“Commitment in the face of conflict produces character.” – Mark Twain
Dear readers, last week I shared some sentiments about how relationship banking can be optimised as a risk management tool. I concentrated on how customer visits and face to face meetings with borrowing customers can reduce loan defaults to a minimum. Visiting customers’ premises is very key from the first day of the loan process. Early warning signals can be seen and nipped in the bud. Many financial professionals know they should be communicating on a regular basis, but time gets in the way and busy schedules may become big roadblocks. Consistent communication with clients is an essential ingredient to long-term success. Here is a summary of tips for Loan Officers:
Tips for Loan Officers
- Ensure that operations of accounts are regular, bad indications warrant greater supervision.
- Keep watch over the inflow and outflow of Funds.
- Verify proper end-use of funds for the purpose which the loan was given, and the progress made in construction and operations.
- Ascertain reasons for default or delayed payment of loan installments.
- Ascertain financial positions of the borrowing concern from time to time through the study of audited Balance sheet/Financial statements.
- See that the project is carried out as it was intended, or modified in the light of changing circumstances.
- See that the conditions of lending are complied with by borrowers.
- Ensure proceeds from the loans are made available to the borrower according to project need, and see to it that funds so released are utilised for the intended purpose.
- Ensure adequate feedback to management and appraisal team in matters of cost over-runs, financing deficiencies and project implementation delays, if any.
- Obtain payment of installments promptly and prevent occurrence of arrears in the normal course.
- Maintain a satisfactory relationship with the customer with a view to promoting a well-balanced attitude of helpfulness and understanding.
Now, let us examine Relationship Banking for non-borrowing customers.
Banks that practice relationship banking take a consultative approach with customers, getting to know their particular situation and needs and adapting to changes in their financial or business lives. Whether for an individual or small business, relationship bankers engage in relationship services to try and make their banks the ‘one-stop shop’ for clients’ A-to-Z needs. Sometimes they are called ‘The Customers’ Friends’.
Cross-selling is the modus operandi of relationship bankers, but they must be careful to ensure it is done in the customers’ interests. Readers may remember my recent article that featured an abuse of relationship banking at Wells Fargo Bank in America.
Relationship banking went too far. A flawed and aggressive incentive (and punishment) system that the bank implemented for relationship bankers at a number of retail branches from around 2011 to 2016 led to millions of new account openings. The problem was that customers did not authorise the bankers to open them. Trust is the foundation of successful relationship banking, but Wells Fargo broke that trust for millions of customers. A bank must have a culture of ethical service to practice relationship banking for the mutual benefit of bank and customer. Customers are able to take advantage of a bank’s desire to develop relationship banking by obtaining more favourable terms or treatment with regard to rates and fees, as well as obtain a higher level of customer service.
We all know that banking is all about accepting or sourcing funds from idle sources for use in deficit units. Without depositors or investors, no bank can effectively get idle funds to manage and make a profit. In some banks, when a large depositor ‘coughs’ the bank ‘shakes to its bones’. Such large depositors are rates-sensitive and often dictate interest rates on their deposits because they know that any threat of disinvestment will give the bank Treasurer a big headache. Once again, we shall look at some real-life cases of how customer visits and face to face calls can make a big difference to the bank’s bottom line:
The Bank’s Largest Single Depositor
How do you handle your investors? With regular shows of concern for their business operations; proactivity in managing their payment systems such as payments of their clients, workers’ salaries; extra care in managing service and product delivery to their executives and other persons of influence in the organisation, you have a good deal. Let us look at the case of Mr. Kumi, one of the largest depositors in Bank A.
After several months of no communication from his bankers, he received a call from his relationship manager. She informed him that one of his fixed deposits, running into tens of millions of cedis, was maturing in two days’ time. This was timely, because he was having some cash flow problems. He therefore asked the lady how much the new rates were and told her of his need to redeem part of the investment. However, the relationship manager had not been meeting her targets recently – and was praying that Mr. Kumi would not touch the investment. She suddenly felt jittery and alarmed on the phone and asked that she be allowed to get back to him later. In fact, she did not do so and rather allowed the investment to roll-on, and unfortunately at the same interest rate – despite the fact that the rates had gone upward. A month later, Mr. Kumi wrote the bank to disinvest all his funds! You can imagine the stress on the bank’s liquidity.
Dear Relationship Manager, business is rough and the competition is rough – but do not abandon your customers after the sale is closed. When you leave the customer’s premises, another relationship manager from a different bank is entering his office to offer better and juicer deals. Even if the market is rough, you still have to update your customers and discuss their investments with them. You will be surprised to know that some customers patronise your product based on their emotions. So long as you offer premium service, they are comfortable and might not move their funds elsewhere even if your rates are not competitive. When you feel for the customers, some will also feel for you during your bad times. Yes, that is how far customer loyalty can go.
Be more visible
Do you want your clients wondering why they never hear from you? Whether by email or hard copy (or both), you can consistently stay in front of clients with valued-added material. Relationship Managers should be just a mouse-click away.
Customers really do appreciate that you are keeping them informed. By regularly sending communiqués, latest services and products they can benefit from, you convey a sense of trust and belonging while enhancing your brand. Your newsletters become another tool to demonstrate your expertise, and sometimes customers forward your information to family and friends – creating a pool of potential prospects.
Avoid technical jargon
Correspondence to customers should be simple and in terms they will grasp. Stay away from jargon! If you feel you must use jargon, then take the time to explain the terms in language they will grasp. What message do you want to reach clients with? Personalise it. Go one step further and feel free to share pictures of your company’s corporate activities. It humanises you and makes you more relatable.
Reinforce the Sale
Communication can serve as a valuable reinforcement tool to solidify the purchase. For example, a salesperson who stays in touch with a customer in the period immediately following a sale can reinforce the benefits of his product or service and how they meet the customer’s needs. They can also quickly address any problems the customer may have; such as attempting to figure out how to use a new product. In the process, the salesperson can also lay the foundation for a long-term relationship leading to repeat sales.
Some bankers fear their customers’ feedback, so much so that it prevents them from following up after sales. But the feedback your customers share with you, whether it is positive or negative, is the key to building a better business. Your customers, who have experienced your products and services first-hand, will provide priceless insights into the quality, affordability, customer service and benefits you offer compared to what else is available in your industry. And if you choose to listen, they will help you create greater products and services that are more competitive and relevant to your market.
Never underestimate the power of a trusting business relationship. You have already invested time, money and energy into getting your customers; why not do everything in your power to keep them as well? People want to be valued for who they are and not just how much they spend with you. A quick phone call to see how they are doing is a great way to build a relationship with your customers and inspire loyalty and trust.
My final words
Dear banker, risk management is a more preventive method than waiting for losses to occur and looking for the root-causes and the culprits involved. Let us use relationship management in all customer interactions and go the extra mile, and guess what? Frauds, both internal and external as well as losses, will be reduced to the barest minimum and I won’t have so much to nag about!!
I wish you all a happy relationship banking experience.
ABOUT THE AUTHOR
Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She is the Author of two books: “The 21st Century Bank Teller: A Strategic Partner” and “My Front Desk Experience: A Young Banker’s Story”. She uses her experience and practical case studies for training young bankers in operational risk management, sales, customer service, banking operations and fraud.