service over lockdown, research shows 1

SAS research reveals that banks offered an improved customer experience during lockdown

A quarter (27%) of banking customers noted an improvement in their customer experience over lockdown, according to research conducted by SAS, the leader in analytics.

This represents some good news for banks in an extremely challenging time, with 59% of customers also saying they’d pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.

The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of banking customers using a digital service or app has grown by 11%, adding to an existing 58% who were already digital customers. Over half (53%) of new users plan to continue using these digital services permanently moving forward.

Brian Holden, Director, Financial Services at SAS UK & Ireland, said:

“It’s notable that in times of need customers value being able to communicate with their bank and place an even higher value on good customer service. A rise in the number of digital customers means banks can now reach a wider audience online, leveraging AI and analytics to offer a more personalised experience.

“There is work to be done, though. Even greater personalisation is needed if banks are to win over the 12% of customers who felt banking services deteriorated over lockdown. And this personalisation will need to get right down to a segment of one to properly reflect the unique circumstances some individuals now find themselves in due to the pandemic.”

While the number of digital users grew over lockdown, there is still a quarter (24%) of the banking customer base that have chosen not to make the switch to digital services.

Meanwhile, failure to offer a consistently satisfactory customer experience could prove costly for banks, with a third (33%) of customers claiming that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service, so this just underlines how much retail banks can win or lose in these difficult times.

For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer? 

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Banking

Swedish Bank Stress Tests in Line with Recent Rating Actions

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Swedish Bank Stress Tests in Line with Recent Rating Actions 2

The Swedish Financial Supervisory Authority’s (FSA) latest stress test results show major Swedish banks’ robust ability to absorb credit losses. The results support Fitch Ratings’ view that short-term risks have abated in recent months, and are in line with Fitch’s assessment of major Swedish banks’ capitalisation at ‘aa-‘, which was a factor when Fitch removed the ratings of Handelsbanken, Nordea (not covered by the FSA’s stress test) and SEB from Rating Watch Negative in September.

The FSA estimated about SEK130 billion of credit losses over 2020-2022 for the three largest banks (Swedbank, Handelsbanken and SEB) under its stress test. This represents about 220bp of their loans, or about 70bp annually. However, the banks’ pre-impairment profitability in the stress test could absorb credit losses of up to about 110bp of loans annually. Fitch’s baseline expectation is for credit losses below 20bp of loans in 2020 and 8bp-12bp in 2021.

Capital remained strong under the stress test. The average common equity Tier 1 (CET1) ratio fell by only 2.8pp (1.9pp if banks did not pay dividends) from 17.6% at end-June 2020. The capital decline was not driven by credit losses, which could be absorbed by pre-impairment profitability, but by risk-weighted asset inflation.

The three banks’ 3Q20 results showed that capital has been resilient despite the coronavirus crisis. The banks had a CET1 capital surplus over regulatory minimums, including buffers, of almost SEK100 billion (excluding about SEK33 billion earmarked for dividends). SEB had a CET1 ratio of 19.4% at end-September, Handelsbanken’s was 17.8% and Swedbank’s 16.8%.

The SEK130 billion credit losses under the latest stress test are lower than under the FSA’s spring 2020 stress test (SEK145 billion), which also covered a shorter period of two years. However, they are still larger than the actual losses incurred by the three banks during the 2008-2010 crisis. This is despite tightened underwriting standards by the three banks in recent years, including, in the case of SEB and Swedbank, in the Baltics, the source of most of their loan impairment charges in the previous crisis.

In its baseline economic forecasts, the FSA assumes a harsher shock to Sweden’s GDP in 2020 and 2021 (-6.9% and 1%, respectively) than Fitch’s baseline (-4% and 3.4%), although it assumes a similar recovery by end-2022. It also assumes real estate price corrections, which appears particularly conservative in light of a 11% housing property price increase over January to November 2020.

The ratings of Handelsbanken (AA), Nordea (AA-) and SEB (AA-) are on Negative Outlook due to medium-term risks to our baseline scenario. The rating of Swedbank (A+) is on Stable Outlook, reflecting significant headroom at the current rating level following a one-notch downgrade in April due to shortcomings in anti-money laundering risk controls.

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Banking

Future success for banks will be driven by balancing physical and digital services

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Future success for banks will be driven by balancing physical and digital services 3

Digital acceleration due to COVID-19 has not eliminated the need for bank branches

Faster service (23%), smaller queues (26%) and longer opening hours (31%) are among customers’ biggest asks of their bank branch, new research from Diebold Nixdorf today reveals. But with 41% consumers saying they would be comfortable to engage with all banking services via an app, it is vital that banks respond to the full spectrum of customer needs – balancing and evolving their offerings on multiple fronts.

A third (35%) of customers say they will always want access to physical, in-branch banking services in some capacity and one in ten (10%) consumers will never bank predominantly online in the future. This demonstrates that there remains an important role for the services a branch provides. This role, however, continues to shift away from purely transactional banking:

  • A quarter (26%) value face-to-face advice when it comes to their banking needs

  • One in five (18%) seek advice on different products

  • 17% want to speak to the staff or other customers.

Matt Phillips, Diebold Nixdorf vice president, head of financial services UK & Ireland, said: “The majority of banks have spent the last decade focusing on their digital strategies and investing in improving – or establishing – their online customer experience. However, the data shows that there is still an essential role for physical branches. Banks now increasingly face the challenge of continuing to provide customers with access to a range of physical and as well as digital services, giving them the flexibility to choose the best service for them at any given moment in time.”

When looking beyond the impact of COVID-19, planned branch visits by customers are expected to rebound to 28%, following a dip to 11% during lockdown. And when asked about the new services they’d like to see inside their bank, sixteen percent of respondents said more self-service machines would improve their in-branch experience.

Matt Phillips continues: “In a world that is fast evolving and where the future is digital, there’s no doubt that high street banks must, and are, responding to the needs of highly digital customers. But not every customer requirement is digital. There is still a strong need for physical bank branches and the interaction and services they offer, and striking this balance between physical and digital is where the industry must come together to provide solutions. For example, building a strong, leave-behind strategy is something we’re seeing across the board when banks have to close branches, ensuring customers have access to self-service machines to complete all their transactional needs.”

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